Judge v Judge & Ors [2008] EWCA Civ 1458

[2008] EWCA Civ 1458Case No B4/2008/0585
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, FAMILY DIVISION
MR JUSTICE COLERIDGE
LOWER COURT NO: FD00D00505
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 19/12/2008
Before
LORD JUSTICE LONGMORELORD JUSTICE WILSONLORD JUSTICE LAWRENCE COLLINS
Between
ANNE-MARIE JUDGE (LADY JUDGE)AppellantPAUL RUPERT JUDGE (SIR PAUL JUDGE)First RespondentOGIER TRUSTEES (JERSEY) LIMITEDSecond Respondent
Mr James Turner QC and Mr Stewart Leech (instructed by Charles Russell LLP) appeared for Appellant.Mr Robert Seabrook QC and Professor Rebecca Bailey-Harris (instructed by Payne Hicks Beach) appeared for First Respondent. for The Second Respondent did not appear.Hearing Hearing dates: 2 & 3 December 2008
Judgment

SECTION A: INTRODUCTION

[1]The wife (as it will be convenient to describe her notwithstanding the pronouncement of a decree absolute of divorce in 2001) appeals against the dismissal by Coleridge J, sitting in the High Court, Family Division, on 29 February 2008, of her application, by summons, for an order setting aside orders by way of ancillary relief which the same judge had made in her favour against the husband (as it will be convenient to describe him) on 12 July 2001. Wisely the judge had postponed for separate consideration, if it arose, his enquiry into the nature and size of any further orders by way of ancillary relief to be made in the event that the earlier orders were set aside.[2]The wife also appeals, and the husband cross-appeals, against the order for costs made by the judge on 29 February 2008, namely that she should pay 50% of his costs of her application. The judge proceeded summarily to assess the costs thus awarded to the husband at £100,000.[3]The first basis of the wife’s application for an order setting aside the orders by way of ancillary relief, and now of this appeal against its dismissal, is that the orders were vitiated by a substantial mistake under which she, the husband and, in particular, the court all laboured at the time when they were made. It has long been recognised that a substantial mistake entitles the court to reopen such orders: de Lasala v. de Lasala [1980] AC 546 at 561E. As Hale J observed in Cornick v. Cornick [1994] 2 FLR 530 at 535E, the decision of this court in Thompson v. Thompson [1991] 2 FLR 530 is properly analysed as an example of a vitiating mistake in relation to which no one had been at fault. I also agree with the other observations of Hale J in Cornick, at 532F and 536F-G, in relation to a vitiating mistake, save only that nowadays it is not regarded as falling within the principles set out in Barder v. Caluori [1988] AC 20. The second basis of the application is that at that time there was material non-disclosure on the part of the husband. The two bases are linked by the contention of Mr Turner QC, who appears on behalf of the wife, that, had the husband given the disclosure which allegedly he should have given, the alleged mistake would not, or might well not, have been made. But Mr Turner wishes to keep the two bases distinct in order to be able to argue that, even were he to fail to establish material non-disclosure, his appeal should nevertheless prevail by reason of a substantial mistake.[4]It is important to note that, insofar as she alleges material non-disclosure on the part of the husband, the wife does not allege that his non-disclosure was deliberate. She argues that his disclosure was not full; but she refrains from arguing that it was not frank. In 2001 (so her argument proceeds) the husband had in his possession substantially relevant material which should have been disclosed but the relevance of which he did not appreciate, with the result that the non-disclosure, albeit not exactly innocent in that it was in breach of duty, was unintentional. In Shaw v. Shaw [2002] 2 FLR 1204 Thorpe LJ suggested obiter, at [44(ii)], that it was hard to conceive that material non-disclosure could be unintentional; but, with respect, I find somewhat less difficulty with the concept than he does.[5]There has been some discussion, both before the judge and in this court, of a third basis of the wife’s application, namely that, following the making of the orders by way of ancillary relief, a new event occurred which invalidated a fundamental assumption upon which they were made. By the conclusion of the hearing in our court over two days, arguably relevant new events, properly so-called, had been whittled down to two, neither of which Mr Turner pressed hard. I will explain in Section G why neither justifies the setting aside of the orders. So the wife’s substantial argument is not governed by the principles in Barder cited above. It follows that, although the lapse of time between the making of the orders and the discovery of a vitiating mistake (or non-disclosure) may not be irrelevant, there is no black-letter condition that the discovery should have occurred shortly after the orders were made, such as obtains in the case of new events (Barder, 43 C-D).

SECTION B: SUMMARY OF THE PROCEEDINGS IN 2001

[6]The central effect of the orders by way of ancillary relief dated 12 July 2001, following a hearing which had proceeded for a week in June 2001, was to order the husband to provide to the wife assets valued at £6,625,000 on a clean break basis. This comprised the matrimonial home in Worcestershire (£650,000), a flat in London (£825,000), a fund for the clearance of debts (£150,000) and a fund for her future maintenance (£5,000,000). The provisions of the flat in London and of the fund for the wife’s future maintenance were made by way of variation in her favour of the terms of a trust created by the husband in Guernsey in 1986 primarily for his own benefit (“the offshore trust”). There was no issue before the judge but that the property of the trust represented resources of the husband. The judge held that, although created three years after the marriage, the offshore trust was not initially “post-nuptial”; but he went on to hold that it had later become “post-nuptial”, with the result that, pursuant to s.24(1)(c) of the Matrimonial Causes Act 1973, he could vary it by providing that the flat in London owned by the trust and £5,000,000 of the liquid securities held by the trust should be held in effect for the wife absolutely. The corporate trustee of the offshore trust was represented by counsel not only at the hearing in 2001 but also at the hearing in December 2007 which led to the order under appeal; and at both hearings it adopted a stance not only properly defensive of the interests of the trust but also both neutral as between the husband and the wife and essentially helpful to the court. Wisely it has chosen not to appear at the hearing before this court.[7]The award to the wife in 2001 was made nine months after the decision of the House of Lords in White v White [2001] 1 AC 596; and the judge was thereby required to cross-check his provisional award against a yardstick of equality. In the event he decided that, in the light of the exceptional contribution of the husband to the creation of the matrimonial wealth, there should be a departure from that yardstick in his favour. In terms of percentages the judge made alternative calculations, both upon slightly complex premises; but it is agreed to be as convenient for us upon this appeal as it seemed to the judge on 29 February 2008 to take his award to the wife as having represented 38% of their assets. In that on one basis the judge had computed their assets in the sum of £15,650,000, an award of £6,625,000 indeed amounts to only slightly more than 38% of it.[8]The judge computed the assets of the husband and wife in the sum of £15,650,000 only after deducting from the husband’s assets a liability which he estimated at £14,000,000 and which I will call “the liability”. Thus, otherwise, the assets would have been computed in the sum of £29,650,000. In the event, however, the liability which the judge estimated at £14,000,000 has turned out to be a liability (in round terms) only of £600,000. The wife thus says that, in relation to the liability, the court in 2001 made a profound mistake, perhaps partly induced by the husband’s unintentional non-disclosure. Why (asks Mr Turner) should the court not reopen the enquiry with a view (all other things remaining equal) to making a further award to her amounting to 38% of £13,400,000, namely to £5,092,000?[9]I must explain the nature of the liability which in his judgment in 2001 the judge estimated at £14,000,000. In the past the husband was a highly successful businessman. By deployment of some of the fruits of his success he has been a notable benefactor; but with other of its fruits he has made unsuccessful investments. The seeds of his success lay in his leadership in 1985 of a management buy-out of part of the business of Cadbury Schweppes. The part which was thus bought was placed into a company called Premier Brands Ltd; and it was substantially in order that it should receive shares in Premier Brands otherwise receivable by himself that in 1986 the husband created the offshore trust. In 1989 the trust sold its shares in it at substantial profit. Among the distributions then made by the trustee, no doubt in the light (among other things) of the wishes of the husband, was a substantial payment into a newly created, registered charity, namely “The Judge Charitable Foundation” (“the charity”), of which the husband and wife were the trustees.[10]In 1996 the husband embarked on an unsuccessful business venture, namely the development, through a company called Isoworth Holdings Ltd, of a novel machine for the dispensing of soft drinks. In the following four years, at what at this stage I will describe only as the “suggestion” of the husband, the trustees not only of his offshore trust but also of the charity invested heavily in Isoworth. In December 2000, however, i.e. only seven months prior to the hearing of the wife’s application for ancillary relief, Isoworth collapsed. The collapse had an obvious and direct adverse consequence for the offshore trust; but it led to examination at the hearing in 2001 of the risk of a substantial further adverse consequence for both the husband and the wife.[11]The risk of the substantial further adverse consequence of the collapse of Isoworth was the risk that the Charity Commission of England and Wales (“the Commission”) might require the trustees of the charity, namely the husband and wife, personally to reimburse the charity for the amount which it had lost by their ostensible decision to invest its funds so heavily and so speculatively in Isoworth, both by purchasing shares in it and by making loans to it, in that, in particular, Isoworth was a company in which the husband, as founder of the charity and one of its trustees, had a substantial personal interest. The risk was that the Commission would consider that such investment of the charity’s funds, by the husband and wife as its trustees, had been for his indirect benefit and thus improper and that, in that the value of the investment had by then been lost, the Commission would require their personal reimbursement of it to the charity, indeed together with a sum equal to the interest lost by the charity as a result of their failure to invest its funds properly. Such then was the major component of the liability.[12]In addition to the risk that the Commission would require the husband and wife to reimburse the charity, there was another allied, but independent, risk which was raised on behalf of the husband in the course of preparation for the hearing of the wife’s application for ancillary relief, apparently even prior to the collapse of Isoworth. It related to the fact that, irrespective of the company’s fate, there had been a successful claim against the Inland Revenue for gift-aid relief in relation to such payments by the husband to the charity out of his taxed income as the trustees had deployed in investment in Isoworth. The risk was that, to the extent that the husband’s donations had been deployed in an investment in consequence of which, as a person already interested in the success of Isoworth, he had received a benefit, the claim for gift-aid relief would be ruled to be invalid by virtue of s.25(2)(e) of the Finance Act 1990, with the result that the tax refunded by the Revenue would have to be repaid to it. To whom had the Revenue made the refund? As to the higher rate of income tax which the husband had paid in respect of the sums donated, the refund had been to the husband himself as donor; but, as to the basic rate of income tax which he had paid, the refund had been to the charity, with the result that any repayment of sums thus wrongly refunded to the charity pursuant to a claim for relief made by the husband and the wife, as its trustees, would or might have to be made by themselves.[13]It was in relation to the risks that the husband and wife were liable both to reimburse the charity at the direction of the Commission and to repay to the Revenue sums which it had refunded to the charity pursuant to an invalid claim for gift-aid relief (together with the risk that the husband was further liable to repay to the Revenue sums which it had refunded to himself pursuant to such a claim) that, in his computations, the judge estimated a liability of £14,000,000, being a sum swollen by a further feature to which I will turn in [16].[14]It is important therefore to appreciate what one might call the forensic dynamics which were in play at the hearing in 2001. Almost all of the feared liability to the charity and to the Revenue was likely to fall on the wife as well as on the husband. No doubt it was not in the wife’s interest to persuade the judge to overestimate the liability; equally, however, it was not in her interest to persuade him to underestimate it. For, were he to underestimate it and thus to consider it practicable for her to meet out of her award any such apparently modest liability as might fall on her, her wealth would be at risk of serious, unexpected erosion at a later date. It is clear, therefore, that the strategy adopted on behalf of the wife was to present argument as to the size of the liability straightforwardly, without any attempt at possible minimisation; and to that end she briefed Mr McCall QC, of the Chancery bar, to address the judge in relation to it. During the last three decades Mr McCall has become something of an institution in the Family Division in that he has often been introduced into complex applications for ancillary relief in order to make submissions to the court about difficult aspects of trust, revenue and charity law with, as is generally considered, clarity, balance and authority.[11]The line therefore taken on behalf of the wife at the hearing in 2001 was that, whatever the amount of the liability to the charity and/or to the Revenue, she should as far as possible be protected against continued exposure to it in order that the sum to be awarded to her should not be at risk of later depletion. Like most applicants for ancillary relief, she wanted to leave court with a clear understanding of the size of the funds definitely to be available for her future deployment. Thus she asked the judge to effect, to the maximum possible extent, a transfer to the husband of her exposure to the liability. In this regard she contended not only that the husband should personally indemnify her against it in an unlimited amount but also that he should provide security for his indemnity. The husband conceded that the liability, whatever its amount, should be entirely borne by him and thus that he should undertake to the court to indemnify her against it in an unlimited amount. But he objected to the provision of security. In the event, however, the judge overruled his objection and ordered such further variation of the offshore trust as would require the trustee to earmark £3,000,000 to stand as security for the husband’s obligation to indemnify the wife against the liability.[12]Only by the above route did the liability to the charity and/or to the Revenue come to be treated at the hearing in 2001 as a liability only of the husband. How would he meet such liability? The only funds which might be available to him in this regard lay in the offshore trust. But, to the extent that funds of the trust were to be remitted onshore in order to enable him to meet the liability, much of the remittance would trigger a substantial liability on the part of the husband to U.K. tax under s.87 of the Taxation of Chargeable Gains Act 1992. In this regard the judge was required substantially to gross up such sum as he identified as being the likely liability to the charity and/or to the Revenue. Such is the further feature to which I have referred in [13] as causing the judge’s estimate of the liability to be swollen.[13]If a respondent to an application for ancillary relief claims exposure to a substantial liability the existence and, if so, the amount of which the court finds difficult to determine, one course open to it is to calibrate the award to the applicant, wholly or partly, in accordance with whether the liability later materialises and, if so, with the ultimate size of it. In Charman v Charman(No 4) [2007] 1 FLR 1246 this court noted, at [3], that, in the order then under appeal, Coleridge J had himself adopted such a mechanism, which he had described as provision for a reverse contingent lump sum.[14]In the present case it would therefore have been possible for the judge to have provided that, to the extent that the liability to be entirely assumed by the husband were ultimately to be seen to fall below £14,000,000, the award to the wife should be pro tanto – or at any rate to some extent – increased. Indeed, within minutes of the beginning of the hearing in 2001, the judge canvassed such a solution with Mr Murdoch QC, who was leading the wife’s team of advocates. Their exchange was as follows: The judge:
“So far as the Isoworth aspect of the case is concerned, the loss to the charity, what are you inviting me to do? Make findings? Come to a conclusion about what the likely payment to the Charity Commissioners is likely to be, rather like one used to have to do in Lloyd’s cases? Or are we going to have a contingency payment or contingency sums dependent upon the outcome? There are a number of ways of dealing with these imponderable financial features.”
Mr Murdoch:
“That is right. In the light of the figures and the way that we analysed them, we invite your Lordship to take a view that the risk lies within a range from nil to, at a maximum, 14.5 million….”
Neither during the hearing which continued throughout that week nor in the judge’s reserved judgment was there any further reference to a calibrated award. Mr Murdoch had shown no interest in the judge’s suggestion of it. He probably recognised that the likely quid pro quo for an increase in the wife’s award in the event that the liability proved lower than the judge’s ultimate estimate would have been a decrease in it in the event that the liability proved higher than it. Mr Murdoch’s stance was consistent with the wife’s desire to be relieved as far as possible from exposure to the liability; she preferred a solution in which she knew where she stood and in which the uncertainties surrounding the liability were cast entirely upon the husband.[15]In the early exchange set out above Mr Murdoch had described the liability as lying within a range from nil to £14,500,000. In this appeal, however, Mr Turner is at pains to stress that, by the end of that hearing, Mr Murdoch had moved away from a minimum of nil. Mr Murdoch seems certainly by then to have accepted that the husband and wife were liable to repay to the charity £6,800,000 lost by its investment of that amount in Isoworth and that, irrespective of continuing issues with the husband about interest thereon and about liability to the Revenue, it was proper to gross up that amount in order to allow for tax triggered by its remittance onshore. Mr Murdoch pointed out that, were the husband to choose to move himself offshore prior to remittance, the tax would not be payable; but Mr Murdoch conceded that, even were the husband to take that course, the wife would be unable to return to court and to complain of “daylight robbery”. The husband seems to have contended that the liability should be estimated at a higher figure, that it was “certain” that £6,800,000 would be repayable to the charity and that over all the liability should be estimated at £24,000,000.[16]In his judgment dated 12 July 2001

the judge addressed the liability as follows:

“The single most significant controversy on the financial side of this case concerns the potential liability that the husband, and to a lesser extent the wife, have to the charitable foundation and also, arguably, to the Inland Revenue which can only be met to any extent from the trust. I am anxious in the course of this judgment to say the minimum about the circumstances leading to the creation of these potential liabilities for a number of reasons. In the first place neither is at present a liability at all. They are some way off being crystallised and the circumstances surrounding their coning into existence are likely to form the basis of some enquiry by both the Charity Commissioners and the Inland Revenue at some date in the future. I have not explored (or been required to explore) in detail these matters or to come to any precisely concluded view about the circumstances surrounding the creation of these potential claims and the rights and wrongs pertaining thereto. However, for the purposes of my decision, it is necessary for me to form a view about the provision which overall it would be fair to set against the trust assets to enable these liabilities to be met either in full or in part at some time in the future. Both the husband and the wife acknowledge that sums will be owing at least to the [charity] and so I cannot ignore them. However, they do not agree about the level of the provision for which I should make allowance. The need for the provision has arisen in this way … For the reasons which I have already made clear, it will assist nobody in this case if I evaluate the merits of the various points for and against the positions adopted by the parties in relation to these potential liabilities. There is huge scope for disagreement and there is no actual evidence in support of either view; only inspired conjecture. Overall, having carefully weighed up the arguments certain points strike me. In the first place the creditors in this situation have to face the stark reality which is that neither the husband nor the wife have any resources to meet these liabilities even if they went bankrupt. On the other hand both the husband and the wife recognise that they are at the very least morally bound to make some proper reimbursement in relation particularly to the capital sum owed to the charitable foundation … Further I regard it as likely that by a combination of sensible and sensitive negotiation it will be possible to arrive at a composition with either or both the Charity Commissioners and the Inland Revenue which will not involve either the reimbursement of the whole of the lost amounts or the immediate repayment of all sums agreed to be owing… Having carefully weighed up all the competing arguments relating to this part of the case I propose for the purposes of my calculations to take the figure of £14m as a reasonable estimate of the overall capital cost of the potential reimbursements both to the Charity Commissioners and the Inland Revenue (on a present value basis). I should hasten to add that this is not a figure which has any blessing from the trustees who at this stage have been presented with no request for funds to enable reimbursement to be made … I have done the best I can to “crystal ball gaze” in relation to this matter having had the competing arguments fully and fairly put before me. At this stage no court can do better than that.”

The need for the provision has arisen in this way …

[17]In 2001 there was substantial mistrust between the husband and the wife, which seems still to remain. The husband argued that, in that the liability – whatever its size – was in effect to fall only upon him, he should be allowed to have sole conduct of future negotiations with the Commission and with the Revenue in relation to it and that accordingly the court should preclude the wife from exercising her entitlement, as a trustee of the charity, to participate in them or even to be informed about their progress. He might even have feared that the wife would deliberately make mischief for him in seeking to achieve as high an ultimate liability as possible. Although – I must hasten to add – the judge made no finding whatever that the wife harboured so base an intent, he was predictably sympathetic to the husband’s argument in this regard. He extracted from the wife an undertaking that she would volunteer information neither to the Commission nor to the Revenue in relation to what was recorded as the “possible liability”; and on that basis he extracted from the husband an undertaking to inform the wife only of the dates when his communications with the Commission began and ended.

SECTION C: DETERMINATION OF THE LIABILITY AT ONLY £600,000

[18]In February 2002 the husband duly informed the wife, through solicitors, that on 28 January 2002 his communications with the Commission had begun. Thereafter the wife presumably expected to be told nothing of the progress of the negotiations. But there was a curious development. Although he had persuaded the court to override her entitlement to be informed about them, the husband sent to the wife a letter, dated 12 June 2003, in which he volunteered certain information about them. He also enclosed a short “Briefing Paper” dated 13 January 2001, thus prior to the hearing in June 2001, in which he had sought to explain the nature of the charity’s investments to a firm of chartered accountants then recently instructed to assume conduct of his affairs. I will return to the Briefing Paper in [39]. In the text of his letter to the wife the husband sought to make clear that, in making such donations to the charity as its trustees had invested in Isoworth, he had required them thus to have invested them.[19]There is no evidence about the husband’s motive in sending the letter dated 12 June 2003. But Mr Seabrook QC, who has appeared on his behalf at all substantial hearings in and since 2001, does not demur from the hypothesis that the husband might have been concerned lest, were the Commission to approach the wife with a request to explain the circumstances behind the charity’s investment in Isoworth, she would otherwise proffer an inconsistent explanation.[20]In having reached the word required, I have at last come close to being able to explain – in part – why the liability proved to be in a sum so much lower than that estimated by the judge. If in making a donation to the trustees of a charity, the donor requires them to invest the donation in a specified way, or (put another way) he makes the donation conditional upon their so investing it, they have no option, if they accept the donation, but so to invest it: they have no discretion in relation to the nature of the investment and, even if the investment enures to the benefit of a trustee and even if it then becomes valueless, the Commission is unable to charge the trustees with breach of duty. By his letter to the wife dated 12 June 2003, the husband was laying the ground for what I will call the conditionality defence. The only downside to the defence was that it made it even plainer that the successful claim against the Revenue for gift-aid relief had been invalid; but the exposure to the Revenue was massively less than the exposure to the charity. In Section D I will revert to the proceedings in 2001 in order to examine the extent to which the possibility of a conditionality defence was then discernible.[21]In April 2006 the husband informed the wife, by letter through solicitors, that his negotiations with the Commission and with the Revenue were at an end. Although he did not then say so, the liability to reimburse the charity had been agreed with the Commission to be nil and the liability to repay sums refunded pursuant to the invalid claim for gift-aid relief had been agreed with the Revenue in the sum of £600,000.[22]Prior to receipt of that letter the wife had already learnt, to her considerable surprise, that the Commission was proposing to agree with the husband that the liability to reimburse the charity was nil. From May 2005 she had, by her solicitors, been in desultory contact with the Commission. Initially she was expressing concern that, notwithstanding what she later accepted to be her ineffective resignation of trusteeship in 2000, she remained listed as a trustee of the charity. Mr Seabrook alleges that, by some of the communications which then ensued, the wife broke her undertaking dated 12 July 2001 not to volunteer information to the Commission. The wife responds that she was only seeking, rather than giving, information and that she was entitled to do so. The judge made no finding in this regard and Mr Seabrook’s allegation of breach does not appear to me to be established. At all events the Commission was, from December 2005 onwards, giving strong indications to the wife’s solicitors that it proposed to agree with the husband that the liability was nil. In a telephone conversation with the wife’s solicitor in February 2006 an officer of the Commission told her that in its view some of the relevant donations had been conditional and that, taking the case as a whole, it considered that the public interest would not be served by pursuing the matter. In later communications with her the officer gave explanations in much the same terms.[23]Only limited further evidence is available in relation to the husband’s successful negotiations with the Commission, which were conducted on his behalf by solicitors other than those representing him in the matrimonial proceedings. The paucity of evidence arises from the stance taken by the husband by reference to the judge’s provisions on 12 July 2001, namely in effect that the conduct as well as the outcome of the negotiations should be a matter for him alone. In 2003 the wife had made a free-standing application to the judge for an order for disclosure by the husband of all the documents referable to the negotiations; and in 2004 the judge had refused it. Following the subsequent determination of the liability at £600,000 and the issue of her application to reopen her award, the wife did not reapply for an order for such disclosure on the basis that the documents had by then become relevant. No doubt the husband would again fiercely have opposed it as being both contrary to the judge’s provisions in 2001 and a shameless fishing expedition. It is idle to speculate upon its outcome.[24]The limited further evidence arises out of a demand made by the wife through solicitors in December 2006, i.e. after the issue in June 2006 of her application to reopen her award, for disclosure of any minutes of meetings between her and the husband as trustees of the charity. If only as a trustee, she was entitled to see them. Eventually, in stages in March and June 2007, the solicitors who had represented the husband in the negotiations with the Commission disclosed to the wife’s solicitors copies of 39 minutes referable to specified dates between 1992 and 2003. The minutes purported to record meetings of the husband and wife as trustees held between 1992 and 2000 and, following her then purported resignation, to record occasions of resolutions on the part of the husband as purported sole trustee. The solicitors who disclosed the minutes confirmed to the wife’s solicitors that all of them had been submitted to the Commission on behalf of the husband as part of the negotiations. When, however, the wife’s solicitors asked to see the original minute book, the husband’s solicitors informed them that no minute book had ever existed; that the minutes which had been disclosed had, insofar as they bore dates prior thereto, all been created by the husband at around the end of 2001 on the advice of his accountants; and that, in effect, they reflected a genuine attempt by the husband, partly with the aid of historical documents, to reconstruct what had then truly been resolved. It would surely have been easy for the husband to record, on their face, that many of the minutes were reconstructions which, albeit bona fide, had been made long after the meetings to which they purported to relate. When, in the course of the hearing in our court, we asked Mr Seabrook whether it had been made clear to the Commission that the husband had created most of the minutes long afterwards, he said, with the husband sitting behind him, that he was unable to answer that question either one way or the other. Inevitably Mr Seabrook thereby increased our concern that the husband might not have been frank with the Commission in that regard.[25]The minute of the thirteenth meeting allegedly held between the husband and the wife, namely on 20 March 1994, is perhaps the most significant in that it included the following paragraphs:
“The Founder stated that he understood that if he stipulated that his donations, plus any related Gift Aid refunds, had to be used for investment in specific private companies then this removed from the Trustees the requirement to ensure that all of its funds were invested in low risk or diversified marketable assets. The Founder therefore asked the Trustees to consider whether they would accept his proposed gift of £300,000, and any future gifts, unless otherwise stipulated by him, on the basis that the Trustees should only invest money in companies where the Founder had a management interest as the Founder felt that his involvement was likely to help such companies to succeed. The Trustees considered this proposal and agreed that they would accept any future donations by the Founder on the basis that such funds, and any related Gift Aid refunds, could only be invested in companies in which the Founder had a substantial management interest.”
[26]It is clear that the conditionality defence played a very substantial part in leading the Commission to agree that the liability to the charity was nil.

SECTION D: WAS CONDITIONALITY DISCERNIBLE IN 2001?

[27]Before the court in 2001 there was in my view material which suggested that a defence of conditionality might be able successfully to be developed on behalf of the trustees of the charity in negotiation with the Commission.[28]Disclosed in the proceedings in 2001 was a copy letter written by the husband to an officer of the Commission dated 31 October 1999 in which he said:
“My donations [to the charity] have been made on the explicit understanding, and with the clear knowledge, that they would be invested in capital growth situations such as Isoworth.”
In my view the distinction between understandings that the donations would be so invested and that they should be so invested is fine.[29]In the first of two written Opinions dated March 2001 and placed before the judge at the hearing in 2001 Mr McCall referred to “the fact that the gifted money had to be lent to the company” although he probably intended to refer to it as an alleged fact rather than one which was incontrovertible; and in the second he rejected a suggestion that the trustees might escape liability to the charity by making further “unconditional” gifts to it.[30]On the second day of the hearing in 2001 there was the following exchange between the judge, Mr Brandon QC, who was instructed to address him on behalf of the husband in relation to the liability, and Mr McCall: The judge:
“Can I just ask? … The factual basis seems to be put forward that the sum of money that was paid to Isoworth literally came in and went out almost in a seamless transaction … Does anybody actually know whether that was the case or whether there was in fact a delay of days, hours?”
Mr Brandon:
“My Lord, I believe the situation was that the … letter [from the husband] that said that an amount would be paid to the trustees also indicated that it should go to Isoworth… I think it would seem to be indissolubly linked, although no doubt [the husband] could be asked about this in evidence.”
Mr McCall:
“My Lord, that is a most remarkable statement because of course that implies that the gift was made subject to a condition or a trust that it was not to be used for charitable purposes alone but for charitable purposes and the purpose of Isoworth. So I would be very surprised if it adopted that form. It would be tantamount to saying: “We are doing a charity donation but we are doing something else as well”
. It may be that that is so but I certainly have not seen a document. I would be perfectly happy to assume that it was understood throughout that monies received by the charity would go on to Isoworth. I would be surprised to find that there was an obligation that they had to. My Lord, all I would say is that if there was an obligation, it may change the whole character of the case because of course, if there was an obligation, may be there was no breach of the charitable trust and may be that argument would be a defence to the Charity Commission.” The judge:
“You mean it was not effectively a payment to the trust at all?”
Mr McCall:
“Or was it a conditional one? So far as Isoworth was good for the money, the charity was benefiting, but the charity was only benefiting through Isoworth. So may be we have now suddenly discovered a defence to the Charity Commissioners’ claim in discovering a loophole through which the Revenue have no difficulty in clambering for gift aid. That may be the answer… My learned friend’s comment a moment or two ago does raise a fundamentally different perspective on the whole thing and it may be that, if there is a letter that can be produced dealing with the Isoworth investment by the charity, your Lordship should hear further submissions on the point.”
[31]Later that day Mr Brandon stated that he had unintentionally misled the judge in relation to the husband’s letter. He explained first that the letter was written to the husband’s bank, also being that of the charity, rather than, as he had implied, to its trustees; and second that he had been incorrect to have given the impression that “it was conditional”. Mr Turner now accepts that Mr Brandon thereby meant only that the letter had not stated that any gift was conditional and that Mr Brandon was not more broadly rejecting the possibility that the husband’s gifts to the charity were conditional. Mr Brandon repeated that, when he came to give oral evidence, the husband could be asked about it.[32]On the following day Mr Seabrook produced to the court a copy letter of the type which Mr Brandon had described. Mr Seabrook said that it was a sample of a large number of such letters. By the letter produced, dated 1999, the husband instructed his bank to transfer £65,000 out of his account into that of the charity and then forthwith to transfer the same sum out of the latter into an account of Isoworth. As Mr Seabrook observed to the judge, it demonstrated the seamlessness of the transfers.[33]In the event there was no attempt by either side to explore with the husband in oral evidence whether he might be able to claim that his gifts to the charity were conditional; and no further reference was made at the hearing to the possibility of the defence. But it seems to me that the makings of the defence were there for all to see and further to have explored had they had any appetite to do so. By reference to material then before the court, it was, to put at its lowest, arguable that these were payments by the husband to Isoworth via the charity in what was believed to be a tax-efficient manner and that any suggestion that, in making the payments, the husband was leaving it open to the trustees (including himself) to exercise their discretion to invest them otherwise than in Isoworth is unreal.

SECTION E: NON-DISCLOSURE

[34]Mr Turner contends that the material, albeit unintentional, non-disclosure on the part of the husband in the proceedings in 2001 was of two pieces of evidence.[35]He says first that the husband should have disclosed his Briefing Paper to the accountants, to which I have referred in [22]. In it the husband wrote as follows:
“Prior to March 1998 it was not possible for [the husband] to invest directly in Isoworth as the [offshore trust] was also a shareholder and any personal investment by [the husband] could have been seen as a contribution by him to the [trust] which would have prejudiced its tax status. He therefore decided explicitly to donate money to the [charity] for investment in Isoworth as shown by the timing of such donations.”
[36]Mr Turner then turns to the minutes of such of the meetings of the trustees of the charity as were purportedly held on dates prior to the hearing in 2001. On the basis that the husband is correct to aver (and admit) that the minutes of such meetings were created only after that hearing, Mr Turner contends that at any rate their contents, which, after all, the husband claims to be a faithful reconstruction of what the trustees then resolved, should have been disclosed. In particular (says Mr Turner) the husband should have disclosed the apparent fact, recorded in the minute of the alleged meeting on 20 March 1994 the relevant part of which I have set out in [29], that the trustees had then in effect agreed to accept all future donations from him as conditional upon their investment of them in companies in which he had a management interest.[37]Mr Turner’s case is that, had these two pieces of evidence been disclosed in the proceedings in 2001, the availability of a defence of conditionality would then have been far clearer and the judge would have assessed the liability in a sum much lower than £14,000,000. I disagree. I do not regard the terms of the husband’s Briefing Paper as adding anything of significance to the terms of his letter dated 31 October 1999. I accept that the terms of the minute of the alleged meeting on 20 March 1994 are more explicit, indeed no doubt conveniently explicit for the purpose of the later negotiations with the Commission. But I have already explained that material sufficient to raise the possibility of a defence of conditionality was brought into the proceedings in 2001. No doubt for good reason Mr Murdoch spurned Mr Brandon’s express invitations to cross-examine the husband about the possibly conditional nature of his gifts to the charity; and in my view it is impossible for Mr Turner to contend that the husband’s duty of disclosure required him, albeit unasked, to make any more detailed presentation of the circumstances surrounding the gifts.

SECTION F: MISTAKE

[38]The crux of the reasoning of Coleridge J for rejecting the assertion that his award to the wife had been vitiated by a substantial mistake is set out in the following paragraphs of his judgment under appeal: “55. The court proceeded on the basis that the probability was that a very significant sum would have to be paid to one, other or both agencies. This was the probable outcome. However the court was fully alive to the possibility that the payment would end up being very much larger or very much smaller. These were the possible outcomes. As far as I was concerned both possible outcomes were on the spectrum of outcomes, albeit at their outer edges, and the chances of either of them occurring was, in my judgment, the same. No one could say with any degree of confidence where the eventual outcome would fall on the spectrum and until the enquiry was concluded. The unlikely but not the impossible occurred. … 57. The court (and the parties) were, in the circumstances, especially anxious to ensure that the wife’s position was as bomb-proof from later attack as possible hence the broadly drawn indemnity backed up by the indemnity fund (opposed by the husband). The whole risk arising from the liability was entirely to be assumed by the husband and the quid pro quo for that was that the husband might indeed do significantly better than the court predicted. Protecting the wife was my especial pre-occupation and concern. … 63. In this case the ball has bounced the wrong way for this wife… It might just as easily have bounced the wrong way for the husband in which event it would have had a catastrophic effect on his finances. She was completely secure, he was most insecure. That is precisely how I intended it to be.” …[39]It seems to me that, in particular , the observations in [55] of that judgment, set out above, made by a judge in a position of unparalleled authority to explain the approach to the liability taken by the court some seven years previously, make the wife’s appeal extremely problematical. It comes as no surprise that Mr Turner feels driven to submit, simply but respectfully, that in that regard the judge’s powers of recollection have for once failed him. I do not accept the submission. I agree that at first sight the sum of £14,000,000 adopted by the judge in 2001 is of such size and specificity as to make it hard to accept that nil or even a sum of £600,000 was also contemplated. But, as the judge was later to say, such is to fail to distinguish between what is found to be the most probable and what is nevertheless recognised to be possible. A judge’s compilation of a balance sheet, usually necessary in order to enable him to address what is now the principle of equality, often requires him to confer a spurious specificity on the value of assets, or on the size of liabilities, in relation to which, on the evidence before him, he can reach no confident conclusion: his balance sheet demands figures so he inserts into it the figures which he considers to be the most probable or, more accurately, the least improbable. There is no evidence which enables us to override the judge’s conclusion that he made no mistake in 2001 in that a liability of £600,000 fell within the spectrum of recognised outcomes. In his judgment in 2001 he expressly referred to the need to gaze into a crystal ball. Indeed when, following its delivery, Mr Seabrook made submissions about the absence of need for the wife to be acquainted even with the result of the negotiations in respect of the liability, the judge asked him “What if it is nought?”. Mr Turner speculates that the judge asked the question because he considered that a liability of nought might enable the wife to apply to reopen the award; but its greater significance seems to me, on balance, to lie in the simple fact that the judge did there expressly contemplate a liability even of nought.[40]In the light of the above, my reasons for rejecting the assertion that the wife’s award in 2001 was vitiated by mistake can be collected into four, linked propositions:(a) In the proceedings in 2001 the size of the liability was, in Mr Seabrook’s phrase, a known unknown and the judge found that the spectrum within which it might possibly fall was vast.(b) In those proceedings the makings of a conditionality defence, which would dramatically reduce exposure to the charity albeit not to the Revenue, were there for all to see and further to have explored.(c) It was in particular because she acknowledged that the size of the liability was so uncertain that the wife successfully pressed the court to transfer her exposure to it, as a trustee, to the husband to the maximum possible extent. She actively sought, and secured, a solution under which she left the marriage with assets of firm value and under which, by contrast, the husband was required to meet the liability, whatever its size might prove to be. The chance is almost non-existent that, had the liability proved to be in a sum vastly higher than £14,000,000, the husband would have secured the reopening of the award and a refund from the wife.(d) For precisely the same reason the wife showed no interest in the judge’s suggestion that her award might be calibrated so as to rise or fall in accordance with the ultimate determination of the size of the liability. She forswore the benefit attendant upon the determination of a low liability because of the concomitant detriment attendant upon that of a high liability and also, no doubt, because of the stress likely to be generated by the interim uncertainty.

SECTION G: NEW EVENTS

[41]At the hearing in 2001 the husband firmly stated that, irrespective of his legal obligation to reimburse the charity for its losses in Isoworth (taken to be £6,800,000), he considered that he was subject to a moral obligation to do so; and the wife concurred that he was subject to it. Soon after that hearing his sense of moral obligation seems to have evaporated; such may be related to what he alleges to be a substantial further decline in his wealth beginning soon after 2001. The question is whether the evaporation of the husband’s sense of moral obligation to pay £6,800,000 is a new event which has invalidated a fundamental assumption upon which the orders in 2001 were made. In the judgment under appeal the judge was correct to answer the question negatively. He accepted that the husband’s assertion of a moral obligation was genuine when made in 2001 but held in effect that, had it not run in tandem with the assertion of a legal liability, it would have carried no significant weight and thus, in particular, would have precipitated no significant deduction from the assets upon the court’s balance sheet. I accept that the moral obligation of a respondent to an application for ancillary relief, for example to accommodate or maintain an elderly parent, can occasionally serve to reduce the level of his legal obligation to an applicant, particularly if it existed, even embryonically, at the time of the marriage. But for obvious reasons it is rare for a moral obligation to trump a legal obligation; and a moral obligation to pay further funds to a registered charity would not do so.[42]The other alleged new event, canvassed faintly and almost parenthetically, relates to the agreement of the Commission that the liability to the charity was nil. The argument would have to be that the Commission’s agreement was made in such unexpected dereliction of its duty to safeguard the rights of the charity as to amount to a falsifying event. But, apart from other problems (such as the time which elapsed between the making of the orders and the Commission’s agreement), the evidence does not begin to justify so profoundly serious a charge against the Commission. We can see that it had before it a fairly substantial defence of conditionality; and it has been given no opportunity to explain its other wider reasons, if any, for agreeing that the liability was nil. This case must proceed – and today surely end – on the basis that the Commission acted properly.

SECTION H: APPEAL IN LIEU OF APPLICATION

[43]In an attempt to evade all the above difficulties, Mr Turner makes one final throw. He reminds us that there are various courses available to those who seeks to reopen orders by way of ancillary relief, including to seek to appeal out of time against them or to apply within the existing proceedings to the judge who made them (or, if impracticable, to a judge at the same level) for an order that they be set aside. The wife chose the latter course. But Mr Turner invites us to imagine that she had chosen the former and that he had therefore been appearing before us upon three preliminary applications, namely for permission to appeal, for an extension of time for appealing and for permission to adduce fresh evidence. The result (says Mr Turner) is that the extension would have been granted because, on any view, the wife issued proceedings promptly after learning that the liability had been agreed in the sum of £600,000; that the application for permission to adduce fresh evidence, viz that the liability had been agreed in that sum, would have been granted under CPR 52.11(2); that, in that (as Coleridge J specifically accepted in the judgment under appeal) his award to the wife in 2001 would have been higher if he had known that the size of the liability was only £600,000 rather than £14,000,000, permission to appeal would have been granted; and indeed that, thereafter and for the same reason, the substantive appeal would have been allowed. Why (asks Mr Turner) should the fate of the wife’s proceedings turn on her adoption of the former, rather than the latter, course?[44]But Mr Turner’s premises are wrong. First, this court is an inappropriate forum for an attempt to reopen an award of ancillary relief in circumstances in which the primary ground is otherwise than that the judge erred on the material before him. Thus, where the award was made by a high court judge or a circuit judge, proceedings such as the present should normally be launched by summons or notice of application returnable before the judge who made the award (or, if impracticable, to a judge at the same level): see Robinson v. Robinson, Practice Note, [1982] 1 WLR 786 at 786G – 787A. Thus, had the wife first approached this court, it would in my view have shut out her proposed appeal in limine on the basis that she should issue a summons returnable before Coleridge J. Second, even if this court had proceeded fully to consider (and let us assume even to grant) the three preliminary applications, its despatch of the wife’s substantive appeal would have been negative in that it would have been by reference to considerations identical to those which have led me to conclude that the judge was right to dismiss her application: see Hertfordshire Investments Ltd v. Bubb [2000] 1 WLR 2318, per Hale LJ at 2325D.

SECTION I: THE APPEALS AGAINST THE ORDER FOR COSTS

[45]In relation to the dispute whether, as the husband contended, the wife should pay all his costs of the application, indeed on the indemnity basis, or whether, as she contended, there should be no order for costs between them, the parties raised a preliminary issue which the judge resolved in the husband’s favour; in my view however he rightly added that it was ultimately unimportant.[46]Mr Turner invoked Rule 2.71(4)(a) of the Family Proceedings Rules 1991, which provides that “the general rule in ancillary relief proceedings is that the court will not make an order requiring one party to pay the costs of another party”. Mr Seabrook, on the other hand, invoked Rule 44.3(2)(a) of the Civil Procedure Rules 1998, which provides that “the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party”. Counsel’s invocations could not both be valid. So which was valid? Or was neither valid?[47]In my view the judge was right to reject Mr Turner’s argument. Rule 2.71(4) of the Rules of 1991 applies to “ancillary relief proceedings”. Of course, as Mr Turner stresses, the wife’s aspiration, following any setting aside of the orders made in 2001, was again to proceed with her application for ancillary relief. But her application for an order setting those orders aside was not itself an application for ancillary relief, as defined in Rule 1.2(1) of the Rules of 1991. So, although the proceedings before the judge were in connection with ancillary relief, they were not for ancillary relief. I would have been willing to give the phrase “ancillary relief proceedings” in Rule 2.71(4) a wide, purposive construction so as to include proceedings in connectionwith ancillary relief as well as for ancillary relief if my view had been that such would better reflect the ruler-makers’ purpose. But such is not my view. The general rule in Rule 2.71(4)(a) is only a concomitant of the modern approach in applications for ancillary relief that the sum owed by each party in respect of his own costs will be treated as his liability for the purposes of calculating the substantive award.[48]The judge considered that, if Mr Turner was wrong, it followed that Mr Seabrook was right. With respect, I do not agree. Rule 10.27(1)(b) of the Rules of 1991 provides that Rule 44.3(2) of the Rules of 1998 shall not apply to “family proceedings”. Contrary to the submissions of Mr Seabrook, I have no doubt that, although they were not “ancillary relief proceedings”, the proceedings before the judge were “family proceedings” within the meaning of Rule 1.2(1) of the Rules of 1991 and of s.32 of the Matrimonial and Family Proceedings Act 1984 in that they constituted a matrimonial matter within the meaning of paragraph 3(a) of Schedule 1 to the Supreme Court Act 1981.[49]Thus there was no “general rule” in either direction for the judge to apply to his decision. He had before him a clean sheet; but by reference to the facts of the case, and in particular, the wife’s responsibility for the generation of the costs of a failed application, he remained perfectly entitled to record upon it, as he did, that he would start from the position that the husband was entitled to his costs.[50]The judge moved from that position for two reasons. His subsidiary reason was that the determination of the liability in a sum so much lower than that which in 2001 had been regarded as probable had yielded the husband a substantial windfall. Notwithstanding the width of the judge’s discretion in relation to costs, I am sympathetic to Mr Seabrook’s complaint that such a consideration was irrelevant to it. I am reminded of the days when judges of the Family Division would not uncommonly order a wealthy party to pay the costs of an impoverished party irrespective of outcome; but they are gone. The judge’s primary reason, however, was that the circumstances of the case were extraordinary; that the consequences of the determination of the liability in so low a sum called for forensic investigation; that the wife’s application fell into an uncertain area of the law; and that in particular she was entitled to ask the court to consider in depth whether it should lead to the setting aside of the orders made in 2001. Although there was no criticism of the husband within his remarks, the judge was in my view just about entitled to weigh this feature not as eliminating, but nevertheless as reducing by one half, the wife’s liability in respect of the husband’s costs.

SECTION J: CONCLUSIONS

[55]I would dismiss not only the wife’s appeal against the judge’s substantive order but also both the appeals against his order for costs.[56]Sir Paul Judge was presented to the court as a successful and eminent businessman. But I remain disturbed about the way in which he used the charity to fund his own enterprises while simultaneously taking advantage of gift aid, especially when coupled with the relativity with which he seems to approach the concept of moral obligation.[57]In particular I was troubled, like Wilson LJ, about whether the Charity Commission was informed that the minutes of the trustees were not contemporaneous documents. If they were reconstructed (as Sir Paul says they were) many years after the meetings they are said to record, it is very difficult to imagine that they represent any form of accurate record, for example of the meeting of March 20, 1994.[58]Initially I considered that this appeal was one of those cases which highlighted the tension between the public interest in the finality of litigation, on the one hand, and the attainment of justice in the individual case, on the other hand. The tension is normally resolved through the primacy of the principle of finality: see The Ampthill Peerage case [1977] AC 547, at 569 (Lord Wilberforce) and 575 (Lord Simon of Glaisdale).[59]There are, of course many, exceptions. In particular in the matrimonial sphere, orders by way of ancillary relief may be set aside on the ground of fraud or substantial mistake (de Lasala v. de Lasala [1980] AC 546, 561; Cornick v. Cornick [1994] 2 FLR 530, 535) or for material non-disclosure (Livesey v Jenkins [1985] AC 424; Shaw v. Shaw [2002] 2 FLR 1204, 1216) or for undue influence (Tommey v Tommey (1983) 4 FLR 159, 168). There are a number of routes to achieve the justice in such cases, including appeal, a fresh action to set aside the judgment or order, or an application to the court which made the[60]In this country, by contrast with the United States, there is no widely available route of a re-hearing of a judgment after trial or after appeal. Outside the matrimonial sphere, if justice requires it, a judgment or order which has been delivered may be re-opened before it has been entered: Re Barrell Enterprises [1973] 1 WLR 19; Stewart v Engel [2000] EWCA Civ 362, [2000] 1 WLR 2268. A final judgment may be impugned for fraud: Cinpres Gas Injection Ltd v Melea Ltd [2008] EWCA Civ 9, [2008] Bus LR 1157 (discussing the obsolete bill of review, on which see also Hazel-Atlas Glass Co v Hartford-Empire Co 322 US 238 (1944)).An appeal court may admit fresh evidence not available to the judge below: Ladd v Marshall [1954] 1 WLR1489; Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2318. In exceptional cases a judgment on appeal may be re-opened to avoid real injustice: Taylor v Lawrence [2002] EWCA Civ 90, [2003] QB 528.[61]This is not a case which falls within any of the recognised categories in which a final order made years before (in this case some 7 years ago) can be re-opened either by the court which made it or by an appeal court. Lady Judge expressly disavows any deception of the court by Sir Paul in 2001, and I am satisfied that the possibility that there might have been no liability was in the arena. In the end I am persuaded that, despite what is an undeserved windfall for Sir Paul, the appeal should fail for the reasons given by Wilson LJ.[11]I agree with both judgments.

order

Shaw v. Shaw [2002] 2 FLR 1204, 1217. Permission to appeal out of time may be given in cases where new events invalidate the fundamental assumption on which an order has been made: Barder v. Caluori [1988] AC 20, and for recent examples B v B (Ancillary Relief Consent Order: Appeal Out of Time) [2007] EWHC 2472 (Fam), [2008] 1 FLR 1279; Dixon v Marchant [2008] EWCA Civ 11, [2008] 1 FLR 655.

Cited in 27 later judgments

and 18 more of the most senior