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Marriage

9 May 2017

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DW and another v CG [2016] EWHC 2965 (Fam)

21 Nov 2016 Family Division: Moylan J

Marriage — Financial provision — Equitable interest — Consent order for husband to pay lump sum to wife with order for sale of property in husband’s sole name in event of his default in paying any instalment — Husband subsequently made bankrupt — Whether order for sale of property — Whether order giving wife equitable interest in property — Whether wife’s interest affected by husband’s bankruptcy — Matrimonial Causes Act 1973 (c 18), s 24A (as inserted by Matrimonial Homes and Property Act 1981 (c 24), s 7)

On the dissolution of their marriage a husband and wife had resolved their respective financial remedy claims by way of a final consent order made in 2009 (“the 2009 order”), which required the husband to make a significant lump sum payment to the wife in a series of instalments. The order further contained provision entitling the wife to sell a number of properties, held in the husband’s sole name, should the husband default on payment and a right for the wife to continue to reside in one of those properties (“the property”) until payment by the husband of the final lump sum instalment. The husband failed to pay the final instalment and, in 2010, the court made an order for sale of the property with the outstanding interim payment to be provided to the wife from the net proceeds of sale. That order was never implemented and in 2011 bankruptcy proceedings were commenced against the husband. The wife registered a restriction against the property before the husband was made bankrupt in 2012. Following an initial agreed period of inactivity in the family proceedings the husband and his new partner were both discharged from bankruptcy in 2013. In 2014 they both entered into a settlement agreement to purchase any interest their estates in bankruptcy “may” have had in respect of the properties and other assets and, between themselves, entered into a declaration of trust in relation to the property with the apparent effect of frustrating the wife’s claim. The wife recommenced her application for sale of the property and such an order was duly made with the requirement that the net proceeds of sale be paid in to court. The husband was then invited by the court to make representations as to why the wife should not receive the final instalment from the net proceeds of sale. He contended, inter alia, that the terms of the 2009 order had never created an equitable interest in the property in the wife’s favour and consequently there was no basis on which the court could go further and consider whether that interest fell outside of, or how it was effected by, his bankruptcy. The husband and his new partner appealed against the decision that the wife was entitled to receive her outstanding instalment payment from the net proceeds of sale.

On the husband’s appeal—

Held, appeal dismissed. (1) The provision in the 2009 court order that in the event of the husband defaulting in payment of any instalment of the lump sum the properties “shall be sold” was clearly an order for sale under section 24A(1) of the Matrimonial Causes Act 1973. The order also contained “consequential or supplementary provisions” within section 24A(2), including for the payment of the lump sum due to the wife from the proceeds of sale of the properties. Accordingly, the order gave the wife, in the event of default by the husband in paying any instalment of the lump sum, the immediate right to sell the properties and to payment of the lump sum due from the proceeds of sale, being the very rights identified as the essential elements of an equitable charge creating an equitable interest. The 2009 order therefore gave the wife an immediate equitable interest in the properties, which position was further strengthened by an order for sale already having been made (paras 86, 87, 89, 90, 134).

Mountney v Treharne [2003] Ch 135, CA and Hughmans Solicitors v Central Stream Services Ltd (in liquidation) [2012] EWCA Civ 1720, CA applied.

(2) The husband’s trustee in bankruptcy acquired the properties subject to the wife’s proprietary rights. The wife’s conduct had not constituted her giving up or surrendering her interest in, and rights against, the properties for the purposes of the husband’s bankruptcy such that his interest in the properties would have been comprised in his bankruptcy estate unencumbered by her rights. The trustee in bankruptcy had made no determination as to the nature or extent of the wife’s interest and no registrable disposition had taken place so as to affect the priority of the wife’s interest. Accordingly, the wife’s equitable interest in the properties was enforceable against the husband and his new partner (paras 92, 99, 106, 122, 126, 133, 134, 135, 136).

Appearances: Nicholas Fairbank (instructed by Debenhams Ottaway LLP, St Albans) for the wife. The husband and his partner, as second appellant, in person.

Reported by: Thomas Barnes, solicitor.

Solicitors Journal case digest is prepared by the Incorporated Council of Law Reporting for England and Wales (ICLR)

Categorised in:

Marriage & Civil partnership