England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
The Honourable Mrs Justice Baron
FD 05 D 06223

		Royal Courts of Justice Strand. London. WC2A 2LL
		11/12/2008

Lord Justice Thorpe:

The issue

1. This appeal raises the question as to whether the Judge who has made an order, by consent, at the conclusion of a successful FDR can then decide subsidiary issues which the parties have subsequently failed to agree. The answer to that question lays in the interpretation of rule 2.61E(2) of the Family Proceedings Rules 1991 which provides:

"(2) The District Judge or Judge hearing the FDR appointment must have no further involvement with the application, other than to conduct any further FDR appointment or to make a consent order or a further directions order."

The context

2. There were contested ancillary relief proceedings between the parties. It was what would be loosely classified as a big money case. Leading specialist silks and juniors were instructed. The FDR appointment was listed before Baron J. No agreement was reached at that appointment, perhaps because the husband appeared only by video link. It was agreed that there should be a further FDR appointment which the husband could attend.
3. That took place on the 21st February 2008 when, after a long day of negotiation, leading counsel informed the Judge that agreement had been reached.
4. Drafting was left to the juniors and a sealed order resulted dated 19^th March 2008. However, the consent order was not completely comprehensive. Paragraph 11 provided:

"there shall be security for the lump sums ordered at paragraphs 1.b to 1.e (preferably by way of a legal charge over shares in Principal Capital Holdings SA owned by Concerto Capital Corporation Ltd if practicable), the terms of such security to be agreed between the parties and in default of agreement determined by the Court on the basis that the parties will make use of the hearing listed on 1^st April 2008 for any such determination."

5. A further order was made by Baron J on 1^st April 2008, paragraph 3 of which provided:

"The issue of security of the lump sum instalments due under the final ancillary relief order shall be determined on the first available date after 28 April 2008 (time estimate 1 day) before Mrs Justice Baron to be fixed by counsel's clerks in conjunction with the Clerk of the Rules and the Clerk to Mrs Justice Baron."

6. The envisaged hearing was listed on 10 July 2008 when the Judge was informed that the issue of security had still not been finalised. Baron J made a series of directions to enable the outstanding issues to be determined by her on a future date.
7. Outstanding issues were now escalating beyond the nature and extent of security for future lump sum instalments.
8. . Unfortunately for the parties, the structure and worth of the husband's fortune had been hit by the earthquake of the global financial crisis.
9. In reaction, the husband has issued a range of applications from an application for extension of time, to an application for the variation of the lump sum and an application for permission to appeal out of time. The wife has countered with her application to vary, seeking both acceleration and increase. Thus major and unforeseen contentious litigation has rapidly developed. A hearing was fixed for partial determination and/or directions on Friday 21^st November.
10. However, the husband had obtained a hearing date of 19^th November for a number of applications, including an application for an order that Mrs Justice Baron was prevented by her conduct of the FDR appointment from determining the issues of security still unresolved as well as the cross applications created by the global recession.
11. That prompted Mr Webster, for the wife, to apply to Baron J without notice on the morning of 17^th November. He made a number of applications to the Judge, sufficiently summarised by saying that he sought all applications, including the husband's applications fixed for hearing on 19^th November, to be stood over to the fixture before Baron J on 21^st November.
12. Baron J was minded to make that omnibus direction but gave liberty to Mr Ewins, junior counsel for the husband, to be heard at 2pm that day.
13. That afternoon Mr Ewins objected to the Judge's proposed omnibus direction on the simple ground that Baron J should take no further part in the proceedings being debarred from so doing by the terms of rule 2.61 E(2). Baron J ruled against him giving her reasons in an extempore judgment. Her ruling can have been no surprise to Mr Ewins since she had already decided the issue in the case of G v G [2007] 1 FLR 237.
14. Mr Ewins sought permission to appeal which she refused, signing detailed reasons for her refusal.
15. Accordingly Mr Ewins filed an application for permission to appeal on 18^th November which was referred to me on the morning of the 19^th. I initially directed an oral hearing without notice but subsequently enlarged the direction to an oral hearing on notice with appeal to follow if permission granted. I enlarged the order to guarantee that the issue would be completely decided on 20^th November in advance of the fixture on the 21^st. I am grateful to Mr Ewins for a full skeleton argument and a careful oral argument and even more grateful to Mr Webster who provided the same assistance at only 3 hours notice.

The appellant's submissions

16. Mr Ewins submits that the crucial words within the rule are "the application". That can only mean the application for ancillary relief. The application is commenced by the filing of form A and its life extends through whatever developments until terminated by the determination of an application for leave to appeal out of time. Any subsequent contentious issues arising out of the compromise or the enforcement of the compromise, revert the judge to the application.
17. Mr Ewins further submits that this interpretation is supported by the authority of Rush and Tomkins v GLC [1988] 3 WLR 939 where at 943E Lord Griffiths in his speech summarised the law in this sentence:

"I would therefore hold that as a general rule the 'without prejudice' rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement."

18. To illustrate the application of that rule Mr Ewins suggested a fictional case in which a husband offers a lump sum of £150 payable as to £100 immediately and five annual instalments of £10 each thereafter. Alternatively he offers an immediate lump sum of £120. The wife accepts the first offer. Implementation breaks down and the wife applies for variation to accelerate and the husband variation to extend or to release. The judge who heard the FDR could not properly determine those cross-applications because the judge would be prejudiced by the recollection of the alternative offer that the wife had not chosen.
19. Finally Mr Ewins submits that were we to uphold the judge the public confidence in the security which rule 2.61 E (2) is designed to offer would be undermined.

Respondent's submissions

20. Mr Webster adopts the judge's reasoning which is essentially within paragraph 19 of her judgment, as follows:

"I am clear that a judge who has made a final order is in a different position to the FDR judge where the proceedings remain in issue. If an agreement is reached, then whatever the judge may know about the earlier negotiations is no longer relevant because the parties have reached a concluded agreement. The judge is therefore in a similar position to the trial judge who makes a final order (whether by consent or otherwise). It is no longer necessary for the veil of without prejudice to be sacrosanct and the rules must be construed purposively. Consequently, for those reasons, it seems to me that, save for in exceptional circumstances (which I suppose might occur in some cases), the judge who makes an order in the circumstances in which I made this order can and should deal with consequential issues that arise as a result of the consent order."

21. To like effect in her reasons for refusing permission to appeal she said:

"I consider that that when the FDR Judge makes a final order he/she is no longer bound by the confines of rule 2.61 E because he/she becomes akin to the trial judge. As such that judge can and should deal with matters arising from the final order such as defining security in the event that the parties cannot agree. I am not privy to any without prejudice negotiations which might effect my decision on that or any other point."

22. Mr Webster in his skeleton emphasises that the FDR Judge, making a consent order at the conclusion of the appointment, is not simply rubber stamping the terms that the parties have agreed. There is abundant authority that establishes that he is exercising an overriding statutory responsibility to ensure that the contract is fair to both parties, that is to say within the broad ambit of a discretionary judicial determination. Thus the judge in exercising that responsibility is surveying not just the available evidence but also all the without prejudice disclosure. So Mr Webster says that if Mr Ewins were right in his submission that the judge who has been privy to without prejudice material cannot have any further role in the proceedings it would not be permissible for that judge to conduct the independent review required by the statute.
23. Mr Webster makes the practical submission that there is great merit in judicial continuity. If a judge had spent a considerable amount of time reading the papers, conducting the FDR and exercising the independent review under section 25 it would be wasteful of resources at a minimum if consequential issues arising out of the final order, had to be listed before another judge.
24. Finally, Mr Webster points to the fact that the order of 1^st April 2008 specifically listed the outstanding issue of security before Baron J. Mr Ewins had not said on 1^st April or on 10^th July that such a listing was precluded by the provisions of rule 2.61E(2).
25. Mr Ewins in reply accepts that the husband's objection to Baron J was not raised before 4^th November because it was only then that it became fully apparent that outstanding issues could only be resolved by the court.

Conclusion

26. I am in no doubt that Mr Ewins is correct in his submissions as to the proper interpretation of the rule. The underlying policy of the sub-rule is clear. Litigants distrustful of each other and made anxious by the complex tactics of contested litigation must be confident that conciliation within the court proceedings guarantees them the same confidentiality that they would enjoy had the dispute been referred by the judge to mediation by a mediation professional. So the intention and the meaning of the sub-rule are clear. The judge who has been armed to conciliate by the provision of all the privileged communications can only do one of three things, that is to say set up a further FDR appointment, make a consent order or make an order for further directions, practically speaking directions for trial.
27. There will be cases where at the end of the appointment, the judge is presented with a contract which needs to be drafted technically into the form of an acceptable order: see Rose v Rose [2002] 1 FLR 978 or the present case. Any disagreement between counsel as to how the contract should be expressed in the language of the court can clearly be referred to the FDR judge for determination.
28. However, where the contract presented to the judge at the conclusion of the FDR is incomplete in the sense that there are subsidiary or peripheral issues to be agreed, or determined by the court in default of agreement, it is otherwise. Where, as here, the parties did not reach agreement as to the nature and extent of the security, the dispute must be listed before another judge. So too must issues of enforcement be listed before another judge. Equally subsequent applications to vary or set aside the consent order achieved at the FDR appointment must be listed before another judge.
29. I do not accept the submission that this interpretation would create administrative difficulties or a waste of judicial resources. Even were that the case, it would be a small price to pay for preserving the complete confidentiality that must attach to the FDR appointment.
30. With all due respect to Baron J, who has the greatest experience in this field, I cannot accept her fundamental premise that once agreement is reached the without prejudice material is no longer relevant and that the judge is therefore in a similar position to the trial judge who makes a final order. To me the dissimilarity is clear. The one has been exposed to confidential material and the other has not. Whether in the individual case the judge has or has not any recollection of the confidential material is not to the point. The rule provides a limitation on the function of the FDR judge that is not fact dependent.
31. During the course of argument there was some discussion as to whether, despite the terms of the rule, the parties might, for whatever reason, prefer the determination of the FDR judge on subsidiary issues that could not be agreed and therefore apply for the issue to be listed before the same judge. That issue does not arise on the present appeal and I would prefer to express no opinion on the point.
32. At the end of the submission we allowed the appeal with reasons to follow in writing. We invited counsel immediately to request the Clerk of the Rules to re-arrange the listing so that Baron J and another judge of the division exchanged lists. We invited written submissions on costs.

Lord Justice Lawrence Collins:

33. I agree that the appeal should be allowed for the reasons given by Thorpe LJ. The policy considerations behind Rule 2.61E(2) of the Family Proceedings Rules 1991 require that in a case such as this the judge who has dealt with the FDR appointment should have no involvement with an application of the present kind.
34. As Thorpe LJ has said, there was some discussion in the course of argument about the question whether the parties might agree that the FDR judge could subsequently determine subsidiary issues which could not be agreed.
35. Rule 2.61E(2) provides that the judge hearing the FDR appointment "must have no further involvement with the application" except in the specified cases. Although the point does not arise for decision in the present case, it seems to me that there are grounds for concluding that the parties may waive the prohibition. The meaning of jurisdiction has been much debated: see for example, among many other decisions in many different contexts, Garthwaite v Garthwaite [1964] P 356, 387; Carter v Ahsan [2005] EWCA Civ 990, [2005] ICR 1817, at [16].
36. Today it seems to me that the question should be approached not by considering whether the Rule is a rule of jurisdiction, or whether it is mandatory or directory, but what its consequences are intended to be: cf R v Home Secretary, ex p Jeyeanthan [2000] 1 WLR 3545, 359-362; R v Soneji [2005] UKHL 49, [2006] 1 AC 340. The policy behind the Rule is to encourage settlement and in particular to protect without prejudice communications. That policy is not undermined by allowing the parties to waive the requirement.

Lord Justice Goldring:

37. I have had the advantage of reading in draft the judgment of Lord Justice Thorpe, with which I am in full agreement.

Introduction

38. On 19 March 2008 the Petitioner and Respondent reached agreement, the terms "being approved by Baron J on a Rose v Rose basis." Those terms were set out in the order of that date. Among other things, Mr. Myerson was ordered to pay a lump sum of £9.5 million by annual instalments, the final payment being on 3 April 2012. By paragraph 11 of the order, however, there was to be security for the lump sums, "such security to be agreed between the parties and in default of agreement determined by the Court on the basis that the parties will make use of the hearing listed on 1 April 2008 for any such determination."
39. Agreement had not been reached by 1 April. On that date Mrs. Justice Baron made orders for the resolution of the security issue. By paragraph 3 of that order, the dispute "shall be determined on the first available date.. .before Mrs. Justice Baron..." There was another hearing before Mrs. Justice Baron on 10 July 2008 in which a hearing date before her was set for the first available date after 1 October 2008. That date was subsequently set for 21 November 2008.
40. On 4 November 2008 Mr. Myerson's solicitors issued two summonses. In the first was sought a hearing on 19 November 2008 to hear an application that the order of 19 March 2008 be set aside or that leave be granted to appeal out of time against that order and that the decision on the issue of security be adjourned pending determination of the application. Alternatively, Mr. Myerson sought variation of the lump sum payable, extension of the timing of the property transfer order of 19 March 2008 and reconsideration of the issue of security.
41. The justification advanced for re-opening what had been agreed is said to be the effect on Mr. Myerson's financial position of the current financial turmoil.
42. In the second summons of 4 November 2008 Mr. Myerson sought an adjournment of the hearing fixed for 21 November 2008 pending resolution of the first summons or, to have the hearing of 21 November 2008 heard by a judge other than Mrs. Justice Baron. There was too an application that all subsequent hearings of the case be by a judge other than Mrs. Justice Baron.
43. On 17 November 2008 there were further hearings before the judge. For present purposes, the important application was that by Mr. Ewins on behalf of Mr. Myerson. As the judge put it in paragraph 15 of her judgment regarding that application,

"The essence of his submission is that I should not take any part in these proceedings because of the provisions of Rule 2.61E of the Family Proceedings Rules ("FPR")."

44. The judge decided that she could take further part in the proceedings: that, in particular, she could deal with all the issues to be raised at the hearing on 21 November 2008. Was she right?

FPR2.61E

45. FPR2.61 provides that:

"(1) The FDR appointment must be treated as a meeting held for the purposes of discussion and negotiation...

(2) By FPR2.61E(2):

"The...judge hearing the FDR appointment must have no further involvement with the application, other than to conduct any further FDR appointment or to make a consent order or further direction order...

(5) At the conclusion of the FDR appointment, any documents filed.. .must, at the request of the party who filed them, be returned to him and not retained on the court file...

(6) Parties attending the FDR appointment must use their best endeavours to reach agreement on the matters in issue between them."

The judgment

46. The judge observed that in none of the previous proceedings before her following the agreement had it been suggested she should recuse herself. She referred to the well known speech of Lord Griffiths in Rush and Tomkins v GLC [1998] 3 WLR 939 at page 943E, in which he said:

"I would hold that as a general rule the 'without prejudice rule' renders inadmissible in any subsequent litigation connected with the same subject matter, proof of any admissions made in a genuine attempt to reach a settlement... "

47. As to that passage, the judge said this:

"Relying on that passage...Mr. Ewins [counsel for Mr. Myerson] informs me that because without prejudice matters were placed before me prior to the consent order being [made] I can take no further part in any application to do with this case. I do not accept his submission as being correct in circumstances when the parties have reached a concluded agreement."

48. The judge referred to G v G [2007] 1 FLR 237, a previous decision of hers. In that case, in the context of the wife's application for a variation of an order following an agreement previously reached before Mrs. Justice Baron at the FDR appointment, the parties had agreed she should deal with the wife's application. Although jurisdiction had been conceded, the judge went on to consider FPR2.61E(2). She said (at page 241[16]):

"...I consider that I have jurisdiction to deal with this application. It seems clear that the terminology in subpara [(2)] when it refers to "the application " means the application for ancillary relief with which the court is being asked to deal at the FDR appointment.

Once a consent order has been made that issue has been determined. As a matter of reality, thereafter the court must be able to deal with consequential directions or disputes in relation to its order which includes the ability to vary the terms of the lump sum order pursuant to s31.

The reason for the embargo in the...Rules which stops a judge from taking any further part in the case after a mediation session is simply to cover the fact that each of the parties have made their without-prejudice position entirely clear. Accordingly, that judge should take no part in any other aspect of the case while those matters remain undecided. But once they have been decided by another judge, or have been dealt with by consent, for my part I think the original judge, who dealt with the FDR, should be able to deal with further or new applications that come into being unless there is some good reason which is fact specific."

49. In paragraph 19 of her judgment in the present case she said that:

"I am clear that a judge who has made a final order is in a different position to the FDR judge where proceedings remain in issue. If agreement is reached, then whatever the judge may know about the earlier negotiations is no longer relevant because the parties had reached a concluded agreement. The judge is therefore in a similar position to the trial judge who makes the final order (whether by consent or otherwise). It is no longer necessary for the veil of without prejudice to be sacrosanct and the rules must be construed purposefully.

Consequently, for those reasons, it seems to me that, save for exceptional circumstances...the judge who makes an order in the circumstances in which I made this order can and should deal with consequential issues that arise as a result of the consent order."

The argument

50. Mr. Ewins on behalf of the appellant submitted that the meaning of FDR2.61E is clear. The judge does not have jurisdiction to determine the issues now raised by Mr. Myerson. The "application" must mean the application for ancillary relief in general. That application subsists from the time it is made to a final order and enforcement or variation proceedings. There is no justification for attempting to sub-categorise it, as did Baron J. Application of what Lord Griffiths said in Rush and Tomkins to the present case would therefore mean that all the without prejudice material disclosed in the course of the FDR appointment would remain privileged when the judge hears and determines Mr. Myerson's present applications.
51. Although there may be pragmatic arguments of judicial continuity in favour of the same judge dealing with subsequent applications where issues such as those in present case have to be resolved, there are substantial arguments against. The different roles of the judge facilitating a negotiated settlement and the judge deciding issues would become blurred. The profession would have to advise clients that what is revealed during the course of the meeting might not be confidential. It would be impossible for a judge entirely to exclude what was heard in confidence during a subsequent hearing.
52. Mr. Webster on behalf of Mrs. Myerson submitted that there is, as the judge decided, a crucial difference between an FDR hearing which does not result in an agreement and one which does, as here. The position is similar to that of the FDR judge when making a final consent order for ancillary relief, something he is specifically empowered to do. When doing so, the judge is obliged to conduct an independent review of the information available to him by virtue of section 25 of the Matrimonial Causes Act 1973. That was made clear by Lord Justice Thorpe in Xydhias v Xydhias [1999] 1 FLR 638, when he said (at page 691G):

''''The court conducts an independent assessment to enable it to discharge its statutory function to make such orders as reflect the criteria listed in s25 of the Matrimonial Causes Act 1973 as amended."

53. It is fanciful, submitted Mr. Webster, to suggest that when carrying out the section 25 function, the judge does not take consider the without prejudice material. The judge does so as the trial judge.
54. Mr. Webster relied upon a further aspect of that case. An issue was whether an agreement had been reached between husband and wife. On appeal, the husband argued that all the negotiations had been without prejudice and that as they had not resulted in a compromise, evidence of them should not have been admitted. No objection had been taken before the district judge to the admission of evidence of negotiations or of concessions made in the course of without prejudice communications. Lord Justice Thorpe was "in no doubt that an agreement was concluded." Mr. Webster relied upon the following observation (at page 695F):

"Of course an agreement serves to open without prejudice correspondence and if there is a dispute as to whether or not that stage was reached the without prejudice correspondence must be admitted to determine that issue"

55. Mr. Webster submitted that given there was an agreement in the present case, that opened all the without prejudice material. It followed there could be no conceivable objection to Baron J continuing to deal with the case.
56. Mr. Webster made two final points. First, he submitted that in complex ancillary relief cases such as the present, there was obvious practical merit in judicial continuity. Second, Mr. Ewins had not suggested on 1 April or 10 July 2008 that Mrs. Justice Baron should not continue to hear the case.

My conclusion

57. The overall purpose of paragraph 2.61E is to encourage parties to resolve the dispute between them by discussion and negotiation. Sub-paragraph 6 imposes an obligation upon them to do so. All the provisions in the paragraph are to that end. By subparagraph 2, they know that if no agreement is reached, the FDR judge can have only very limited further involvement and only for the purposes there stated. By subparagraph 5 they know that at the conclusion of the appointment (and whether or not agreement is reached) they can have returned to them any documents detailing or referring to offers and proposals made. Any interpretation of sub-paragraph 2 should reflect that overall purpose.
58. In my view "the application" in sub-paragraph 2 must be the application for ancillary relief. Until it is finally resolved, it subsists, as Mr. Ewins submitted. It is not finally resolved if there is outstanding a dispute of substance, albeit there may be agreement on other matters which is reflected by an order. There is, it seems to me, no distinction in principle between a judge deciding a dispute following a complete failure to reach agreement, and resolving what is a dispute of substance following what in reality was only partial agreement. In neither case has privilege been lost, as Rush and Tomkins makes clear.
59. Although it is strictly unnecessary in the circumstances for me to deal with it, I should add that I cannot accept Mr. Webster's submission that what was said by Lord Justice Thorpe in Xydhias in the passage relied upon is authority for such a broad contention as he makes. The observation seems to me very much to reflect the particular facts of that case and to be authority for no wider a proposition than that the court may look at the without prejudice material in order to decide whether or not an agreement has in fact been reached, something about which in that case there was no doubt. The present case is quite different.
60. I cannot too accept Mr. Webster's submission that there is a similarity between the judge carrying out his required review of a consent order under section 25 of the Matrimonial Causes Act 1973 following an FDR appointment and the judge resolving a dispute of substance such as the present. The judge's role in each situation is quite different.
61. In G v G there was of course agreement that Baron J should not recuse herself. There was some discussion as to whether as a consequence of sub-paragraph 2 she did not have the jurisdiction to hear the case at all, whether or not the parties consented. We have heard no detailed submissions on this aspect, which does not arise here. Plainly, if the parties consent to the FDR judge continuing to act, very different considerations may apply. What the position then is must be for future consideration.