England and Wales Family Court Decisions (other Judges)

IN THE FAMILY COURT AT BRISTOL

		10th November 2015

HHJ Wildblood QC:

1. I have anonymised this judgment in a bid to protect the three dependent children of this family.
2. Summary - I have to decide upon the beneficial ownership of a former matrimonial home and whether I should exercise the discretionary powers under The Matrimonial Causes Act 1973 in relation to that home which is the sole asset in divorce proceedings where the husband is subject to a confiscation order and is currently serving a lengthy sentence of imprisonment for a drugs related conspiracy. The Crown Prosecution Service ('the 'CPS') has intervened in these proceedings and contends that the husband is the sole legal and beneficial owner of the property and that the whole of the net value of the property is to be subsumed by the confiscation proceedings. The wife would like the house transferred to her sole name so that she can occupy it with the three children.
3. What started as a somewhat complex case became much more straightforward as it developed in evidence and I say now:

i) I find that the former matrimonial home was bought in the sole name of the husband with the intention that it would be treated as his.

ii) It is highly probable that it was bought with a deposit that was tainted (i.e. funded) by his drugs related offending. Due to that and the point that I mention at iii) below, the case of CPS v Richards [2006] EWCA Civ 849 becomes of particular relevance and distinguishes Re M.C.A. [2002] EWCA Civ 1039.

iii) Not only did this wife know 'that the husband was involved in criminal activities and [know] that from the word go' (the critical finding of Bennett J in CPS v Richards – para 9) but I also find that she knew that the family household was being funded at least in part by the husband's criminal activity. As to knowing 'from the word go' that the husband was involved in criminal activity that is beyond doubt since, the spouses having married in 1998, the husband was convicted of supplying drugs in July 1999 and received a sentence of 15 months from which he was released months before the house was bought. He was then remanded in custody in July 2001 prior to receiving a sentence of six years imprisonment for further supply of drugs. As to the wife's knowledge I deal with that in detail later but I find that she has not told the truth about her own funds (in particular as to how a car was bought for £8.5k) and, applying the logic of R v Lucas [1981] QB 720, I find that she has lied because she knows that a lawful source of the money cannot be advanced.

iv) The contentions of the wife, husband and the husband's brother that there was an express agreement in 2002 that the wife would be entitled to all or part of the beneficial interest in the property, with or without the children, are false. There was no such agreement.

v) The assumption in the 2002 confiscation proceedings that the husband had a 50% interest in the property only (with the wife having the other half) was not made by the CPS (as it was not the enforcement agency then, the HMRC was) and was made without declaration or enquiry. That assumption is not legally binding (I will cite from Re Norris [2001] UKHL 34; [2001] 1 WLR 1388 below) and it is plain that the property was not treated by the husband and wife as being jointly owned thereafter.

vi) The mortgage payments were from money tainted by the husband's criminal activities at least until the husband was again imprisoned in 2012 (therefore CPS v Richards again becomes of significance). The wife accepts that she did not make any mortgage payments until that time (i.e. 2012).

vii) Although the wife contends that she made some mortgage payments after 2012 her evidence (and that of the husband's brother) was entirely unreliable to the extent that I do not accept it and, further, there are three other factors that militate against any such payments grounding a finding that a constructive or resulting trust arose then.

4. My conclusions in this case are that the husband is solely entitled to the legal and beneficial interests in the former matrimonial home and that it would be wrong to exercise my discretion under the 1973 Act to transfer to the wife any part of the beneficial entitlement or proceeds of sale of the property (save to the extent of any surplus after the confiscation) since the husband's beneficial interest in it is tainted by his drug related criminality and her application under the 1973 Act is tainted by her own knowledge of his criminal activity. The decision that I reach is devastating for the wife and three children who will face the seizure of their home in the confiscation proceedings. I note that there was a five year old child involved in the Richards case. I also note that at paragraph 27 of the judgment in CPS v Richards Thorpe LJ, giving he judgment of the court, said: 'In section 24 of the 1973 Act the reference is to property to which 'the party is entitled'. Whilst, of course, pending confiscation the husband remains the owner of the assets, he has in reality forfeited entitlement. This is, of course, another sad example, all too familiar to family judges, of the fact that the court cannot protect children from every consequence of their parents' behaviour'.
5. The moral of the tale in my opinion is that where a family knowingly builds its house upon the sand of drug related activity in this way the house (and other finances) may well fall to confiscation. Or, put more simply, the best advice to any family contemplating behaving in this way is: 'Don't do it'.
6. I will now set matters out in more detail.
7. Introduction - This is a case which has seen inordinate delay. It arises from two sets of proceedings, first, divorce proceedings where there is one asset, the former matrimonial home and, second, confiscation proceedings where a confiscation order was made in July 2013 after the husband was convicted for the drugs related conspiracy for which he is serving 11 years imprisonment; the Crown Prosecution Service seeks to claim the whole of the net value of the home in satisfaction of that confiscation order. The CPS was given leave to intervene in the divorce proceedings on 22^nd January 2014 [B8]. I am sitting as a Family Judge and do not have the confiscation proceedings before me as a judge of the Crown Court. The family proceedings have been listed before me with the permission of Baker J. My job is to determine the beneficial interests in the former matrimonial home and decide whether I should make any financial remedy orders in favour of the wife under The Matrimonial Causes Act 1973.
8. On the 29^th June 1998 the husband and wife married [C10]. There are three children from the marriage; they are aged 16, 13 and 7 and live with the wife. The wife issued a divorce petition on 25^th September 2012 and a decree nisi was made on 15^th February 2013. She has lived in the former matrimonial home throughout.
9. The confiscation order – The husband's offence is described at E79; the Crown stated that 'the evidence links the defendant to the large scale supply of heroin in the Bristol area. Specifically the defendant was linked evidentially to two significant incidents where heroin was being supplied'. The two incidents are described at E79 as having occurred on 31^st October 2009 and 4^th November 2009. He was charged with conspiracy to supply heroin on 26^th July 2010 and his conviction therefore arose some 21 months after he was charged (i.e. on 26^th April 2012). He was sentenced on the date of his conviction, 26^th April 2012.
10. Shortly after the husband was charged, a restraint order, which is still in place, was made by HHJ Lambert on 6^th August 2010. Its terms are of some importance in relation to whether a common intention could have been formed by the husband and wife for the wife to acquire a beneficial interest in the property after the making of the order. It states that:

3. the husband and wife must not:-

(1) remove from England and Wales any of his assets which are in England and Wales; or

(2) in any way dispose of, deal with or diminish the value of any of his assets whether they are in or outside England and Wales.

4. Paragraph three applies to all the defendant's assets whether or not the assets are described in this order or are transferred to the defendant after the order is made, are in his sole name and whether they are solely or jointly owned. For the purpose of this order the defendant's assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own…

5. This prohibition includes the following assets in particular:- i) the property known as [the former matrimonial home]…

11. The confiscation order was made on 12^th July 2013 by HHJ Ticehurst sitting in the Bristol Crown Court in the sum of £95,827 [E155] representing the husband's available assets as assessed at that time. A period of 16 months imprisonment was imposed in default of satisfaction of the confiscation order. £11,409 of cash was seized from the husband at the time of his arrest which has been used in partial satisfaction of the confiscation order, leaving £84,687 outstanding together with interest which runs at 8%.
12. The court declared with agreement between the prosecution and defence that the 'benefit' figure was considerably higher (£226,443.54) and, in reaching the figure for the available assets, took the former matrimonial home to be worth £142k whereas, in fact, it is worth £175k according to the valuation that has been obtained for this hearing [E148]. At A15 counsel for the CPS states 'In the event that the house is sold for a sum in excess of his current liability [under the confiscation order], an application would be made to the Crown Court to vary the figure upwards to better reflect his actual criminal benefit'.
13. The wife did not give oral evidence at the hearing in the Crown Court but did file a statement dated 11^th October 2012 [C2]; in that statement she said that she would be seeking a property adjustment order in relation to the home [C5] but does not assert that she is the sole owner of it (or, indeed, that she has any beneficial interest in it); at C4 she asserted that she had been paying the mortgage. In her Form E at C12 the wife had said in relation to the property: 'I believe that as the former wife and mother of three children and because I have been paying the mortgage for years that I have a substantial beneficial interest in the property to be determined'. That form E was signed on 20^th January 2014; the wife's evidence at this hearing is that she started making mortgage payments in 2012 after the husband was imprisoned in April of that year (I state later why I reject her evidence of making the payments alleged). The first assertion by the wife that she and the children own the whole of the beneficial interest in the property is in her position statement at A9 which was filed in 2015.
14. The husband had filed two statements in the confiscation proceedings; the first is dated 11^th June 2012 and in that statement the husband refers to the former matrimonial home being in his sole name, states his opinion of its value and makes no reference to the wife having a beneficial interest in it. In his second statement, dated 21^st September 2012 he said that 'the above valuation of £100,000 is divided as follows. £60k is a mortgage loan with £5k being used on fees to sell the property. From the remaining £35k, my wife has half equity in the property (50% equity) which leaves me with £17.5k'; thus, in that statement, he was asserting that she had a 50% interest (and that he retained the other 50%).
15. At A20 of the bundle the husband says that he is seeking to appeal the confiscation order but there has not been an application for permission to appeal out of time and no appeal is outstanding.
16. The wife - she is in her mid 30's. She made her application for financial remedy orders on 16^th January 2013, nearly three years ago [B1]. She gave evidence as a deeply distressed woman who recognises the financial peril in which she stands and the impact that these proceedings are having on her children. She is also a woman who did not tell the truth in her evidence and who called a witness, her former brother-in-law 'R' who also did not tell the truth.
17. The husband – he is in his late 30's. He has 13 previous offences recorded against him between 1994 and 2002 [E110 – i.e. not including the current offence]. It is important to cite his last three offences for the purposes of this judgment:

i) On 16^th July 1999 he was convicted of possessing heroin with intent to supply and was imprisoned for 15 months. This involved supplying heroin to a prisoner. I do not have the precise date upon which the husband was released from the sentence but it must have been in the year 2000, just before the former matrimonial home was bought.

ii) On 11^th October 2002 he was convicted of conspiracy to import drugs for which he received 6 years imprisonment and a drug trafficking confiscation order of £24,200 was made; he was remanded in custody in relation to that offence from the 8^th July 2001 and was released in about July 2004. Therefore, for that period he had no income to provide for the former matrimonial home and the wife was not working.

iii) The offence for which he is currently imprisoned (conspiracy to supply controlled drugs – E111). He was not remanded in custody, as I understand it, in relation to that offending prior to his imprisonment; thus he was on bail until 26^th April 2012. That offending took place in 2009, some five years after he was released.

18. Arrangements had been made for the husband to attend this hearing. However, on the morning of the hearing an email was received from him stating that he did not want to attend as this would lead to his removal from an open prison and would have a 'serious effect on [his] sentence plan'. He said that the hearing should continue without him and that he had 'never contested that the family home be transferred to the wife as part of the divorce proceedings'. The wife said that she did not want to insist upon is attendance and anticipated that little if any reliance could be put on anything that he might say.
19. The matrimonial home - It is in Bristol and is occupied by the wife and children. There is a mortgage with Cheltenham and Gloucester Plc with a balance of about £45,040, and a second charge to Prestige (known as Melbourne mortgages) with a balance of about £6,400. After costs of sale at 3% (£5,250) and based on the value of £175k [E148] the net equity would be £118,310. Thus the amount of the mortgage debt has decreased by about £35k since the property was bought (since the original mortgage debt was for £80k). At the time when the wife first says that she began making mortgage payments in 2012 the mortgage debt stood at £52,761.03. Having regard to the schedule that Ms Wiltshire has so helpfully provided about the lawful income into the household it is perfectly obvious that there was no lawful income that could have provided for that reduction in mortgage capital whilst still funding the other outgoings of the family (I set out the net income position later). Of course, no state benefit payments could explain the reduction in mortgage capital since the state will not fund capital repayments. At E17 there is a direct debit statement for July 2009 which states that the mortgage payments of £786.25 p.m. were to be paid from the National Westminster Bank account in the husband's sole name. The statement of DC Blunden at E81 states: 'the majority of mortgage payments have been made from the husband's Nat West account other than a period of 1/6/07 to 01/05/09 when they were paid by DWP, however there are also a number of cash and unidentified credits'.
20. The property was bought in August 2000 in the sole name of the husband; he must have been released from custody in about March 2000 after serving one half of his sentence of 15 months. The application form for the repayment mortgage with Cheltenham and Gloucester plc is at E5 and shows that the husband was declaring an income of £30,000 p.a. [A6], the mortgage was £80k and the purchase price was £89k [E8]. Given that the husband had just been released from custody, his declared income after that date and his fraudulent statements about his income on later applications, I think it highly improbable that his income was anything like £30k p.a.
21. It is at very least highly probable in my opinion that, following his release from prison in 2000 and prior to his return to prison in July 2001, the husband's income was at very least supplemented by his criminal activity. The wife accepts that is an inevitable conclusion for the court to reach, in the light of the incomes that the spouses had at the time (I set them out later). She accepted in evidence that the family could not possibly have lived as it did on the income shown in the schedule alone and that there must have been funding from the husband's drug related activities. In my opinion that was an inevitable concession by her.
22. As to the initial deposit of £9k for the home, the husband has suggested that it might have come from a dowry. When I asked the wife about this her response was 'what is a dowry?'. She knew nothing about any dowry having been paid in relation to the marriage and there is no evidence at all that the deposit came from one. I think it highly improbable that it did.
23. Incomes – Ms Wiltshire did an excellent piece of work by way of the schedule to which I have referred and which records the incomes of the husband and wife during the years 2000 to 2014. I have studied it but will not annex it to the judgment since to do so is unnecessary. The net position column on the schedule shows very clearly that it would have been impossible for this family to have adopted the lifestyle that it did on the basis of the declared incomes. From 2001 until 2004 the husband was in prison and the wife was not working. From 2004 to 2009 the net position based on their declared incomes and benefits after mortgage payments and car loan payments were as follows:

2004 /5	-5171
2005/6	-1880
2006/7	106
2007/8	1522
2008/9	-546
2009/10	18,818

24. By 2009/10 the husband was involved in the criminal activity that has led to his current imprisonment. He was also making applications for mortgages / loans in which he and the wife, I find, were asserting that the house was owned solely and beneficially by the husband.
25. In my opinion, therefore, it is apparent from the above that there must have been undisclosed funding of the lifestyle of this family and the only source must have been criminal. Hence the finding that mortgage payments were made by the husband from tainted funds.
26. Re-mortgages – In 2009 and 2010 (2009 being the year in which the offence was committed that led to the current sentence) the husband tried to raise money on the security of the former matrimonial home. In one instance he was successful but on at least two others he was not.
27. An application was made for the property to be remortgaged with the Santander bank in 2009 [E81]. The application was not successful. The documents submitted by the husband in support of the application suggested that he earned £31,800 gross in 2008/09 working for his brother ('R'); in interview the husband 'stated that he actually earned approximately £1,000 p.m. (£7,400 from is brother and £5,400 from ATM Motors) and that earnings on the certificate and payslips were false, but denied submitting the slips himself'. His declared income for tax purposes for that year was £0 (see Ms Wiltshire's schedule).
28. That remortgage application was declined by Santander. The application had been made in the joint names of the husband and wife; in the police interview in relation to the investigation as to whether he should be prosecuted for fraud (which did not proceed) the husband said that he had made the application in the joint names of himself and his wife because his friend, who is a mortgage adviser, told him that it would be better if it was a joint application (i.e. not that it had to be joint because the spouses held the beneficial interests jointly).
29. On 18^th May 2009 [E93] a successful application was made for a secured loan with Prestige Finance Ltd (now called Melbourne Mortgages Ltd) for £9,116. The loan was granted and is secured against the former matrimonial home. In his application form the husband declared that his income was £42k p.a. (which it was not); the form, supported by a letter from the husband, stated that his income was £50k p.a. (plainly that figure was not true either).
30. It is in relation to that Prestige loan that a document was signed purportedly by the wife stating that she had no legal, financial or other interest or any rights of occupation in the property [E98]; the document was also signed by the husband. The document contains a declaration from the borrower (i.e. the husband) that 'I hereby confirm….that everything set out above…is true and accurate'. The Prestige loan was said to be to 'buy new kitchen and new bathroom and extra work around the house, furniture etc)'.
31. In her oral evidence that wife said that she did not sign the Prestige document at E98; it was signed by someone else. She was therefore asked about what she said in her statement at A12: 'I simply was asked by the respondent to sign the document otherwise he would not get the loan he desperately needed…I simply complied with a tyrant who was abusive if I did not obey'. Thus, why had she said in her statement that she had signed the document under the influence of an abusive husband rather than saying 'I did not sign that document'? Her reply, which was obviously untrue, was that she did not think about this passage in her statement; the reply is obviously untrue because she knew exactly what document was being debated (she had a copy of it) and, by dealing with it specifically in her statement, she demonstrated that she had thought about it. The wife said that the signature on the document at E98 was not written by her but I have no evidence from a handwriting expert on this point and it was something that I raised at a directions hearing on 29^th June 2015 to see if anyone wished to call one. However, it may not matter since:

i) Either the document was signed by the property owner, the husband, and represents him confirming his own sole ownership of the property, or;

ii) It was signed by the wife (which I think is much more probable) and it represents her stating that she had no interest in the property.

32. That document is evidence of how the parties regarded the former matrimonial home to be held rather than being declaratory for the purposes of section 53 of the Law of Property Act 1925. However, it is important evidence in my opinion.
33. On 15^th February 2010 there is a telephone record of the husband having applied for a 'top up' mortgage with Ocean Finance and Mortgages Ltd [E122]. That application, for a further £50k to be secured against the property, was also declined by the company. The purpose of the application was said to be to do 'a lot of home improvements' [E125]. At E126-7 the husband is recorded as telling the mortgage adviser that he was married but that 'everything' was in his sole name and he was looking to keep it that way. He said that his income was about £35k p.a. [E128], which it was not. The husband tells the adviser that the C&G mortgage repayments were £420 p.m. and were up to date [E129]. Again that is important evidence of how the husband regarded the property to be held.
34. Thus in 2009 /10 there are two instances of the husband applying for loans on the basis that he is the sole owner of the property and intends to keep it that way. In relation to the Santander application he did not apply for a mortgage in joint names because the property was jointly owned; he applied in joint names because he had been told by a friend to do so.
35. The wife's position statement at A9: 'I relied entirely upon the good will and word of my husband, there was no formal basis of an agreement in writing that I and all my children would have a stipulated share in the matrimonial home, however, it was always the common intention expressed to me that when the matrimonial home was purchased I was to be for all its intents and purposes an equal owner of it'. I pause there to say that I reject the contents of this part of her statement. It is very plain that the husband regarded this as his property from start to finish and there was no common intention to the contrary of the type suggested by her.
36. The wife goes on: 'In fact, when my husband was in prison around 2002 and by that time I had two children, it was expressly agreed with me that any share that my husband may have had was now to be held by me for our children…I took the above steps in order to ensure that I and my children are never left without a roof over our heads. I remember the respondent saying to me at that time that he was very sorry for the position he had put me and my children in and to effectively relinquish any rights of ownership he may have had over the property was the least he could do for me and his children'. Again, on the basis of the evidence that I set out below, I do not believe this part of her statement either. I find that there were no such discussions; if I am wrong about that it is certain that no such discussions were acted upon and, by 2009/10 the husband was asserting that the property was his.
37. At A11 she says: 'I am paying the mortgage…During these periods I not only was looking after the home and maintaining it, and ensuring that it was in good repair, but as a single mother I also was in and out of employment in the last 10 years. I also received help from DWP to pay towards the mortgage, may I remind the court that if I had not contacted DWP for help, the house may have been repossessed. I was also assisted by family members during difficult periods. Further, I had made all payments towards utility bills, expenses and upkeep of the house. It has almost been impossible for me to obtain bank statements for the last 15 years to show my account and withdrawal of cash to pay towards the above. It would be nonsensical for anyone to suggest that whilst in prison and on a weekly salary of approximately £8, the respondent was able to pay his own mortgage'. I have already set out how the household was funded and reached the conclusion that it was funded at least to a significant part, from the husband's illegal activities.
38. My circumstances show the conduct and contribution as discussed by Lady Hale [in Jones v Kernott]…I say that even if no financial contribution was made by me, the fact that I looked after the house and the children is in itself significant to show that I have a share in the house [Burns v Burns, 1984]…The court in LeFoe v LeFoe accepted that indirect contributions were accepted to show an interest in the house. In respect of my improvements, maintenance and upkeep by me into the home is to be considered by referring to the Matrimonial Proceedings and Property Act 1970, section 37, which states that improvements to the matrimonial house entitle a person to a larger share of the benefits in the house. In my instance should the court decide not to order the entire share of the home for me and my children, then this position should be taken into account. I adopt Lord Diplock's comments in Gissing where he states 'even where there has been no initial contribution by the wife to the cash deposit but she makes regular direct contributions to mortgage instalments, it is reasonable to infer a common intention of the spouses from the outset that she should share in the beneficial interest'. I deal with these points later. However, there is no evidence of any significant work having been done to the property by the wife. The schedule of incomes shows that the wife had no declared income at all between 1999 and 2006; she then had a declared income of £1637 in 06/07 and no income for the years 07/08 and 08/09 save for very limited state benefits.
39. At A12 she denies any knowledge of her husband's wrongdoing and suggests that CPS are 'completely out of touch with Asian culture, dynamics of a wife's limited role with the relationship and all mitigating factors of stigma and shame attached to breaking a marriage….it may be crucially important for the court to consider and infer that considering the average non-lavish lifestyle that the respondent had that it is unrealistic to expect that I would be put on notice of his wrong doing. It is not as if my husband was driving around in flashy cars or that we lived in an expensive home. The dynamics were contrary to any sign that would have put me on notice. The facts are that the respondent was in debt, he took out a loan and tried to remortgage the house, he even borrowed from The Provident on high interest.. The house is in need of serious repair, no money was spent on it since the date of the purchase, so any allegation that I had knowledge due to obvious signs of spending are therefore unfounded'. For reasons that I will set out I do not accept that.
40. In her substantive statement at C1 she says, amongst other things that she 'made mortgage payments by giving the money due to R, the husband's brother, and he assured her that the payments were being made to the mortgagees' [C4]. At C40 there is a witness statement by R in which he says: '[the wife] would give me cash to cover the monthly mortgage payments of £420 approx. She would give these to me in instalments as and when I would pop by to check on the kids. I would then make an electronic transfer from my account to the husband's account to ensure that there were sufficient funds in his account for the mortgage direct debit to be cleared. [The wife] gave me the money in cash as it saved her from having to physically go to the bank as she had three children to care for and general stress of the overall situation.' That suggested arrangement was examined in oral evidence, which I will examine later, and I do not accept that the wife was making substantial mortgage payments during that period.
41. R also says this at C40: 'I can also confirm that I was a witness to many family discussions between the parties regarding their home. I remember in 2002 when the wife gave birth to their second child, the husband agreed that his wife and two children would have all the share in the property and complete ownership. To guarantee the family security, due to his foolhardiness which led to imprisonment at the time in 2002. She was paying the mortgage and maintaining the property whilst he was in prison on his previous conviction too'.
42. The husband's position statement at A16 – He says:

The house was purchased in 2000. It was purchased for the sole purpose of living in and raising a family. The house was under my sole name purely because the broker at the time told me that these were the terms from the mortgage company. Although my name is only on the property, my wife had an equal share. A deposit of around £9,000 was paid and the majority of the money was part of the Dowry and money saved from working for my father in his business.

The conviction in 1999 for 15 months was for supplying a small amount of drugs to an inmate on a visit in prison. There was no financial gain. In 2001 I started a 6 year sentence. There was a confiscation order for the sum of £24,000 this was made up of £5,000 in cash already in the hands of the police and £19,000 was from the equity in the former matrimonial home . The total equity was £38k at the time, the CPS accepted that 50% belonged to my wife. Since then the total ownership and maintenance of the upkeep have been her sole responsibility. Between 2001-2004 whilst I was in prison, my wife and my family paid the mortgage payments. After my daughter was born in 2002 I told my wife that the family home belonged to her and the children, because, as a Muslim, it is the father's responsibility to ensure the security and welfare of the children of the family and I thought that is the least I could do after letting my family down and burdening my wife with the mortgage payments and raising the children on her own.

After my release in mid 2004 I did contribute towards my children and general expense towards the house until 2006 when I went abroad for two years. At this point my wife was paying the mortgage and had help from DWP towards the payments.

In 2012 I was sentenced to 11 years in prison…Since 2012 my ex wife has been paying the mortgage. The fact is that since the purchase of the family home in 2000 up until 2015, I have lived [there] infrequently out of the 15 years. In my absence all mortgage payments were met by my wife all of the time except on a few occasions help was provided from benefits and family members'.

Since the purchase of the property, the payments were made monthly as agreed. The mortgage is a repayment mortgage. Never have any extra payments been made towards the mortgage, only monthly minimum required was met. Since the purchase no money has been spent on refurbishments or any work on the building itself. The house has been maintained by my ex wife the best she could regarding the circumstances. All various repairs to fixtures and fittings were done by her. Any value added on to the property was due to the economy. The last valuation report stated that the property is dilapidated and in need to serious work relating to damp issues in the kitchen and bathroom, which are in a very poor state and need refurbishing.

…[[A19]Second bite at the cherry, the CPS have already taken he equity from the house once in 2002 of £19,000. Therefore I believe they should only be entitled to make an order for the difference of the current equity of £84,000 minus the £19,000 already previously taken. Therefore at the highest amount of 50% of the £65,000 should be taken (£32,500). This is based on current case law of double jeopardy rules in recent cases. Although I am firmly opposed to them taking any equity, as the property does not belong to me. This is the worst case scenario.

43. The position statement of the CPS. In its response to the wife's contentions the CPS say:

i) It appears that Wife relies on the following as the foundation of her proprietary claim:

a) An express agreement at the time of purchase between the husband and wife that they would hold the property in equal shares;

b) An express agreement in 2002 that Wife would be the sole beneficial owner of the property, such agreement being witnessed by Husband's brother;

c) Payment of the mortgage payments from 2001 – 2004, and from 2012 onwards.

ii) The wife is put to strict proof of her claim.

iii) a) and b) will be dealt with by evidence and cross examination. Wife's assertions are not borne out by the parties' subsequent conduct, or by the Husband's statement in the confiscation proceedings that they held the property in equal shares. In particular, in order to establish a share in the property the wife (and presumably husband) asserts that a document signed by each of them in 2009 in which they both confirmed that Wife had no legal or beneficial interest in the property was fraudulent. Tinsley v Milligan 1993 UKHL 3 prevents any party recovering a share in a property if, in order to do so, they must rely on their own illegality. Even if Wife's assertions about express intention in 2000 and 2002 were true (which is challenged) they would be superseded by an express and documented position in 2009 whereby Husband is the sole legal and beneficial owner. Wife (and presumably Husband) must rely on the fraud perpetrated in that document to establish her share and therefore her claim must fail.

iv) In respect of the mortgage payments, the wife is put to strict proof of such payments. The earlier payments (if made) similarly fall foul of the illegality problem above, and the later payments (2012 onwards) post-date the restraint and confiscation orders and cannot be said therefore to give rise in themselves to a share in the husband's tainted asset. Wife had the benefit of occupation of the property and any payments to the mortgage represent a rent for that corresponding benefit. Both parties were served with the restraint order and knew that it was not open to them, after 6-8-10, to dispose on any asset held by the husband. Thus their actions and financial dealings after that date cannot have been in contemplation of acquiring a share of the restrained house.

v) Thus the Crown Prosecution Service asserts that the sole beneficial owner is Husband, in line with the legal title for the property and the declaration to that effect signed by both parties in 2009.

vi) As to documents and statements in support, the Crown Prosecution Service relies upon the following:

a) HMRC records in respect of Husband and Wife

b) Mortgage application documents in respect of a loan with Prestige (now Melbourne Mortgages)

c) Statement of DC Ian Blunden dated 20-7-12

d) Husband's statement in response

e) Bank/mortgage statements of husband and wife

vii) All documents save the bank statements are served herewith. The content of the bank/mortgage statements is known to the parties and they will be included in the bundle rather than served herewith to avoid voluminous duplication.

44. 'R' – The husband's brother came to give oral evidence. He said that he first became involved with the making of payments of the mortgage after April 2012 when the husband went to prison for the current conspiracy offence. R could not remember exactly when the arrangement for the mortgage was made and he thought that both the husband and the wife spoke to him about this. He said that the wife gave him money as and when it was convenient and that she paid him in various amounts, sometimes she paid in dribs and drabs; he did not keep a record of how much she had paid. The arrangement continued until August 2014 [C41] and he could not be sure whether he had ever made payments directly to the mortgage company.
45. This issue of the mortgage payments between 2012 and 2014 was explored with the wife in cross examination. I will set out her evidence later but the upshot is that there is no reliable evidence to show that the mortgage was paid by the wife in the way that she suggests; her evidence that she took money out in dribs and drabs from the bank account and paid a regular £420 p.m. to R without keeping any record of what was occurring is so unreliable that I reject it. I accept that she may have made some payments to R that went towards the mortgage but it would appear from her bank statements that these would have been few and far between, at best.
46. R also said that there were lots of discussions in 2002 when the husband agreed that the wife and the children would have all 'the share in the property and complete ownership'. He said that the wife was paying the mortgage then and maintaining the property; she plainly was not as she had no income with which to do so. Why, then he was asked, did he need to get involved in 2012 with the mortgage payments – if she had been able to make direct payments to the mortgage in previous years why did he get involved in 2012? He said that it was very stressful for the wife in 2012 when the husband was sentenced again. He said that it was known by all of the family that the husband had given up all of his interest in the property as at 2002.
47. It was in 2002 that the husband was sentenced to six years imprisonment and therefore I asked where the discussions took place; R said that he visited the husband in prison and the discussions were held there. He said that he, the wife, his mother and sometimes his father would visit the husband in prison. I do not accept that there was any concluded agreement or understanding that the property was held for the wife and children exclusively. The wife's own evidence contradicted this and, further, the husband did not treat this property as belonging to the wife and children after this.
48. R was asked to look at E103 which is the P60 in relation to the husband that had been issued by R as the husband's employer in support of the Santander application. He said that he could not remember the husband being paid as much as the amount shown (£31,800 p.a.) and said that he did not know that his brother was trying to remortgage the house.
49. Overall I found R to be an unsatisfactory witness upon whom I could not place any reliance.
50. The wife –In relation to the purchase of the former matrimonial home she said that the husband said 'we are buying a house'; nothing was discussed about it and he just took it into his control. He decided that they were going to buy the house and he had the money to do it. Her evidence was that the husband made decisions without reference to her and did not discuss matters with her at all. She said that he never communicated about financial 'stuff' with her; indeed she went so far as to say that the husband never communicated with her about anything. He never involved her in socialising either; she was just a wife and did not get to know anything. She said that she did not know about the amount that was borrowed on the original mortgage, the terms of repayment or the nature of the mortgage (whether it was repayment or not). She said that she only found out when things 'ground to a halt' and, when that happened, R had to step in and make arrangements for the payment of the mortgage. He said to her repeatedly 'don't worry' the house is going to be yours and, she said, when she asked questions he would say 'it is yours' although she knew that he remained the sole owner on paper. All she ever got from him were words, she said. In 2009 he humiliated her when she found that he was having a relationship with another woman and then she discovered that he had been cheating on her throughout the marriage.
51. In my opinion the above evidence is entirely at odds with the suggestion that was a conclusive agreement in 2002 that the house was to be treated as hers either for herself or for the children.
52. She said that she did not think that the house was hers because she knew that it was in his sole name. 'On paper', therefore, she accepted that the house was all in his sole name but in her head she thought it was 'our house'. She then said that the house was half hers and he always said that the house was half hers. This is not what she said in her statement at A7 and it is not what she said earlier in her evidence.
53. I find that the wife knew all along that the house was vested in the sole name of the husband and that it remained in his sole name. I also find that there was no express agreement or understanding that she would have a beneficial interest in the property either at the outset or in 2002. This was a marriage where there was very little discussion between the parties, as the wife said herself. I find that the suggestion that there was an agreement for her to have the beneficial interest in the property for the children is invented.
54. Her evidence was that she had very little knowledge about his way of life and knew nothing about his drug dealing (which I do not accept). She said that she did not know that there was a confiscation order in 2002 and did not go to court to support him. She said that he used to have a lot of cash about him (when the 2002 confiscation order was made he had been found with £6k in cash) but did not know where it came from. She could only think that he raised the £18k for the 2002 confiscation order from his family and did not know how he met the loan repayments on the Mercedes, the credit payments on the £4k television or the payments on the BMW that she drove. She did not know that he was found with £11,000 in cash when he was arrested in 2009 and could not imagine where that might have come from.
55. She was asked to look at the schedule that Ms Wiltshire has prepared which shows that he had no declared salary between 2001 (when he was in prison) until 2009 and then earned a small amount in 09/10, 10/11 before being sentenced to imprisonment in 2012. The wife said that she did not know how he funded their lifestyle during this period but said that she could see now from the documents that his money must have been coming from drugs money. Looking at the net position revealed in the schedule of incomes she accepted that they could not have managed on the declared income.
56. I then heard evidence about the purchase of a BMW car for her. She was asked how she had raised a bankers' draft for £8.5k in 2010 to buy it. At E118 it was stated that the money came from her savings which she had made from her employment (£3k) and also the return of money that she had lent the husband (£5.5k). Her explanation of this was patently unsatisfactory since:

i) As to the suggestion that she made savings out of income, she had no income between 1999 and 2010 save for £1637 in 06/07 and £2055 in 09/10. Given the demands on the household income and the absence of evidence of any savings I do not accept that she would have been in a position to save all of her earned income to apply towards a car in 2010. I find that the £3k came from the husband and that the wife has lied about its source.

ii) As to the money she was asked where the money had come from and could not give any sensible reply. She said that she had 'lent' money to the husband 'in dribs and drabs' and that the £5.5k represented repayment of that loan. She said that she did not keep a record of the loans that she made but did make a mental note. I do not accept what she said. It was patently untrue that this wife, in her circumstances, should have lent her husband, in his circumstances, £5.5k. I find that she had not done so. This was a further amount of cash that the husband managed to find at a time when the two underlying offences behind the conspiracy charge had occurred. It is highly likely that any money that he did have at the time was tainted because there is no explanation as to how he might have had sums of money of this magnitude.

57. This is the point that I made earlier about applying the principles in R v Lucas. Why did the wife lie about the source of this money? The answer is that she knows that this husband, who was found when arrested in 2001 and in 2009 with large amounts of cash, can only have produced this sum of capital from illegal activity. Thus I find that she knows that this was tainted money. This is therefore important evidence because it shows that the wife knew that the husband was funding himself, at very least in part, illegally. Hence the application of the principles in CPS v Richards.
58. She was also asked about a passage in her Form E where she said that she had spent a large amount of money on furniture for the home ('all the furniture in the home was purchased by me and worth in the region of £12k' – C16). The point being that, if her income was a low as she had suggested, where did the money come from to buy that? Further, she was asked, how had she made savings of £3k and loans of £5.5k given the extent of her income? She did not give a satisfactory answer for that. The combination of furniture (£12k) and car (£8.5k) is £20.5k – there is no explanation as to how she managed to raise that amount of money and therefore, as to the purchase of furniture it is highly likely that this was funded by the husband and the wife's misrepresentation of that arises because she realises that the money that he used was tainted by his criminality.
59. I now turn to what the wife said about the payment of the mortgage between 2012 and 2014. Her evidence was that she gave R the cash for the mortgage payment and he then paid the cash into the husband's bank account for the mortgage to be paid. She said that she gave R mortgage payments in dribs and drabs, paying £50 here and £70 there. This is why, she said, there are no debits in her bank account that can be shown to be referable to the mortgage payments. The mortgage payments were made, she said, because she knew that she was going to divorce the husband and she thought that she would be able to keep the house. It was R who suggested that her money should be paid to him and then paid into the husband's account to pay the mortgage. She did not pay money directly into the husband's account because she was thinking 'why should I pay money into his account when the house is in his name?', she said (once again affirming her belief that the house was owned beneficially by him). She accepted that she could have transferred money into the husband's account on online banking but R had always looked after the husband's account, she said, and it was more convenient to make the payment through R. She said that she has no proof of what she paid. She was asked: 'Why not leave the money in the bank and then make regular payments of £420 p.m. to R, if that is what you were doing?'; she said that she just did not work in that way.
60. I am entirely convinced (well beyond a mere balance of probability) that the wife was not making regular mortgage payment from her funds during the period 2012-14. She may have paid something towards the mortgage (or, possibly, nothing) but her evidence is so untruthful that I cannot hazard any sort of guess as to what she did pay, if anything.

Submission from the wife's solicitors - Shortly before the hearing started a skeleton argument was emailed to me by a solicitor, Lorna McCammon of DPP Law in Liverpool, who has assisted the wife on a 'pro bono' basis. I pay tribute to Ms McCammon for assisting the wife on that basis. I respectfully agree with her when she said, amongst other things: 'The fact that beneficial interests are being considered as part of confiscation proceedings does not result in ordinary principles of property law being disapplied. On the contrary, it has been held that determination of a third party's interest in assets deemed available under POCA will be determined, whether by the Crown Court or High Court, using the ordinary principles of contract, property, or trust law (see e.g. Larkfield v RCPO [2010] EWCA Civ 521 and Revenue & Customs Prosecutions Office v Johnson and Backhouse [2011] EWHC 1950)'.

61. Who held the beneficial interest in the property when it was bought? – There was no express declaration of trust and the property was undoubtedly bought in the husband's sole name. Therefore it is for the wife to show that the beneficial interest did not follow the legal title. As Lady Hale said in Stack v Dowden [2007] UKHL 17: 'So in sole ownership cases [the onus] is upon the non-owner to show that he has any interest at all'. As the solicitors for the wife said: 'The Property is registered in H's sole name. Accordingly, the burden initially lies upon W to demonstrate that she holds a beneficial interest in the same (see Stack v Dowden [2007] 2 AC 432). This is set out in the W's statement to the court dated 5^th March 2015 numbered paragraphs 12 (a)-(g)'
62. In Capehorn v Harris and Another [2015] EWCA Civ 955 the Court of Appeal stated that there is a two stage process where a property is held in the sole name of one party: 'First, the person claiming the beneficial interest must show that there was an agreement that he should have a beneficial interest in the property owned by his partner even if there was no agreement as to the precise extent of that interest.  Secondly, if such an agreement can be shown to have been made, then absent agreement on the extent of the interest, the court may impute an intention that the person was to have a fair beneficial share in the asset and may assess the quantum of the fair share in the light of all the circumstances…There is an important difference between the approach applicable at each stage.  At the first stage, an actual agreement has to be found to have been made, which may be inferred from conduct in an appropriate case.  At the second stage, the court is entitled to impute an intention that each person is entitled to the share which the court considers fair having regard to the whole course of dealing between them in relation to the property.  A court is not entitled to impute an intention to the parties at the first stage in the analysis'.
63. In my opinion the evidence demonstrates very clearly that there was no agreement that the house should be held for the husband and wife beneficially. The husband bought the property in his sole name and intended that it should be regarded as his. There is no basis for inferring a common intention to share the beneficial interest in it at the time of purchase either, because there is no basis upon which such an inference could be raised. The wife was not making payments to the mortgage and had no income. The wife's evidence suggested a husband who was independent, criminal and self focussed and everything that I have read and heard suggests that is so.
64. I do not accept that the wife was making indirect payments that are of relevance since she had no money with which to do so. I accept that, in some circumstances, indirect contributions may be relevant to the inference of a common intention to share the beneficial interest in a property; however the evidential basis for any such inference is entirely lacking in this case. Thus, Lord Hope said as follows in Stack v Dowden at para 12: 'I think that indirect contributions, such as making improvements which added significant value to the property, or a complete pooling of resources in both time and money so that it did not matter who paid for what during their relationship, ought to be taken into account as well as financial contributions made directly towards the purchase of the property. I would endorse Chadwick LJ's view in Oxley v Hiscock [2005] Fam 211, para 69 that regard should be had to the whole course of dealing between them in relation to the property'. Lord Walker said at para 34: 'Now that almost all houses and flats are bought with mortgage finance, and the average period of ownership of a residence is a great deal shorter than the contractual term of the mortgage secured on it, the process of buying a house does very often continue, in a real sense, throughout the period of its ownership. The law should recognise that by taking a wide view of what is capable of counting as a contribution towards the acquisition of a residence, while remaining sceptical of the value of alleged improvements that are really insignificant, or elaborate arguments (suggestive of creative accounting) as to how the family finances were arranged'.
65. There was no pooling of resources in this case because the wife did not have any and further it is highly likely that any resources that the husband had were tainted by his criminality (as the wife herself accepted in her evidence when faced with the schedule of their income and asked to explain how they funded their lifestyle).
66. What did happen in 2002? There were two matters to consider from 2002. First, did the husband and wife reach an agreement that the wife was to have a beneficial share in the property either as described by the wife and R or in some other form? Second, what is the effect of the assumption within the confiscation proceedings in 2002 that the beneficial interests were shared equally?
67. Was there a fresh agreement in 2002? I have already made it plain that the evidence leaves me persuaded that there was no such fresh agreement. The suggestion that there was is an invention. I find that the evidence is inconsistent and unreliable (as I have set out) and the husband plainly regarded the property as belonging to him entirely in 2009 and 2010 when he made the mortgage / loan applications.
68. What is the effect of the assumption made by the Crown Court in 2002 as to the ownership of the former matrimonial home? - In Re Norris [2001] UKHL 34; [2001] 1 WLR 1388 (a case under The Drug Trafficking Offences Act 1986) Lord Hobhouse said as follows: 'The criminal jurisdiction is concerned alone with what order to make under sections 1 to 4 of the Act. The procedure of the criminal court is solely concerned with the parties before it, the prosecution and the defendant. In some situations the Crown Court may also make compensation or restitution orders in favour of third parties who are given a right to apply (eg under sections 148 and 149 of the Powers of Criminal Courts (Sentencing) Act 2000), order property to be forfeited (eg vehicles used in the commission of the relevant crime) or to be returned to the loser (eg under the Theft Acts). But it is well established that these powers are only to be used where there is no disputed civil law right or similar issue which needs to be determined (eg s.148(5) of the Act of 2000). If there is such an issue, the proper course for the Crown Court to take is to leave the relevant person interested to pursue his or her civil remedy in the civil courts: R v Ferguson (1970) 54 Cr App R 410 and R v Calcutt (1985) 7 Cr App R (S) 385. The English system of criminal justice does not itself confer any civil jurisdiction upon the criminal courts and it takes a clear and express provision in a statute to achieve that result. The 1986 Act does not contain any such provision; indeed, as already explained, its clear intention is to preserve the distinction between the respective jurisdictions. The time and place for Mrs Norris to assert her civil law rights over 7 Berryfield Close was when the Customs and Excise attempted in the High Court to deprive her of her interest. It is at this stage that she becomes directly affected and has the right to invoke the remedies of the court in the defence of her civil law rights. In the criminal court she was a mere witness with no right of representation and no control of the proceedings and no right of appeal. It is relevant to observe that Lord Hoffmann remarked upon the same division of jurisdiction between the criminal and civil courts in Government of the United States of America v Montgomery [2001] HL1§22'.
69. It appears that in 2002 there was no enquiry into the beneficial ownership and an assumption was made that, because the parties were married, the house must be jointly owned. Having now enquired into the beneficial title I do not accept that it was jointly owned. Therefore I do not consider that the wife can rely on the assumption that was made in 2002 in the earlier confiscation proceedings. The CPS does not make any concessions that are similar to those made by HMRC.
70. Mortgage payments - I have already said that I am not remotely persuaded that the wife did make mortgage payments after 2012 and so that aspect of her case fails in any event on the facts. Further the payments followed the assertions in 2010 that the property remained owned by him and thus the legal and prior beneficial title holder was not holding out any agreement that the wife was acquiring a share after 2012. Further still if the wife did make any such mortgage payments they arose after the restraint order at which time there could be no agreement reached by either party to diminish the value of the husband's assets (including his beneficial interest in the property) because of the terms of the order and, further, I have real difficulty in seeing how the court could infer a common intention that would have been contrary to the court's restraint order.
71. The four points about the alleged mortgage payments are therefore these:

i) I do not accept that the wife made them. That kills off the point anyway.

ii) Any payments were made after the restraint order and I do not see how there could be said to be a common intention between the spouses that a share would arise in favour of the wife where there was a prohibition against dealing with assets including the home.

iii) The payments arose after there had been the clear assertion by the husband that he was the sole owner of the property. That again is relevant as to whether there was a common intention that they should share the beneficial interests.

iv) If she did make any payments towards the mortgage they were so small as to be of no consequence ('de minimis') and certainly far less than any occupational rent might be.

72. Section 37 of the Matrimonial Proceedings and Property Act – The wife raises this in her position statement. The section provides as follows: 'Where a husband or wife contributes in money or money's worth to the improvement of real or personal property in which or in the proceeds of sale of which either or both of them has or have a beneficial interest, the husband or wife so contributing shall, if the contribution is of a substantial nature and subject to any agreement to the contrary, express or implied, be treated as having then acquired by virtue of his or her contribution a share or an enlarged share as the case may be in that beneficial interest of such an extent as may have been agreed, or in default of such agreement, as may seem in all the circumstances just to any court before which the question of any existence or extent of the beneficial interest of the husband or wife arises (whether in proceedings between them or in any other proceedings).'
73. Although that section was raised in the position statement, it was specifically recorded on the order of 29^th June 2015 that 'the applicant wife [accepts] that she has made no improvements to the property and that no issue arises pursuant to s37 Matrimonial Proceedings & Property Act 1970'. I have no evidence at all from the wife that she did make any substantial contributions to the property; indeed the evidence appears to be very much to the contrary with the wife saying that the property is dilapidated.

.

74. Conclusion as to beneficial entitlement - In those circumstances I find that the former matrimonial home is owned beneficially entirely by the husband and that the wife has no beneficial interest in it. I make a declaration to that effect.
75. Tainted property - I have already stated that I think it highly probable that the house was bought and maintained at least in part on money that arose from the husband's drug related activities. Indeed, the wife has also formed the same view when faced with the schedule of declared incomes that were available to this household.
76. The wife knew of the husband's criminal activities not least because of his convictions. I do not accept that, when he returned to the home after being released in 2004, she was unaware of his activities and financial circumstances.
77. I find that the wife knew that the family household was being funded at least in part by the husband's criminal activity. I think that it is highly probable that she realised that there was no basis upon which the household could be funded in the way that it was on the incomes that the husband was receiving from legitimate sources (since, for much of the time he had no such legitimate income). Further, I did not believe her account about how she managed to raise the money for the motor car (£8.5k); that money must have come from somewhere and she was not earning money to acquire it herself. The money must have come from the husband and she must have known that he had no legitimate means of raising that amount. Further the money for furniture must have come from him as I have already found.
78. The effect of this being tainted money / property - Unlike the case of Re M.C.A the only asset involved in these 'ancillary relief' proceedings is dirty, not 'clean'. In the case of CPS v Richards the Court of Appeal held at para 23: 'We have come to the conclusion that in making the orders he did, the learned judge fell into error. Although the learned judge found that all the assets were tainted as the proceeds of drug dealing and although he reminded himself of the relevant passages of Re M.C.A, he failed to give sufficient weight to the inevitable consequences of that finding'.
79. At para 26 the judgment in Richards goes on to state: 'where assets are tainted and subject to confiscation they should ordinarily, as a matter of justice and public policy, not be distributed. This is not to say that the court is deprived of jurisdiction under the 1973 Act nor to say that no circumstances could exist in which an order would be justified; an example of a seriously disabled child living in a specially adapted accommodation was mooted in argument. It is to say that, in most cases, and certainly in this one, the fact that the assets are tainted is the decisive factor in the balance. The error of the judge lay in thinking that the requirement to conduct a balancing exercise meant that in every case all factors are relevant. In cases such as this the knowledge of the wife, throughout her married life, that the lifestyle and the assets she enjoyed were derived from drug trafficking is dispositive'.
80. Outcome of financial remedy application – In the highly unlikely event that there is any surplus of real or personal assets held by the husband (either in his sole name or jointly with another) at the conclusion of the confiscation proceedings and satisfaction of the order for costs that I make below, I order that the husband's interest be transferred to the wife absolutely. This includes any residual chattels held by him, save for his personal clothing and any agreed items and it also includes any sums held by him in any bank or savings accounts or with any financial or other institutions (e.g. endowment or insurance policies). Save to that extent I dismiss the wife's capital and proprietary claims.
81. I make a nominal order for periodical payments to be made by the husband to the wife in the sum of £0.05 p.a. during their joint lives or until she shall remarry or further order.
82. I also order the husband to pay the costs of the intervener (CPS). I have considered the case of Baker v Rowe [2009] EWCA Civ 1162. These are not 'ancillary relief' proceedings and Rule 28.3 does not apply as between the intervener and the spouses. Although it may very well be that the husband will be so impecunious as to make any such order of no value to the CPS I make it all the same lest there be a surplus. It is inescapable that the husband, who has disgraced himself and his family, has brought about this pitiful result on his family (including his three children) through his criminality and dishonesty in his conduct within the proceedings and in his marriage and in the exposure of his children to this result.
83. I will ask Ms Wiltshire to submit an order to the above effect.

HHJ Stephen Wildblood QC

10^th November 2015