England and Wales Family Court Decisions (other Judges)

IN THE FAMILY COURT
AT MANCHESTER
SITTING AT PRESTON

		The Law Courts Openshaw Place Ring Way Preston PR1 2LL
		24th November 2015

SECOND JUDGMENT

HIS HONOUR JUDGE BOOTH:

1. Today I handed down my judgment in this case. This second judgment deals with a number of matters arising.

Payment of the lump sum

2. The first question I must resolve is the timing of payment of the lump sum of £500,000 I have ordered to be paid by Mr C to Mrs C. It was Mr C's case at the final hearing that he could pay £150,000 more or less immediately and that that was the sum I should order and that would then terminate any liability to his former wife. I will assume, therefore, that that money remains available. He has known of my judgment now for many weeks. I see no reason why that money cannot be paid within 28 days.
3. That would leave outstanding the further sum of £350,000. I concluded he had an entitlement to money, tied up within his family, whether it be within Q, should that be developed and sold, or in his shareholding in Ravi's business where I held the nominee agreement to be a sham or in some other way within the wider family business, noting as I did the arrangement whereby he works driving a stacker truck in a warehouse for a business which, on the face of it, he has no direct connection with.
4. Again, he has had some 8 weeks to start to put in place arrangements to make that money available. I see no reason why those funds cannot be realised with the assistance of his family. By that I mean precisely what was spelt out in the case of Thomas v Thomas [1995] 2 FLR 668 CA, namely that they would be expected by the court to help him realise the value in the assets to which he is entitled and, that whilst clearly the court cannot impose upon his family members, there is a realistic expectation that they will assist, particularly bearing in mind that the purpose of the order pursuant to my duty under section 25 of the Matrimonial Causes Act was to put the welfare interests of the children first. In this instance, that means providing the children with a home.
5. In my judgment, a period of six months is an appropriate timeframe for that to be carried out. The husband has already had two of those months but did not know until today precisely what I was going to be ordering. I will allow the six months to run from today but, in doing so I am taking account of the fact that he has had time since I distributed my judgment in draft to start to put matters in place.
6. The statutory rate of interest is the appropriate rate of interest. If there are compelling reasons that the husband can evidence why that is not appropriate, then he can make an application nearer the time payment is due, but I hope that will not be necessary.
7. Mrs C has raised the issue of Mr C becoming bankrupt. I think Mr Wagstaffe has a sound point that were the husband to be made bankrupt, either on his own petition or somebody else's petition, his shareholding in Ravi's company would vest in the trustee. The wife would be able to pursue her lump sum within the bankruptcy. Any outstanding balance would survive the bankruptcy. If that shareholding is to be turned into cash, I do not see anybody better placed to achieve that outcome than the trustee in bankruptcy.

Charge over partnership account

8. As far as the partnership account is concerned, in my judgment, that sits in a different position and it is to be treated as cash. Mr C made an offer in relation to settlement which can only, on his case, be coming from his partnership account although he says there may be some difficulties in getting in all of the money that on paper he is entitled to. As asked for by Mrs C there should be a charge over the partnership account subject to Mr C being able to live off that account and meet the expenditures that are currently listed in the interim orders, which would include school fees if he chooses to pay some of his school fees from that account.

Clarification of the draft order

9. For clarification, what could be added to the definitions section is to assist with what "reasonable legal fees" means in this context. It seems to me that perfecting the order, seeking advice on appeal and any advised grounds of appeal, settling and lodging with the court - I am sure there is a better form of words than that but it is clear what I am driving at here - that process, launching an appeal, is covered. Anything beyond that is not and would not be reasonable in this context. So, as the order is going to provide for a potential return to court for implementation and timing, if that wording needed to be altered for the purposes of implementation, then the husband could come back. I will leave it to counsel to devise a suitable form of words.

Application for permission to appeal by Mr C

10. Mr Wagstaffe seeks permission from me to appeal against the order in respect of two aspects. They relate to the shareholding that Mr C has in his brother, Ravi's, company, that is the money-lending business; and, secondly, in relation to the question of the funds available to Mr C to meet the lump sum order that I have made.
11. Mr C's case in relation to his shareholding in his brother's company was that he was a nominee. He had held the shares since incorporation, although the nominee agreement upon which he relied was created many years later but before this marriage. The evidence I had from Mr C was to the effect that in order to pass muster with the regulatory authorities (as his brother Ravi's business was a regulated money-lending business) there needed to be other shareholders and other directors of the business and if that is right, the mischief would be obvious that it was thought inappropriate for a money-lending business lending to members of the public to be in the absolute control of one person. As I set out in the judgment, the effect of that evidence was that the nominee agreement was from its start a dishonest document because the husband said that throughout the business was Ravi's, Ravi was the decision-maker and he, Mr C, had nothing to do with the business. I am satisfied that I applied the correct legal test to what is essentially a factual question and I see no prospect of that being interfered with on appeal.
12. The question of the value of the lump sum and how it was to be paid relied on my drawing inferences from the primary facts as I found them to be and looking at the financial reality that the husband's family had created in a series of businesses. It was the husband's case throughout the final hearing that he had a sum of £150,000 ready and available that he was willing to pay to Mrs C, albeit that that was to be in full satisfaction of her claims. In relation to the rest of the money, I indicated in my judgment that I was making an order for £350,000 on the basis that he had interests and assets within the family businesses vastly in excess of that amount. I assessed his total worth at, as best I could, £1 million but I acknowledged that some of that money would not be immediately available to him. On a straightforward application of the principles enunciated in Thomas, I said that I hoped and expected that family members would assist Mr C in gaining access to the wealth that was undoubtedly his, particularly when they bore in mind that the purpose of my order was to achieve a home for Mr C's children, who are, of course, the grandchildren and the nephew and niece of the other members of the family who control the purse strings.
13. I have given today Mr C a further six months to raise that further £350,000. It is now two months since my judgment went out in draft form and he knew the funds he had to raise. Given the findings of fact that I made and the inferences I drew from those primary findings of fact, the conclusion I came to was, in my judgment, well within the band of fair outcomes and, therefore, could not be said to be wrong. Again, I see no prospect of an appeal succeeding.
14. I therefore refuse permission to appeal.

Costs between Mr and Mrs C

15. Next I must deal with the costs between Mr and Mrs C of the financial remedy proceedings. There is a separate costs issue to deal with between Mrs C and the intervening party, GBL. Inevitably, some of Mrs C's total costs liability is in respect of those parts of the case that were against GBL.
16. I have to be careful what I do. On the face of things, Mrs C's primary need is for a home for herself and the children. That is how she ran her case but because of the magnitude of her costs, unless she recovers the ability to pay her own solicitors in the first instance, she will not have funds available to go towards a home because her solicitors, one way or another, will be taking from her the amount she has incurred with them. So in order to achieve any sort of housing fund, the totality of the lump sum has to include some element of costs recovery.
17. As was made clear in Ezair v Ezair [2012] EWCA Civ 893 Mr C, if he is the subject of an adverse costs order, is entitled to have those costs assessed. He is entitled to have a determination of just what proportion of the costs claimed are attributable both to his part of the case concerning his wife and differentiated between that concerning GBL. He is also entitled to argue on the question of when those costs should be paid. I have pre-empted both of those exercises by wrapping up an element of costs in the total lump sum contrary, to what was said in Ezair.
18. Mr Wagstaffe's point is that within the total lump sum there is an element of costs that is no less than £150,000. That is, on a rough and ready calculation, approximately two-thirds of the total costs bill of £228,000 incurred by Mrs C. For Mrs C to achieve two-thirds of her costs at the end of a costs' assessment process would not be out of the way assuming an order was made for Mr C to pay the whole of her costs.
19. Miss Harrison's retort is that unless an order is made that allows her to repay the whole of her costs, she will not have sufficient to rehouse the children. In addition to the costs she still owes to her solicitors, she owes her mother £100,000 attributable to legal costs.
20. This is not a case where Mr C's litigation misconduct and dishonesty are sufficient to justify an indemnity costs order, but it was close.
21. The starting point in financial remedy proceedings is that both parties will pay their own costs. Mr C's litigation misconduct and dishonesty are more than sufficient for me to take the view that that starting point is rapidly left behind and that there should be an order which effectively means that he pays a substantial proportion of Mrs C's costs. In any financial remedy proceedings, there is an element of costs that are incurred come what may. There is an investigative phase to go through where each of the parties sets out their case on paper. That must be a tiny amount of the costs incurred here.
22. In considering the position on costs order I must apply the Family Procedure Rules 2010 Part 28 and the Civil Procedure Rules 1998 Part 44. Two matters seem to me to outweigh all the others namely litigation conduct and the effect on the parties of any costs order and, inferentially, not making a costs order.
23. The husband should have accepted the wife's offer to settle for £500,000 made on the 1^st April 2015. All the costs from that date are likely to have fallen on the husband in any event.
24. Mrs C will have to pay and take responsibility for some of her costs herself. My criticisms of Mr C conduct, in particular his dishonesty, must reflect in the outcome. He cannot escape the consequences of the way he has chosen to litigate. If Mr C is paying within the lump sum roughly what is likely to have been awarded against him at the end of an assessment where he was ordered to pay the whole of Mrs C's costs on a standard basis then that seems to me to be the right outcome.
25. Limited in that way it may mean it is much more difficult for Mrs C to rehouse herself. That is unfortunate but I am afraid this court can only divide between these parties that which is identified within these proceedings. It is a matter for both of them that they have both incurred huge legal costs. There will inevitably be a consequence from that as the funds available for division are not unlimited.

Costs between Mrs C and GBL

26. The question now is the costs of that part of the litigation between Mrs C and GBL. The first thing I have to do is establish the starting point. There are three potential starting points. The first is that this is a straightforward civil claim, so that the civil procedure costs rules apply whereby the costs would follow the event, although, of course, there are a number of factors I can take into account in determining what costs follow the event and how I calculate them and whether that initial finding is mitigated by some other feature such as litigation conduct.
27. The second starting point is for financial remedy proceedings, as defined by rule 28.3(4)(b) of the Family Procedure Rules 2010, where the starting point is no order for costs, as it was in the part of the litigation that was between Mr and Mrs C in determining the appropriate financial orders to make.
28. The third possibility is what are proceedings for a financial remedy, so outside rule 28.3(4)(b) but within financial remedy as the overall category of litigation. In that instance, the starting point is a clean sheet of paper. This was explained in Baker v Rowe [2010] EWCA Civ 1162. King J had to grapple with the appropriate starting point in the case of M v M [2013] EWHC 3372 (Fam) where she carried out a comprehensive review of the authorities.
29. I am satisfied that the starting point here is a clean sheet of paper.
30. Mr Chaisty on behalf of GBL says even if it is a clean sheet of paper, the point with magnetic force that indicates the outcome is that the primary purpose of that litigation between Mrs C and GBL was her claim for a declaration that the contract between GBL and Mr C was a sham and, on that claim, she failed. I readily accept that that is an important point but it seems to me to be not the only point.
31. Miss Harrison relies on the findings that I made as to the way in which the husband and his brother colluded within the proceedings whereby they misled the court, they together defeated the section 37 application and they together presented an utterly false picture about the realities of the Q project.
32. It has been argued that Mrs C has escalated the case and the costs by running a case based on sham that has failed. There is an element of truth in that. However she was obliged to seek a legal basis for challenging the joint front put up by the husband and his brother. I have found it to be a fiction that GBL was an entirely independent company with no associations with the other "G" branded companies and I have found that the husband and Raj as the director of GBL have colluded to attempt to defeat the wife's claims for herself and the children. The husband's dishonesty and their collusion put the wife in an impossible position.
33. Although Mr Chaisty has with great care made plain his representation of the limited company, I have no doubt, applying the principles elucidated in Prest v Petrodel [2013] UKSC 34, that Raj is the alter ego of GBL and I can treat his actions in colluding with his brother as being the actions of GBL.
34. I have taken into account all of the matters set out in the written submissions on costs. I have taken into account the factors that would be taken into account were these civil proceedings, looking at, for example, the pursuit of points that were lost, looking at the way in which the litigation was conducted. It is a familiar list. Because these are proceedings for a financial remedy, I must also look at the factors relevant to financial remedy proceedings, which include looking at the outcome of the parties by carrying through a net effect calculation of the impact of the costs order on the parties. Although I have not referred to it in the judgment so far, Raj's evidence was to the effect that his was a company with no financial difficulties. Indeed, he was cross-examined extensively about the financial status of his business. Mrs C, against whom GBL seek their costs, is in no position to pay and to have any prospect of housing the children.
35. For all of those reasons and using the balance sheet approach in the way I have attempted to set out, my conclusion is that the costs between GBL and Mrs C should lie where they fall, so I make no order as to costs.

GBL's application for permission to appeal costs

36. Mr Chaisty seeks permission to appeal my decision on costs. I am going to refuse permission to appeal. His first point is the question of the starting point. I have concluded that these are proceedings for a financial remedy to which GBL were a party. That means that the starting point is a clean sheet with no presumptions. I am satisfied I am right on my reading of the Rules and am supported by the authorities.
37. The second point Mr Chaisty categorises thus, that the peripheral points made on behalf of Mrs C wipe out the costs order that he would otherwise be entitled to. That is a gross misrepresentation of the balancing exercise that I have carried out. I have started with a clean sheet of paper. I have attempted in summary form to take into account all the matters for and against, not least all of those set out in Mr Chaisty's skeleton on the question of costs, but it is a matter of balance, it is a matter of weight and I am uniquely placed, having conducted this trial, to assess the overall balance and, in my conclusion, the balance came down in favour of no order. There was no one factor or combination of factors that tipped things sufficiently in favour of Mr Chaisty's arguments to justify the making of a costs order when I started with a clean sheet of paper. For all of those reasons, I refuse permission to appeal.