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Karim v Musa [2012] EWCA Civ 1332

Appeal by husband against a financial order on the basis of the respondent’s failure to disclose her interest in certain properties. Appeal allowed in part.

The appellant husband appealed a financial order on the basis of the respondent wife's failure to disclose her interests in a number of overseas properties.

At first instance HHJ Hayward Smith had been extremely critical about the conduct of the husband and the wife. Both parties had alleged that the other had had produced fabricated documents and concealed the truth about their assets. When considering the credibility of the parties HHJ Hayward Smith preferred the evidence of the wife. In particular he accepted the wife's evidence in respect of a number of properties she had inherited on the death of her father. The wife said that she had entered into a family arrangement and had received $125,000 which she had spent before she entered the marriage.  The wife produced certificates, which showed that she had no interests in the properties. In respect of a number of other overseas properties the judge accepted the wife's evidence that they were not hers but held by either by or on behalf of other members of her family.

The husband appealed on the grounds that the judge's conclusion was fundamentally vitiated by the wife's material non-disclosure both in relation to her inheritance from her father and her interest in the other overseas properties. The husband adduced fresh evidence relating to the ownership of the properties which did not support the wife's evidence in respect of her interest in the properties. Thorpe LJ said that if the evidence was to be believed the wife was not only guilty of deliberate non-disclosure but also advancement of a false case.

The wife sought to take a procedural point and asserted that the Court of Appeal should not be dealing with the matter and that any application to set aside or vary on the grounds of material non-disclosure was improperly brought to the Court of Appeal. Thorpe LJ held that it was open to an applicant who seeks to establish a case of non-disclosure to go either by way of appeal to the Court of Appeal or by way of application to the first instance court, depending on the circumstances of each and every case [see paragraph 15].

The court rejected the wife's explanation of the fresh evidence and remitted the matter to either the trial judge or another judge of the Family Division.

Summary by Mai-Ling Savage, barrister, 14 Gray's Inn Square

Case No: B6/2012/0341
Neutral Citation Number: [2012] EWCA Civ 1332
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Friday 13th July 2012


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(DAR Transcript of
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Mr Tom Carter (instructed by Woolf Simmonds) appeared on behalf of the Applicant Husband

Mr Perrins appeared for the Respondent Wife.

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(As Approved by the Court)

Crown Copyright ©

Lord Justice Thorpe:
1. There were extremely unsatisfactory ancillary relief proceedings brought between Buder Omer Ali El Karim, the wife, and Ahmed Abdalla Ahmed Musa, the husband, following the dissolution of their marriage.  The proceedings were particularly unsatisfactory given that the husband acted in person and was in the clearest breach of his obligation to make full, frank and clear disclosure of his financial circumstances.  Such was the unsatisfactory nature of the case that the District Judge who was due to conduct a three-day final hearing had to devote those three days to giving directions to bring the case into some sort of order.  He accordingly adjourned to a fresh future date, which was given to HHJ Hayward Smith QC sitting in the Principal Registry on 24 January 2012.

2. HHJ Hayward Smith was extremely critical of the parties.  He described the trial as "an extraordinary hearing".  He said of the parties:

"...each of them demonstrated deep animosity and total mistrust of the other.  Each of them found great difficulty in answering questions.  Many, if not most, questions led to a diatribe by one of them against the other, often accompanied by remarks from the back of the court from the one who was not in the witness box.  Each of them took every opportunity to denigrate and score points off the other ...   Their behaviour at this hearing has not helped either of them, or me, in determining the facts or a conclusion that tries to be fair to both parties.  Each of them alleges that the other has produced fabricated documents.

3. The wife's case is that the husband is a liar.  She contends that she has failed to disclose his financial position.  She contends he is far wealthier than he says.  She asked me to order a sale of the matrimonial home with all the net proceeds being paid to her, plus a lump sum of £100,000, plus periodical payments for her and the children in the region of £26,000. 

4. The husband's case is that the wife is a liar. He contends that she is a very rich woman -- far richer than he is and that I should award her nothing."

3. Having made that introduction, the judge went on to consider the probity and reliability of each on specific issues and came to the conclusion that he preferred the evidence of the wife wherever it was in conflict with the husband.

4. Part of her evidence was that, although she had inherited significant real properties on the demise of her affluent father, she had entered into a family arrangement whereby in lieu of her interests in the realties she received a lump sum of US $125,000, which she had spent before she entered the marriage.  In relation to two other properties which were flats in the general description of Shahad Construction Limited, she said that they were not beneficially hers but her mother's.  And in relation to an Egyptian property in Cairo she said that she had acquired it on behalf of her brother who in due course held on behalf of cousins.  The judge accepted that evidence, which he held to be true, and accordingly he made an order that the assets as described and valued by the wife should be divided equally between the parties and that the balancing sum due to the wife would be achieved by the realisation of the final matrimonial home, which would be part and parcel of the necessary mathematics which would explain equal partition.

5. The husband was condemned in the costs, 80 per cent of the wife's costs, as a publicly funded litigant. 

6. The husband by an appellant's notice sought permission to appeal and his grounds asserted that the judge's conclusion was fundamentally vitiated by the wife's material non-disclosure both in relation to her inheritance from her father and her interest in the two flats in the Shahad Construction Company affair.  There was also the assertion that she was guilty of material non-disclosure in relation to the Cairo flat.  A subsidiary but connected ground was that the judge had erred in principle in refusing to admit relevant evidence that the judge was proffering as a litigant in person.

7. The third ground asserted that the judge was fundamentally wrong in awarding a lump sum to the wife of £219,500 in order to bring her to equality, for reasons which I will not further define. 

8. Ground 4 attacked the mechanism by which the judge gave the wife absolute right to discharge the property of whatever sum she chose to achieve as part and parcel of the achievement of a fixed sum of £219,500. 

9. And the fifth ground sought to attack the judge's discretionary costs order.

10. All this was put to me on paper when I granted a stay and permission, with the observation:

"This appears to be not so much an appeal against a discretionary judgment as an application to set aside an order on the grounds that it is vitiated by material non-disclosure."

11. That observation has stood the argument at the hearing today, where Mr Carter for the appellant has in a very clear and able submission demonstrated the nature of the material non-disclosure.  It centres on the six properties inherited by the wife on her father's death.  The judge accepted her evidence as true.  Mr Carter says he could not possibly have so found had he had sight of the fresh material which Mr Carter explains in his oral submission.  He starts with the property which is known as number 38.  The document at M33 shows a Certificate of Zero Interest held by the wife obtained in the Sudan and dated 4 November 2011.  Against that, we see that, by a document subsequently obtained from the Sudan, on the 2 August 2011 the wife transferred No.38 to her brother for a consideration of 120,000 units of Sudanese money.  Likewise property No. 12: (M36) a document relied on by the wife, 6 October 2011 a Certificate of Nil Interest but subsequently adduced (M37, M38 and M 39) a document of 30 January 2012 showing 2 October 2011 a transfer to her mother for £47,000, possibly effected in the previous month on 12 September. Then property 407: again the same pattern (M25) a Certificate of Ownership by her brother but in contrast (M44, M45) a document of 30 January 2012 showing on 11 September 2011 the transfer from wife to brother of £40,000.  Likewise property 408: (M46) the document relied upon by the wife at trial.  A Certificate of Ownership by the wife's brother, 11 September 2011, but the new document (M50) dated 13 January 2012, showing on 11 September 2011 transfer wife to brother for a consideration of £40,000.

12. All four are highly significant, fresh evidence certificates.  They belie the wife's case that she had divested herself by receipt and historic receipt of US $125,000.  They demonstrate her subsequent dealings in the properties and very significantly demonstrate her divesting at a time when the interlocutory ancillary relief proceedings were at a critical stage.  Furthermore, valuations produced by the husband would seem to suggest that the considerations received by the wife for these transfers were at a significant under-value, so if these fresh documents are to be believed the wife is not only guilty of material non-disclosure but guilty of the deliberate preparation and advance of a false case.

13. There are two other properties inherited by the wife, 105 and 23. As to 105, at M52 there is a no interest certificate dated 13 September 2011, but the document at R36 shows that the property was confiscated by the state, but that she received two properties in compensation, 704 and 715.  Likewise property No. 23: a certificate of no interest dated 5 September 2011 at page M53.  But then a document at M54 showing that that property was the subject of state confiscation, but the document fails to show what compensation was paid in its respect.  The husband has asserted that maybe the document at M54, when translated from the Arabic into English, has words omitted which disguise the nature of the compensation in lieu.  The husband's case in relation to 105 and 23 is not as stirring as in relation to the four earlier properties, but it certainly casts some doubt on the validity of the wife's disclosure.

14. In relation to Shahad Construction (flat 2 and flat 3) in respect of which the wife suggests that she is without beneficial interest, there are unexplained questions, not least that one of the properties seemingly does not exist as flat 28 at the declared address.  That is the subject of asserted transfer from the wife to brother and then from brother to cousins in 2001. So Mr Carter fairly says that in relation to that he is not currently able to demonstrate manifest breach of duty, but that there is an uncertainty regarding all this which demands further investigation. 

15. We have taken Mr Carter's submissions on this ground 1 and 2 as preliminary, because if he can succeed then obviously it may not be necessary to investigate further grounds in greater detail.  Ms Perrins has sought to take a point of procedure and asserted that this court should not be dealing with this material and that any application to set aside or vary on the grounds of material non-disclosure is, as is demonstrated by authority, particularly the recent observations of Wilson LJ in Judge v Judge [2008] EWCA Civ  1458, improperly brought to the Court of Appeal.  That submission is simply not borne out by a full review of the procedural reviews over the course of the years since the decision of the Privy Council in de Lasala v de Lasala  [1980] AC 546.  As so often, a particularly full and profound review of the procedural issue is to be found in Rayden and Jackson on Divorce and Family Matters 18th edition Volume I at paragraphs 18.44 to 18.46.  My current position on this long standing divergence of opinion between myself and Ward LJ is that, as the authors of the sections in Rayden suggest, it is high time that the issue were resolved.  In the meantime it is perfectly open to the applicant who seeks to establish a case of non-disclosure to go either by way of appeal to this court or by application to the first instance court, depending on the circumstances of each and every case.

16. In my judgment the decision to bring the complaint of material non-disclosure was properly brought to this court, and I would reject without any hesitation the criticisms advanced by Ms Perrins.

17. So she has to meet the factual case which is so persuasively advanced by Mr Carter.  She seeks to do so by referring to the statement in opposition by the respondent wife, which is to be found at page S14, paragraph 22.  What does the wife say about the formidable case advanced by the husband? She says :

"I have now asked my family about the registration of the Properties into their names. They have confirmed to me that they did not register the charge in ownership at the Land Registry immediately. When I asked them why not they said because it was not necessary. They decided later to register the change of ownership at the Land Registry and have told me they started this process in 2009, which was before the appellant and I separated.  I do not know the date when the registration of the various properties completed but my family have told me that it took a long time as it was complicated, they only had one lawyer doing the work and it was expensive. "

18. That is a feeble response to the powerful documents.  It certainly does not render unnecessary further judicial investigation.  It does not even notice the highly suspicious point that these registrations were all coincident.  First, there is the coincidence between the no interest certificate and the dates of transfer and then there is the coincidence between the documents executed in the Sudan and the crucial stage of interlocutory proceedings in the financial proceedings case here.

19. I am obviously reaching no conclusion as to the reliability of the case that is now advanced by the husband, nor am I offering any view as to the future outcome.  The only conclusion that I am expressing is that there is a case demonstrated on the husband's behalf that demands re-investigation. Of course, it will be open to the wife to adduce evidence from her brother, from her mother, from lawyers in Sudan to explain how it came about that these documents were executed and why they were executed, always assuming that they were executed on the dates asserted by the husband. 

20. So on grounds 1 and 2 I would simply direct that there should be a remission and that either HHJ Hayward Smith or some other judge of the Division or deputy judge of the Division should conduct a fuller and profounder investigation on the basis of all the evidence now available.

21. We have decided that we should not simply conclude the hearing today on that basis, for obviously if the husband fails at the retrial, re-investigation, there would still be the outstanding grounds of appeal unresolved.  Having heard Mr Carter in support of the additional grounds and determined that his application in relation to ground 5 needs no further ruling from this court today, it remains for us to deal with grounds 3 and 4.

22. Ground 5 needs no further ruling because obviously, if following re-investigation the judge decides that he is going to vary the substantive order below, it is then free for him to vary the order for costs below. As to ground 3 I would grant no permission.  Nothing asserted there seems to me to have any realistic prospect of success.  There remains only the application in ground 4, which goes to the judge's ruling on the wife's freedom not only to market but also to retain an entitlement to £219,000 whatever sum she trades the house at.  That seems to me to be a point that is plainly arguable, for it is plainly arguable that the husband is entitled to safeguard against the wife either deliberately or unwisely contracting a sale of the property at an under-value.  So in relation to ground 4 I would grant permission but adjourn the listing of any appeal to await the outcome of the further proceedings below.

23. I would like to add one final word.  As the judge concluded, having heard the parties this case has engendered extreme hostility and ill-will, probably hatred, between the parties.  Now we have a contested hearing in this court.  Next, we will have a retrial in the court below.  They have between them a choice.  They do not have to prolong litigation.  It is perfectly open to them to resolve the outstanding issues by agreement, which can either be brought about by their sensible, unselfish review of what is best, alternatively by seeking help from professional mediation and it is plainly open to them to embark on mediation within the Court of Appeal scheme before proceeding to another contested hearing before a judge of the Division.

Lord Justice Sullivan:
24. I agree that the question whether the judge's decision was vitiated by the wife's material non-disclosure should be remitted for reconsideration, ideally by HHJ Hayward Smith QC.  So far as the procedural issue raised by Ms Perrins is concerned, that is to say her proposition that the application should have been made to the trial judge rather than this court, I would prefer to express no opinion on the divergence of view between Thorpe LJ and Ward LJ to which my Lord has referred.  I would content myself by saying that, on the facts of this case, I am satisfied that this court does have jurisdiction to consider this application.  Having done so, I am satisfied that there is a serious issue to be tried as to whether or not there was material non-disclosure by the wife in respect of her interest in the properties to which Thorpe LJ has referred. It is not for us to determine that serious issue.  That is an issue which should be investigated, as I say, ideally by the trial judge but if not by another judge in the Family Division.  Otherwise I have nothing further to add.

Mr Justice Morgan:
25. I agree with the judgment of Thorpe LJ.  I would like to express my appreciation to both counsel for their very clear written and oral arguments. I found them of great help when trying to make my way through the very difficult material which the court had to deal with in this case.  I sympathise with the position of the trial judge.  He was not as fortunate as we were in being guided by representation on both sides.

Order: Appeal allowed in part