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Interim capital relief – is a reform overdue?

Posted: 28/06/2018


In WS v HS (Sale of Matrimonial Home) [2018] EWFC 11, [2018] FLR (forthcoming), Cobb J allowed a wife's appeal in financial remedy proceedings against an interim order for sale of the parties' former matrimonial home (FMH).

Background

The husband and wife in this case had been married for 25 years prior to separation and had three children. The youngest two were still at secondary school. The wife had remained living at the FMH since separation and the husband had moved into their holiday home. The husband had lost his lucrative job as a company director and was relying on Jobseeker's Allowance. The parties had exchanged Forms E on a voluntary basis. Both parties were in agreement that the FMH should be sold and they had both stated this as their position in their respective voluntary Forms E.

The FMH was in joint names. This meant that the wife had rights of occupation under the Family Law Act 1996 (FLA 1996) rather than just 'home rights'. However, the parties did not agree upon when the sale should take place: the wife wanted the middle child to be able to take her A-levels before the sale took place to minimise disruption. The FMH had been marketed for sale for some two years. The original asking price was £950,000 but this had been reduced to £850,000. In October 2017, the parties had received an offer at £785,000 and were being advised by the selling agents to accept it. The husband wanted to accept the offer but the wife did not. In addition to wanting to avoid disruption to the parties' middle child, the wife was of the view that selling at £785,000 represented an undervaluation of the property. As a result, the husband issued financial remedy proceedings and made an application for an interim order for sale under part 18 of the Family Procedure Rules 2010 (FPR 2010) shortly thereafter.

First instance decision

The district judge heard the husband's application at an early stage of the proceedings: the parties had not yet attended a first directions hearing. There was no mention of the jurisdictional basis for the application on the face of the husband's application and counsel for the wife conceded that rule 20.2(1)(c)(v) of the FPR 2010 provided the court with the power to make an interim order for sale. There was no further mention of the substantive law regarding such an order. At the conclusion of the hearing, the district judge made an interim order for sale on the basis that there was 'good reason' why it was 'desirable' to sell the FMH.

Appeal to Cobb J

The wife appealed. Cobb J granted the wife's application for permission to appeal and it was allowed. At paragraph 5 of his judgment, Cobb J said this of the context of his decision: 'The appeal requires me to re-visit the important issue of when, and in what circumstances, a court can order the sale of a former matrimonial home by way of interim relief. I recognise that this has been the subject of relatively recent consideration by Mostyn J in BR v VT (Financial Remedies: Interim) [2015] EWHC 2727 (Fam), [2016] 2 FLR 519. With due deference to his experience and undoubted expertise in this field, and cognisant of the responsibilities I owe as a judge of co-ordinate jurisdiction (see Willers v Joyce & another (in substitution for and in their capacity as executors of Albert Gubay (deceased)) (No 2) [2016] UKSC 44 at [9]), I take a different view in part as to the jurisdictional basis for such a claim.'

The decision in BR v VT

In BR v VT, Mostyn J considered that there were three 'procedural' routes to enable an interim order for sale:

  • section 17 of the Married Women's Property Act 1882 (MWPA 1882);
  • sections 13 and 14 of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996); and
  • rule 20.2(1)(c)(v) of FPR 2010.

Mostyn J considered it necessary to carry out the 'exercise required by section 33 of FLA 1996' to provide for vacant possession so that a sale could then take place. Mostyn J used section 33(6) and rule 20.2(1)(c)(v) FPR 2010 in combination to: ‘Make an order that the wife's rights of occupation be terminated and that her rights notice be vacated. I make a positive order for the sale of the home under rule 20.2(1)(c)(v) of the FPR 2010. I am wholly satisfied that it is desirable to sell it quickly, for the very good reasons which I have given. The wife must give vacant possession on completion of the sale.' (paragraph 36)

Legal landscape for interim orders for sale

Cobb J reviewed the statutory provisions which impacted upon the issue at hand (at paragraphs 25 to 30).

Matrimonial Causes Act 1973

The husband's application was for financial relief under sections 23 and 24 of the Matrimonial Causes Act 1973 (MCA 1973). Cobb J was clear that financial relief under these sections can only take effect following decree absolute. This was apparent from section 23(5) and section 24(3). Various orders under sections 23 and 24 can be accompanied (and are capable of being enforced) by an order for sale under section 24A. Cobb J reiterated that the only circumstances in which an order for sale under section 24A may be made on an interim basis is to give effect to a legal services payment order under section 22ZA of MCA 1973.

Section 17 of MWPA 1882

The court has jurisdiction to make an order for sale and vacant possession. Cobb J found that the statute provides the court with the inherent power to order vacant possession based on the wording of section 17 itself and following the Court of Appeal decision in Short v Short [1960] 1 WLR 833, endorsed by Mostyn J in BR v VT. There was no application under this statute before the court for determination.

Sections 13 and 14 of TOLATA 1996

The court has the power to make interim orders for sale of matrimonial property. The court has the power, not only to order the sale, but to order the beneficiary to give vacant possession of land (see Miller Smith v Miller Smith [2009] EWCA Civ 1297, [2010] 1 FLR 1402). Cobb J noted that in Miller Smith, Wilson LJ appeared reluctant to advocate the use of TOLATA 1996 to make significant interim orders on the basis that to do so would be to decide to look at only one element of the overall picture. There was no application under this statute before the court for determination.

FPR 2010, rule 20.2(1)(c)(v)

This rule allows the court to exercise its power to make an interim order for sale of 'relevant property which is of a perishable nature, or which for any other reason it is desirable to sell quickly'. Cobb J highlighted the decision of the Court of Appeal in Wicks v Wicks [1998] 1 FLR 470. He was of the view that the propositions put forward by Mostyn J in BR v VT had already been considered by the Court of Appeal, which had found that the inherent jurisdiction cannot be invoked to fill holes left by a comprehensive statutory scheme. Cobb J was in agreement with Ward LJ's judgment in Wicks: 'The inherent jurisdiction of the High Court does not extend so far as to afford a general residual discretion to make any order necessary to ensure that justice be done between the parties.' (paragraph 34).

Cobb J went on to state that FPR 2010, rule 20.2(1)(c)(v) is procedural in nature: it does not create a remedy where the remedy sought has been specifically prohibited by statute. The FPR and other rules were established to regulate substantive remedies. He cited Dunhill v Burgin (Nos 1 and 2) [2014] UKSC 18, [2014] 2 All ER 364. Cobb J was of the view that it is statute, ie section 24A of MCA 1973, which contains the substantive power to make an order for sale and, as per the statute, that can only operate once there has been a property adjustment order under section 24 of MCA 1973. He came to the conclusion that: 'Given that section 24 and section 24A MCA 1973 is a barred route to relief at an interim stage, I am unable to conclude that an application brought under a generic procedural rule (r 20 FPR 2010) can deliver a result which is specifically prohibited within the claim before the court. The FPR 2010 regulate the practice and procedure of the court; they cannot extend the court's jurisdiction which, in the absence of the rules, the court would otherwise lack . . . Nor, as McFarlane LJ recently confirmed in [Goyal v Goyal [2016] EWCA Civ 792, [2017] 2 FLR 223] can the inherent jurisdiction fill the "perceived gap".' (paragraph 45)

Cobb J added as an aside (at paragraph 64) that even if he was incorrect in deciding that rule 20.2(1)(c)(v) FPR 2010 does not provide the court with the power to order the interim sale of the FMH, the judge at first instance had failed to carry out the two-stage test required by rule 20 (see paragraph 54). The judge at first instance has also failed to consider or conduct the section 33(6) FLA 1996 'exercise' described by Mostyn J in BR v VT before reaching his decision.

Home rights, terminating occupation rights and part IV of FLA 1996

In addition, Cobb J highlighted that the power to order up possession should have been addressed separately to the issue of the power to order an interim sale at first instance. The wife in this case was a joint owner and was, therefore, protected by section 33(1)(a)(i) of FLA 1996 which permits the court only to 'prohibit, suspend or restrict' the wife's rights of occupation (see paragraph 52). However, Cobb J explained his misgivings about terminating rights of occupation of a FMH on the basis of a deemed application under section 33 FLA 1996 at paragraph 53:

  • A spouse with 'home rights' has the right not to be evicted or excluded from the FMH or any part of it by the other spouse save by an order of the court (part IV of FLA 1996).
  • The powers in part IV FLA 1996 override proprietary rights and should be 'restricted to exceptional cases' (Chalmers v Johns [1999] 1 FLR 392).
  • A section 33 order cannot be made by the court of its own motion: it requires an application for an occupation order in writing and supported by evidence.
  • The 'prohibition, suspension or restriction' (under section 33(3)(d)) of occupation rights is different to 'termination' of them (under section 33(3)(e)) and an applicant must state their case clearly as to the respondent's 'rights'.
  • A spouse's legal and beneficial interest cannot be terminated under FLA 1996 so that it would not be right to carry out a section 33(6) FLA 1996 exercise before determining if those rights should be terminated.

Conclusion

Cobb J suggested that the reform of the issue of interim capital relief is overdue and indicated that the discussion regarding the administrative de-linking of divorce/dissolution and financial remedy cases might provide the opportunity to do so.

 

This article was published in Family Law Journal in June 2018.


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