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The Thwaite Jurisdiction – No Longer the Last Reserve of the Desperate?

Joseph Rainer, barrister, Queen Elizabeth Building examines the use of the Thwaite jurisdiction in relation to the court’s power to revisit financial remedy orders by analysing the relevant case law and using some fictitious practical case studies.

Joseph Rainer, barrister, Queen Elizabeth Building


This article will discuss the rarely used 'Thwaite jurisdiction', which provides a lesser known avenue to revisit a financial order. It will (1) define the 'Thwaite jurisdiction', (2) distil the relevant principles from the relatively short string of authorities, and (3) examine the possible uses of the jurisdiction. This discussion takes place in the shadow of the recent judgment of Roberts J in US v SR (No. 4) (Executory Mainframe Distribution Order: Change in circumstances: Extent of the Court's Ability to Revisit Terms) [2018] EWHC 3207 (Fam), which may be a judicial indication that reliance on the Thwaite jurisdiction is no longer the last reserve of the desperate. 


What is the 'Thwaite jurisdiction'?


Most practitioners are familiar with the well-trodden paths to revisiting a final financial order, which are:

1. Variation of maintenance and instalment orders under s.31 of the Matrimonial Causes Act 1973;

2. Conventional appeal;

3. Appeal out of time due to a new event since the making of the order which invalidates the basis, or fundamental assumption on which the order was made (i.e. the Barder jurisdiction);

4. Set aside for fraud or mistake;

5. Set aside for material but non-fraudulent non-disclosure, and;

6. If and insofar as the order contains undertakings (see Birch v Birch [2017] UKSC 53).

The above list does not include the 'Barrell jurisdiction', under which a Judge can (inevitably on invitation) revisit a judgment after its delivery but prior to the sealing of the order. Also missing is the 'Thwaite jurisdiction', which is shorthand for the ratio of the Court of Appeal's judgment in Thwaite v Thwaite [1981] 2 FLR 280. In a nutshell, Thwaite says that where an order remains executory, the court retains the power to refuse to enforce it, vary it and set it aside: the court's seisin remains because the originating application has not been dismissed – it is still before the court awaiting adjudication. What is meant by 'executory'? As Nicholls J put it in Potter v Potter [1990] 2 FLR 27, an executory order is 'an order which has still to be carried out' – it has yet to be executed. A final order for a sale or transfer of property which, for whatever reason, is not implemented would be a common example of an executory order.


Principles from the authorities – law and procedure


The line of authorities on this point is constituted of:

• Thwaite v Thwaite [1981] 1 FLR 26

• Potter v Potter [1990] 2 FLR 27

• Benson v Benson (deceased) [1996] 1 FLR 692

• L v L [2008] 1 FLR 26

• Bezeliansky v Bezelianskaya [2016] EWCA Civ 76

• SR v HR and SC (his trustee in bankruptcy) [2018] EWHC 606 (Fam)

• US v SR (No. 4) (Executory Mainframe Distribution Order: Change in circumstances: Extent of the Court's Ability to Revisit Terms) [2018] EWHC 3207 (Fam)

• For a characteristically thorough review of the development of the Thwaite principle from L v L onwards, readers are directed to paragraphs 37-55 of Roberts J's judgment in US v SR (No. 4) (Executory Mainframe Distribution Order: Change in circumstances: Extent of the Court's Ability to Revisit Terms) [2018] EWHC 3207 (Fam) For the reader in a hurry, I summarise the relevant principles as follows:

The core principle

• The court has an inherent jurisdiction to make a fresh order for ancillary relief where the order remains executory if the basis on which it was made has fundamentally altered. This is not a general unfettered power to adjust a final order – let alone a final consent order – merely because the court considers it just to do so. The essence of the jurisdiction is that it is just to do so – it would be inequitable not to do so – because of or in light of some significant change in the circumstances since the order was made. (Thwaite, Benson, L v L (paragraphs 66,67)).

Ancillary principles and amplification

• A significant change in circumstances is required as a component of the test. As Munby J (as he then was) made clear in L v L [2008] 1 FLR 26, the inequity of leaving the final order unadjusted must stem from the change in circumstances.

• Munby J considered whether the Thwaite test required only a 'significant change in circumstances', or the higher threshold of a Barder event– i.e. a new event since the order which "invalidates the basis or fundamental assumption upon which the order was made." Munby J declined to determine this, saying that this was a 'refinement which there is no need for me to explore here'. The acceptance of Munby J's analysis by the Court of Appeal's in Bezeliansky v Bezelianskaya [2016] EWCA Civ 76 can probably be taken as tacit assent that it is not necessary for the change in circumstances to amount to a Barder event in order for the Thwaite test to be satisfied.

• The test (i.e. whether or not it is just to do so) is likely to be met where an order remains executory as a result of one party frustrating its implementation (Bezeliansky – McFarlane LJ (as he then was) at paragraph 39)

• It was argued in Bezeliansky that a correct interpretation of Thwaite permits its use only as a shield rather than a sword – i.e. that Thwaite provides authority only for a court to opt to refuse to enforce an executory consent order, but not to set it aside or vary it. This submission was roundly rejected by McFarlane LJ in Bezeliansky, who described it as 'completely unsustainable'. It is thus settled that the Thwaite jurisdiction does permit the substantive amendment/setting aside of an executory order.

• Mostyn J said obiter, in SR v JR and SC (his trustee in bankruptcy) [2018] EWHC 606 (Fam)

'I think that any application under the principle in Thwaite should be approached extremely cautiously and conservatively'.

However, as noted by Roberts J in US v SR (No. 4), Mostyn J does not appear to have been referred to Bezeliansky or L v L, and neither authority is referenced in his judgment in that case. In any event, Roberts J expressed confidence that Munby J's approach to the Thwaite principle and additional guidance in L v L (approved by the Court of Appeal in Bezeliansky) did represent such a "cautious" and "conservative" approach.

• Any revision of a final order 'must be contained and, so far as possible, should reflect the underlying intention' of the original order (US v SR No. 4 paragraph 56, SR v HR and SC).

A word on SR v HR and SC
In SR v HR and SC, Mostyn J proffered some commentary on the scope and application of the Thwaite jurisdiction which does not sit entirely flush with Court of Appeal's view in Bezeliansky. With the greatest respect, the author is of the view that some sections of the SR v HR and SC judgment need to be treated with caution. This is for two reasons. Firstly, as noted by Roberts J, the SR v HR and SC judgment does not refer to either L v L and Bezeliansky, so its cautionary words about the extent of the Thwaite jurisdiction were made without reference to the highly important guidance in Bezeliansky (i.e. that the 'circumstances justifying intervention are likely to be met when an order remains executory as a result of one party frustrating its implementation').

Secondly, in SR v HR and SC, the discussion of the Thwaite jurisdiction before Mostyn J had apparently been framed by a recital included on the face of the order under appeal by the District Judge below. This recital read:

"In accordance with the authority of Thwaite v Thwaite the court may consider the order and refuse to enforce the order if it is inequitable to do so. Where such an outcome is determined it is open to the court to determine the matter afresh" 

The reader will recall that this interpretation of the ambit of the Thwaite principle as being limited to an equitable jurisdiction to refuse to enforce an executory order was rejected by the Court of Appeal in Bezeliansky. The recital on the order before Mostyn J suggested a two-stage test: '(1) is it inequitable to enforce the order, and (2) if so, should the court determine the matter afresh?' That was simply not a correct summation of the Thwaite jurisdiction by the District Judge. There is not even reference to the requirement for a significant change in circumstances. In fairness, Bezeliansky was the first time the court's power to vary rather than merely refuse to enforce an executory order was confirmed after argument on the point.

Mostyn J went on to consider the authorities of Mullins v Mullins (1879) 11 Ch D and Purcell v F.C. Trigell Ltd [1971] 1 QB 358 referenced in Thwaite), and considered that whilst Mullins and Purcell confirmed the court's retention of control over orders made on interlocutory applications, "that is a far cry from rewriting a final order anew… this gives no support to the notion that if the court, exercising its equitable jurisdiction, refuses to enforce an order it gains the power to make a completely new one" (paragraphs 11 and 12).

It is suggested respectfully that this particular comment should be treated with caution. Mostyn J's scepticism that the Thwaite jurisdiction provided any exception to the "iron rule" that a capital order cannot be varied or a fortiori discharged by a court of first instance was expressed without reference to the sole Court of Appeal authority confirming that the Thwaite jurisdiction does preserve exactly such a power subject to the test being met.

It would appear that the discrepancy between Mostyn J's view and that of the Court of Appeal in Bezeliansky was also noted by the authors of Rayden & Jackson, who note at 28.364 "It appears that Bezeliansky and Bezelianskaya was not cited to Mostyn J in SR v HR and it is not referred to in his judgment". Furthermore, US v SR (No.4) confirms that a Thwaite application is not appellate in its legal or procedural character. Roberts J sat as the first instance judge in US v SR, and varied her own order in US v SR (No. 4) pursuant to Thwaite. Moor J did the same at first instance in Bezeliansky. 


Degrees of culpability

Just how culpable does a party have to be in frustrating implementation to justify Thwaite intervention? In Bezeliansky the order remained executory as an obvious result of the husband's calculated and deliberate disruptive action. The key capital clauses of the final order provided for the husband to retain a property in Paris, and the wife to receive two properties – one in Moscow and one in Monaco. The husband attempted to transfer the Moscow property to a business associate, rather than to the wife as ordered. Whilst he did not complete the transfer, his business associate subsequently brought an enforcement action in Russia which served to successfully convey the property to him.

US v SR
  gives us a more subtle and marginal example. In that case, the revisiting of the order pursuant to the Thwaite jurisdiction was agreed between the parties. Without rehearsing the dense five-year factual background, that case involved three properties (the English family home and two Russian properties), the wife moved back to Russia immediately after the final distribution hearing despite having asserted that she would not do so, thus to an extent undermined the basis of the judgment.

However, the fact of her moving back did not completely cripple the net distributive effect of the final order. This distinguishes US v SR from Bezeliansky, where an entire property was effectively removed from the pot. In US v SR the wife's conduct created a cluster of smaller implementation issues. The biggest single obstructive issue spawned was not the direct fault of the wife – it was the emergence of difficulties in securing the vacant possession of the second Russian property. This property was central to the distribution mechanism of the order because it was the earmarked source for the extraction of liquid capital: it was the only property subjected to an order for sale and division. The matter came back before the court by way of a Barrell application made by the husband. Roberts J made a number of amendments to the order at that stage, two of which were (1) she made the wife's receipt of the family home contingent on her ensuring vacant possession the second Russian property, and (2) she allowed the husband to rent out the family home pending its (contingent) transfer to the wife. Between 2015 and 2018:

• The wife made further applications for further provision for school fees, an appeal out of time of the substantive order, and a release from mortgage obligations. The husband cross-applied to enforce;

• After a refusal of permission to appeal out of time, the wife attempted to transfer the first Russian property to her adult daughter;

• The second Russian property remained tenanted, so could not be sold, and;

• The Moscow property market tanked.

By 2018, the second Russian property had still not been sold and the Russian property market had collapsed, meaning that both the net distribution effect and the mechanism for extraction of capital intended by Roberts J's order had been undermined. Both parties blamed the other for the delay, but by the time of the hearing before Roberts J the husband's counsel conceded that 'the evidence will not support a finding that the wife deliberately frustrated a sale by standing in the way of attempts to market the property'.

Roberts J did not make any explicit findings of culpability. At paragraphs 54-56 she sets out her conclusions on the Thwaite jurisdiction, and whilst she notes that "no one anticipated that, some four years later, Property R (the second Russian property) would remain unsold and/or that its sale would produce a sum very significantly below the agreed value of $US3 million to $US3.5 million': she did not apportion blame. True – the wife upset the intended basis of the 2014 final order by moving to Russia, but (1) this was addressed by the husband's Barrell application, and (2) this was not the ultimate cause for the order floundering.  US v SR appears to be the only reported case where an order has been successfully revisited under the Thwaite jurisdiction absent the frustration of an order's implementation coming as a result of a party's conduct.


What about procedure?

Whilst there is no specific procedural guidance on the point, it would appear that a Thwaite application is probably procedurally akin to an application for set aside, which is made to the first instance court using the Part 18 procedure pursuant to the new FPR rule 9.9A. As above, a Thwaite application is not appellate in character.


Uses of the jurisdiction – hypotheticals/case studies
So finally, let us consider some examples of when an application for Thwaite intervention may be successful. Obviously, all of these are simplified examples, and are limited by their superficiality. 

 Scenario 1 – executory order for sale, housing market collapse, culpable behaviour

• Capital pot consists of family home with net equity £1m. Order for sale made, equity divided 60/40 in favour of the wife (with whom the 14-year old child of the family lives), but a clause provides for the wife to receive a minimum capital 'floor' of £500,000 regardless of the sale price.

• Wife deliberately frustrates sale, husband brings proceedings to 'work out' the order under the liberty to apply clause, achieves sole sale conduct, but wife is in occupation so continues to undermine the sale process so that no reasonable offers are received.

• One year after the original order, planning permission is granted for an unsightly apartment block next door, value of the family home plummets, leaving net equity of £600,000. 

In this example, the Thwaite ingredients are present: (1) the order remains executory, (2) this is as a result of the wife frustrating implementation, (3) there has been a significant change in circumstances (i.e. the adjacent property development leading to a drastic price drop), and (4) it is arguable that the basis for the original order has now been fundamentally altered, and that it would be inequitable for the order to be followed. Of course, there would be other considerations to grapple with. Would it be possible for the wife to rehouse adequately for less than the capital floor? Could the husband still meet his housing needs with his reduced equity receipt? However, with the obvious caveats in mind, it is submitted that this scenario could possibly give rise to a Thwaite intervention.

Scenario 2 - executory order for sale, housing market collapse, no culpable behaviour

• Capital pot consists of family home with net equity £1m. Final order for sale made six months before Brexit vote, equity divided 60/40 in favour of the wife (with whom the 14-year old child of the family lives), but a clause provides for the wife to receive a minimum capital 'floor' of £500,000 regardless of the sale price.

• Order remains executory for two years, but neither party could be said to have directly frustrated its implementation.

• Housing market crashes, net equity reduced to £600,000.

This is a more troublesome scenario. A reader's instinctive response would probably be 'no, surely those facts do not justify revisiting an order'. Some readers would point to the well-known warnings in Myerson v Myerson [2009] EWCA Civ 282 and Cornick v Cornick [1994] 2 FLR 350 that 'the natural processes of price fluctuation, whether in houses… and however dramatic, do not satisfy the Barder test' (Myerson, paragraph 39). However, as was discussed above, a Barder event is not necessary to trigger the Thwaite jurisdiction – only a significant change of circumstances.

In SR v HR and SC, Mostyn J said at paragraph 15 'Certainly, mere delay in implementing a routine property adjustment order could never amount to a ground for a set aside under rule 9.9A'. Roberts J expressly referenced this quotation in US v SR (No. 4), and agreed with it, but distinguished the facts of her case as being 'very far' from such a description. But, absent blameworthy frustration, how so? At paragraphs 55 and 56 Roberts J pointed to four identifiable factors that distinguish US v SR from a case of 'mere delay in implementing a routine property adjustment order': (1) the net effect of the order and the underlying methodology had been carefully set out in the original judgment, (2) nobody could have anticipated that the second Russian property would not be sold four years later (3) nobody could have anticipated the dramatically reduced value of the property, and (4) given expenditure on legal costs the equity in the second Russian property represented a substantial element of the matrimonial pot. Are any of those four features particularly special or unusual? Are similar circumstances not visible in the relatively unexceptional facts of scenario 2 above? Do Myerson and Cornick not tell us (albeit in a Barder context) that dramatic reductions in property markets do not constitute unforeseeable developments? 

The answer is probably that an application to revisit the order under Thwaite in scenario 2 would have very low prospects of success, but following US v SR (No. 4) would not necessarily be entirely hopeless. There is an obvious 'floodgates' argument for why cases such as scenario 2 should stay outside the boundaries of the Thwaite jurisdiction, not least for the sake of achieving the treasured aim of 'finality in litigation'. The facts leading to the delay in US v SR were unusual: perhaps a case with a particularly exotic reason for delay in implementation would be more susceptible to Thwaite intervention.  

Scenario 3 – international quasi-enforcement problem

• Long childless marriage – net capital pot of £10m. Wife to receive several overseas properties, husband to retain the English family home which is already in his sole name and a private UK pension portfolio. Property adjustment orders made in favour of wife in respect of overseas properties, husband retains the rest with a clean break.

• Shortly thereafter, husband leaves the jurisdiction and stops participating.

• Husband then takes deliberate obstructive steps by registering restrictions against the overseas properties to inhibit enforcement – this was unforeseen and makes overseas enforcement impossible.

• Equity in the family home is less than the value due to be received by the wife from the overseas properties.

In this scenario, the wife could use the Thwaite jurisdiction as a quasi-enforcement method. All of the Thwaite criteria are satisfied: (1) the order remains executory, (2) this is as a result of the husband frustrating implementation, (3) there has been a significant change in circumstances (the husband's non-compliance and disruptive steps taken overseas), and (4) the basis for the order has been fundamentally altered and it would be inequitable to hold the wife to its terms.

The wife does not have a lump sum order, so cannot enforce by way of charging order against the family home. In any event, there is not enough equity in the family home to meet the capital balance of her award in any event. The fact that both parties in this scenario are under age 55 means that even she was due to receive a lump sum, she could not enforce against the husband's pension portfolio using the 'Blight v Brewster method'. In this scenario, the wife could fall back on the Thwaite jurisdiction as an alternative to an application to set aside for mistake. She could invite the court to revisit the capital provisions of the order, and substitute a property adjustment order in respect of the family home, and a pension sharing order over a portion of the pension portfolio that would equal the capital share she was due to receive under the original order.  


Conclusion

The relevance of all this should by now be quite apparent. Practitioners will probably have encountered plenty of cases with comparable facts to scenarios 1, 2 and even 3 above, but having dismissed the possibility of a Barder appeal or set aside, may have thought that the only option was to attempt to 'work out' the order as quickly as possible (either via enforcement or a liberty to apply clause), and attempt to limit the damage. After US v SR (No. 4), the Thwaite jurisdiction may no longer be the last reserve of the desperate. In both 'big money' and more modest cases where an order remains executory, and quantifiable financial damage has already been done by virtue of a party frustrating implementation, then the Thwaite jurisdiction should be considered as a possible route to a remedy.

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