Edgerton v Edgerton & Anor [2012] EWCA Civ 181

Case Nos: B4/2011/1217 and 3104[2012] EWCA Civ 181
IN THE COURT OF APPEAL (CIVIL DIVISION)
Case No LV09D00059
ON APPEAL FROM THE LIVERPOOL DISTRICT REGISTRY
His Honour Judge Wallwork
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 24/02/2012
Before
THE MASTER OF THE ROLLSLADY JUSTICE RAFFERTYSIR MARK POTTER
Between
DEBRA ANN EDGERTONRespondentTHOMAS WILLIAM EDGERTONAppellantsZAFFIRILI SHAIKHAppellant
Peter Kidd (instructed by DWF LLP) made written submissions, but did not appear for appellant husband for Mr Shaikh did not appear and no submissions were made on his behalf, save in his notice of appeal settled by counselMalcolm Sharpe (instructed by Heaney Watson) for respondent wifeHearing Hearing date: 25 January 2012
JudgmentThe Master of the Rolls:
[1]These are appeals against two interlocutory decisions of His Honour Judge Wallwork, sitting as a Deputy High Court Judge in the Family Division of the Liverpool District Registry. Both decisions arise out of ancillary relief proceedings brought against the first appellant, Thomas Edgerton (‘the husband’) by the respondent to both appeals, Debra Edgerton (‘the wife’), in circumstances where an order had been made in the Chancery Division (‘the Chancery order’) that most of the husband’s alleged assets were beneficially owned by and/or should be transferred to the second appellant, Zaffirili Shaikh, a Dubai businessman who is an associate of the husband.[2]In the first appeal, the husband challenges Judge Wallwork’s decisions that(a) the wife could maintain the ancillary relief proceedings despite the Chancery order, and(b) the husband should not be released from an undertaking effectively freezing most or all of the assets the subject of the Chancery order. The second appeal is brought by Mr Shaikh, who challenges a freezing order made against him by Judge Wallwork.

The relevant factual background

[3]The husband and the wife were married in 2006 for the second time, having been previously married and divorced. Their on-and-off relationship lasted more than 25 years, and they have three adult children, all in further education.[4]The husband had, for a number of years, been engaged in entrepreneurial activities world-wide, including dealing in cars and property. Since 2003, he had, at least in part, operated through Railbow Financial Services Incorporated (‘Railbow’), a company incorporated in the British Virgin Islands. At least until January 2008, it appears that the husband and the wife were the sole shareholders, each holding one of the two bearer shares, in Railbow. The husband contends, but the wife denies, that, in January 2008, the wife signed a transfer of her share to the husband. The husband also says that he then executed a deed dated 9 January 2008 agreeing to hold the two shares in Railbow in trust for Mr Shaikh.[5]By the end of 2008, the marriage had broken down again and the parties separated, with the wife continuing to live in the matrimonial home, 30 Merrilocks Road, Liverpool. In March 2009, she commenced divorce and ancillary relief proceedings in the Liverpool County Court. She immediately applied for, and obtained, an interlocutory injunction under the provisions of section 37 of the Matrimonial Causes Act 1973, against the husband, to protect her claim for ancillary relief.[6]Rather than challenging the wife’s right to such an injunction, the husband applied on 5 March 2009 to have the injunction discharged on terms that he would give an undertaking to the court, inter alia:(a) ‘Not to sell, transfer, discharge, charge or in any other way deal with the following properties without the written consent of [the wife’s solicitors] or the leave of the Court - (i) 8 Far Moss Road, Crosby … (ii) any interest … in [30 Merrilocks Road] … (iii) 95 College Road, Crosby … (iv) any charge [over] 3 Durban Avenue, Crosby … .’(b) ‘Not to dispose of or otherwise deal in any interests he may have in Railbow …. without the written consent of [the wife’s solicitors] or the leave of the Court.’ The application was successful, so the undertaking (‘the Undertaking’) was given by the husband[7]When the wife’s proceedings were issued, 30 Merrilocks Road was owned by Railbow, and the wife was living there. At the time that the husband gave the Undertaking, she consented to the sale of 30 Merrilocks Road, on terms that the proceeds of sale be held by the solicitors instructed by the husband on behalf of Railbow, Black Norman, pending resolution of the ancillary relief proceedings. The wife then moved to 8 Far Moss Road, where she currently lives. 8 Far Moss Road is in the sole name of the husband, and the wife seeks a Property Adjustment Order in respect of it.[8]In his Form E, lodged on 15 March 2009, the husband failed to disclose any of the documentation required of him save for three bank statements. The Form E contained a single handwritten reference to a debt of £1.2 million owed to ‘a financial backer’, subsequently identified as Mr Shaikh.[9]Thereafter, a series of orders were made in the ancillary relief proceedings, including various directions concerning valuations, disclosure between the parties, and their replies to questionnaires. By an order dated 28 July 2009, Mr Shaikh was required to file a statement describing his involvement with the parties, to identify any monies which he claimed to be owed, and to attend a family dispute resolution (‘FDR’) hearing to be listed. Mr Shaikh failed to comply, and no FDR hearing took place. On 21 October 2009, District Judge Wright ordered that the ancillary relief proceedings be heard on 25 January 2010, with a three day time estimate.[10]On 23 October 2009, Mr Shaikh brought an action (‘the loan action’) in the Liverpool County Court against the husband claiming £1.548 million plus interest and costs in respect of a ‘business loan … in relation to the purchase of stock for the [husband’s] business’. No reference to a partnership between the husband and Mr Shaikh was mentioned in Mr Shaikh’s statement of case.[11]On 20 January 2010, five days before the final hearing date fixed in the ancillary relief proceedings, Mr Shaikh applied for permission to intervene in those proceedings. The application came on before District Judge Matharu, who ordered that(a) Mr Shaikh be made an intervener in the ancillary relief proceedings,(b) the loan action be consolidated with those proceedings and dealt with as a preliminary issue at the hearing of the proceedings,(c) the hearing fixed for 25 January be adjourned,(d) the hearing take place on 10 May 2010 before Judge Wallwork, with a five day time estimate, and(e) the husband should file all his outstanding documents by 1 February 2010.[12]Instead of pursuing his intervention in the ancillary relief proceedings, on 18 February 2010 Mr Shaikh discontinued the loan action, and started a fresh action (‘the partnership action’) against the husband in the Chancery Division for partnership dissolution and an account. Mr Shaikh’s particulars of claim in this action asserted that he and the husband were partners at will, and that either the partnership was dissolved in August 2009 or he was now entitled to claim dissolution. The particulars of claim identified both 30 Merrilocks Road and 8 Far Moss Road as partnership assets available to be taken into account in repaying to Mr Shaikh the sum which he said he had advanced as the partnership’s capital. That sum was alleged to be Yen 228,000,000, which was roughly equivalent to the sum which, in the loan action, he claimed to have lent to the husband.[13]In the light of this development, His Honour Judge Booth made an order on 19 April 2010: a) transferring the ancillary relief proceedings from the County Court to the Family Division of the High Court; b) transferring the partnership action from the Chancery Division to the Family Division; c) directing a case management conference in both proceedings before Judge Wallwork on 28 April 2010; d) ordering that the wife be a third party in the partnership action, and directing her to file a defence by 26 April 2010.[14]Meanwhile, by his defence of 8 April 2010 in the partnership action, the husband had conceded the existence of the alleged partnership, and admitted that Mr Shaikh was entitled to its dissolution. He also admitted that 30 Merrilocks Road and 8 Far Moss Road were assets of the partnership and stood to be brought into account against Mr Shaikh’s capital contribution of Yen 228,000,000, which he also admitted.[15]By her defence in the partnership action, dated 26 April 2010, the wife: a) denied the alleged partnership, contending that it was a sham; b) disputed the alleged monies invested in the partnership by Mr Shaikh; c) asserted that the assets said to be owned by Railbow or the partnership were the property of the husband and the wife; d) asserted that the disputed properties were each purchased for the benefit of the husband and the wife.[16]On 28 April 2010, the case management conference ordered by Judge Booth took place before Judge Wallwork sitting as a Judge of the Family Division. He effectively reversed the order of Judge Booth made nine days earlier, and directed that the partnership action be transferred back to the Chancery Division. It is not easy to understand why Judge Wallwork adopted that course, but it is only fair to him to mention that his order was not appealed; indeed, it seems to have been unopposed. Mr Sharpe suggested that he must have taken the view that a partnership dispute was better suited to the Chancery Division. That seems to have been the likely reason, although, to my mind, the nature of the allegations in the wife’s case was such that the issues in that dispute were all factual.[17]Despite transferring the partnership action to the Chancery Division, Judge Wallwork gave directions in that action for final pleadings, Part 18 requests, replies, disclosure and inspection. He also ordered that the parties agree issues upon which expert evidence might be required, because the wife had said that her apparent signature on certain documents, in particular an alleged partnership agreement and an alleged transfer of her share in Railbow, was a forgery. The directions were timed so that all these matters should have been dealt with by 9 July 2010, the date Judge Wallwork fixed for a case management conference in the partnership action before District Judge Sykes.[18]In accordance with what Mr Sharpe submitted, it seems to me that Judge Wallwork must have expected that it would be following determination of the issues in the partnership action that the ancillary relief proceedings would return before him in the Family Division, although it is fair to say that this was not spelt out in his order.[19]In the event, none of the directions was effective to progress the partnership action. Although she was in receipt of funding from the Legal Services Commission (‘LSC funding’) in connection with the ancillary relief proceedings, the wife lacked the funds to be represented, and had no LSC funding for representation, in the now separate partnership action in the Chancery Division.[20]On 19 May 2010, Mr Shaikh served on the wife a request for information under CPR Part 18 in the partnership action. She failed to reply in time and, on 24 June 2010, District Judge Sykes ordered that the wife’s Defence be struck out, unless she served her reply to the request by 1 July 2010. The wife served her reply six days late. On 9 July 2010 District Judge Sykes held that the wife had not answered some of the requests, and that some of her answers were defective; so she required the wife to reply properly to all the questions by 6 August 2010, and ordered that, in default of such compliance, the wife’s Defence should be struck out. The wife failed to comply, and, after refusing her application for relief against sanctions, District Judge Sykes, on 26 October 2010, refused her such relief and, accordingly, effectively debarred her from defending the partnership action.[21]In late November 2010, the husband and Mr Shaikh agreed terms for disposing of the partnership action. Those terms were embodied in a draft order, which was duly made on 2 December 2010, and is the Chancery order referred to above. By that order, the court: a) Declared that the partnership between the husband and Mr Shaikh ‘constituted by [a] written … agreement made on 4 July 2002 is hereby dissolved’ b) Declared the partnership assets to be 8 Far Moss Road, £480,000 being the proceeds of sale of 30 Merrilocks Road, and a loan to a Ms Kennedy of £64,000 secured on 3 Durban Avenue; c) Declared that Mr Shaikh had contributed 228,000,000 Yen by way of capital; d) Ordered that Mr Shaikh was entitled to repayment of his capital out of the partnership assets; e) Included a schedule which contained inter alia(i) an agreement that Mr Shaikh would not sell 8 Far Moss Road until 2015,(ii) an assignment and transfer by the husband of his interest in 95 College Road to Mr Shaikh, and(iii) an agreement that Mr Shaikh would not enforce the security against Ms Kennedy.[22]Following the making of the Chancery order, the ancillary relief proceedings came before Judge Wallwork on 14 April 2011. He held that(i) the orders made by District Judge Sykes in the partnership action did not bind the court hearing the ancillary relief proceedings,(ii) the Chancery order did ‘not estop the [wife] from ‘pursuing any issues relating to’ (a) ‘the legal and beneficial ownership of [the disputed] assets’ or (b) ‘any liability purportedly owned by the [husband] to [Mr Shaikh] by reason of the Chancery order’, and(iii) the husband’s application to be released from the Undertaking be dismissed, and that the Undertaking should continue until the completion of the ancillary relief proceedings or further order. Judge Wallwork refused the husband permission to appeal, but permission was granted by Black LJ on 3 October 2011.[23]Meanwhile, on 28 October 2011, the wife had applied without notice to Judge Wallwork for an injunction (‘the Injunction’) under section 37 of the 1973 Act freezing a sum of at least £485,000, being the amount of the proceeds of sale of 30 Merrilocks Road which (as the wife learned) had been transferred by Black Norman to an account with First Union (Hong Kong) Ltd in Switzerland in the name of Mr Sheikh.. The Judge granted the Injunction, and, despite Mr Shaikh’s application to discharge it, the Judge continued it following a hearing on 10 November 2011, but granted Mr Shaikh permission to appeal.

The proceedings and issues in these appeals

[24]Accordingly, there are two appeals before the court, the husband’s appeal against Judge Wallwork’s order of 14 April 2011, and Mr Shaikh’s appeal against Judge Wallwork’s order of 10 November 2011. Black LJ very sensibly directed that the two appeals be heard together.[25]In addition to notices of appeal in both appeals, signed by counsel, the Court of Appeal office received full skeleton arguments from counsel for the husband and from counsel for the wife, and, shortly before the hearing, the husband made direct submissions to the court by email. No skeleton argument was received on behalf of Mr Shaikh,[26]When the appeals were called on, neither the husband nor Mr Shaikh was either present or represented. Mr Sharpe, counsel for the wife, asked us simply to dismiss the two appeals. That may well be the appropriate course in most cases of non-attendance by an appellant, but we were sufficiently concerned by some aspects of this unusual history to decide that we should hear the appeals, despite the absence of the husband and Mr Shaikh or any person representing either of them.[27]In those circumstances, Mr Sharpe had a particularly onerous responsibility, bearing in mind(a) the duty of counsel to assist the court when the opposition is neither represented nor present,(b) the complex factual background,(c) the very contentious relationship between the parties, and(d) the points which have been raised in this court for the first time in these proceedings. I would like to record our gratitude to Mr Sharpe for the very proper, careful and concise manner in which he appears to have presented the case.[28]In relation to the husband’s appeal, it seems to me that the first question to address is whether Judge Wallwork was right in concluding that the Chancery order in the partnership action did not preclude the wife from contending in the ancillary relief proceedings that the husband owned, or had a beneficial interest in, some or all of the disputed assets. If the Judge was right, then that is the end of the husband’s appeal. If the Judge was wrong, then there is a second question, namely whether the position is, as it were, retrievable for the wife, and, if it is, what, if any, assistance this court should give her.[29]So far as Mr Shaikh’s appeal is concerned, it appears to me that, if we conclude that the Judge was wrong on the first point in the husband’s appeal, and that we cannot or ought not assist the wife in retrieving the position, the Injunction would have to be discharged. If, on the other hand, we find in favour of the wife on either point, then the Injunction could stand, but we will have to decide if it ought to do so.[30]Accordingly, there are, at least potentially, three issues for us to consider, two in the husband’s appeal, and one in Mr Shaikh’s appeal, and I will deal with them in turn.

The effect of the Chancery order on the ancillary relief proceedings

[31]At any rate on the face of it, the Chancery order is a regular final decision of the High Court, which is binding on the parties to it, and which conclusively determines the ownership of the assets which are referred to in it. The assets constitute the disputed assets, they are declared to be assets of the partnership between the husband and Mr Shaikh, and they are to be transferred to Mr Shaikh. The parties to the order are not just Mr Shaikh and the husband, who are bound in contract as well as by a court order (because they consented to it), but also the wife because she was a party to the partnership action, and is therefore bound by a regular order made in it. It is a regular order, at least on its face, because it is a final order made by the court to which two of the three parties to the action have agreed, and the third party has been debarred from defending in the action.[32]The wife wishes to maintain the ancillary relief proceedings on the basis that she can contend before the Family Division that the disputed assets belongs to the husband, or at least that he has a beneficial interest in those assets. In particular, she is seeking to deny that there was a partnership between the husband and Mr Shaikh, or that Mr Shaikh has any interest in the disputed assets. She is therefore, as I see it, seeking to maintain in the ancillary relief proceedings a case in relation to the ownership of the disputed assets which is plainly different from that reflected by the Chancery order, and is, in effect, the case which she was debarred from raising in the partnership action.[33]In my opinion, such a course is simply not open to the wife, at least so long as the Chancery order is in force. Without even going into the legal niceties, the absurdity of two final High Court orders, each relating to the same assets in proceedings between the same parties, but based on different holdings as to who owns those assets speaks for itself. Each party would appear to have an unanswerable case in that each could rely on the order which suited him or her. Further, Judge Booth’s order clearly envisaged the issue of who owned the disputed assets being determined in the partnership action for the purpose of the ancillary relief proceedings as well as between the husband and Mr Shaikh.[34]More technically, so long as the Chancery order remains in force, it involves a final determination as between the parties in the partnership action as far concerns the issues it deals with, and it therefore operates as an estoppel. I do not think it is profitable to consider whether it is a case of cause of action estoppel or the rather more flexible issue estoppel (the difference between the two is discussed in Arnold v National Westminster Bank plc [1991] 2 A.C. 93, 104C-107D). Even if the present case is technically one of issue estoppel, it seems to me that the court should approach any question as to its effect substantially as if it were a case of the stricter, cause of action estoppel. As Mr Sharpe contends, the order made in April 2010 by Judge Wallwork intended the resolution of the issues raised by the wife in the partnership action to be determinative of those issues in the ancillary relief proceedings. Indeed, that had been the reason for joining the wife in the partnership action. Further, if the ancillary relief proceedings continue, Mr Shaikh will be joined, and a preliminary issue will be ordered which will involve the court deciding precisely the issues which have been apparently finally determined between the same parties by the Chancery order.[35]The fact that the Chancery order was a consent order, as between the husband and Mr Shaikh, and a default order so far as the wife was concerned, and was therefore made without a trial does not, at least normally, alter this conclusion – see Halsbury’s Laws 5th edition, Vol 12, para 1172. It is true that there may be exceptions (although they may only apply in cases of issue estoppel) where, for instance, the point involved was only ‘of trifling importance’ in the proceedings which resulted in the consent order or the order in default (see Carl Zeiss Stifftung v Rayner & Keeler (No 2) [1967] AC 853, 917) in the earlier case, but that is not the position here, where the issue concerns the ownership of assets in the context of ancillary relief proceedings.[36]Judge Wallwork thought that, as the court in the ancillary relief proceedings had an inquisitorial, or quasi-inquisitorial (as Thorpe LJ put it in Parra v Parra [2002] EWCA Civ 1886, para 22), role, the normal rules as to issue estoppel did not apply. I do not agree. It is true that the law relating to res judicata has been described as ‘difficult and … now in retreat in matrimonial proceedings’ - see Halsbury, op cit, para 1178. However, as Sir Mark Potter P said in Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1426, para 67, ‘the starting point of every inquiry in an application for ancillary relief is the financial position of the parties’, and that ‘inquiry is always in two stages, namely computation and distribution’. At the computation stage, the court is determining what the assets of the parties are, and its determination, when embodied in an order must, in my view, create estoppel between the parties. In Tebbutt v Haynes [1981] 2 All ER 238, the determination by a Family Division Judge as to the beneficial ownership of an asset between spouses was held to be binding between the same parties in proceedings in the Chancery Division. It would be absurd if a different result obtained in the reverse situation. Further, where a third person is a party to the action in which the ownership of an asset is determined by a court, it would also be absurd if he could not be bound by, and entitled to rely on the determination.[37]When giving permission to appeal, Black LJ pointed out that, by entering into the Chancery order, the husband may have been in breach of the Undertaking. I am uneasy about conclusively ruling on that point in the absence of the husband or his representatives, given that the point was not raised below, and was not the subject of a respondent’s notice. However, even if it is right, I do not think it can assist the wife’s case, as an order of the High Court is of full force and effect, even if it is an order which should not have been made - at least until it is amended or set aside – see Isaacs v Robertson [1985] AC 97.[38]Mr Sharpe also argued that any estoppel should not bind the parties if(i) it arises out of a judgment in an earlier action which was obtained by fraud or collusion, or(ii) if the party who wishes to pursue an inconsistent case in a later action is relying on evidence which could not reasonably have been relied on in the earlier action. At the moment, at least, neither proposition can be relied on by the wife, as she would have to plead the facts and matters relied on to support her case, and she has not done so.[39]As a matter of principle, however, I readily accept the first proposition, which is supported by what was said by Lord Keith in Arnold [1991] 2 A.C. 93, 104D. However, it seems to me that it cannot be right that this simply entitles a party, against whom there is an apparently valid order of the High Court to pursue an inconsistent case in later proceedings and merely contend in those proceedings that the earlier order was obtained by fraud: the party would have to apply to set aside the earlier judgment. In my judgment, either an application would first have to be made and granted to set aside the earlier judgment, or an application to set aside the first judgment would have to be before the court hearing the second action.[40]As was said by Lord Buckmaster in Jonesco v Beard [1930] AC 298, 300, ‘the proper method of impeaching a completed judgment on the ground of fraud … is by action’. Bearing in mind the overriding objective, it is conceivable that this is not an absolute rule. However, it seems to me that, at best from the point of view of the wife, it is an approach which should be adopted unless there is a very good reason, not least because, otherwise, there is a risk of two inconsistent court orders between the same parties.[41]As to Mr Sharpe’s second proposition, I am unconvinced that it is correct. In Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630, 642 Diplock LJ seems to me to have said that, where the party advancing an inconsistent case in the second action is doing so on the basis of fresh evidence, the right course would be to seek to appeal against the original order out of time on the basis of the fresh evidence. Different considerations may apply where the estoppel is issue estoppel (e.g. as in Henderson 3 Hare 100 or Johnson [2002] 2 AC 1), but, as I have said, it seems to me that in this case, the correct approach is to treat the estoppel as if it were of the stricter, cause of action variety.[42]Accordingly, I conclude that Judge Wallwork’s decision that the wife could, in effect, ignore the Chancery order in the ancillary relief proceedings, cannot stand, at least in the absence of a pleaded case by the wife that the Chancery order was obtained by fraud or collusion, and, ideally, an application to set aside the Chancery order.

Can and should this court nonetheless effectively dismiss the husband’s appeal?

[43]During the hearing of these appeals, we indicated to Mr Sharpe that our conclusion was likely to be as summarised in the preceding paragraph. Accordingly, he suggested that we should dismiss the husband’s appeal provided the wife undertook (which he made it clear that she would) to issue fresh proceedings (‘the new action’) in the Chancery Division of the Liverpool District Registry to set aside the Chancery order on the ground that it was obtained by fraud or collusion, on the basis that the new action would then be transferred to the Family Division and heard together with the ancillary relief proceedings.[44]An initial point to make about that proposal is that it would, I think, more properly involve our allowing the husband’s appeal, as Judge Wallwork’s order of 14 April 2011 specifically provides that the wife is not bound by any of the orders made in the partnership action, and in particular the Chancery order. That is the point which the husband has successfully challenged.[45]Subject to that point, it seems to me that, if adopted, that proposal would enable the wife to avoid the otherwise insurmountable problem which her claim in the ancillary relief currently faces: it would prevent her claim failing in limine. However, it may, of course, transpire that the court finds against her in the new action, in which case her ancillary relief claim would face severe difficulties, at least in so far as it relates to the disputed assets. However, that is a point which is for the future – and only would arise if we accede to the course which Mr Sharpe proposes. In my view, there are two questions so far as that is concerned. The first is whether we ought to accede to that course; the second is the appropriate directions we should give if we do accede to the proposed course.[46]The question whether we should accede to Mr Sharpe’s proposal should be determined by reference to what the overall justice of the case requires, in the light of the unusual course of these proceedings (the ancillary relief proceedings, the short-lived loan action, the partnership action, and this appeal), the facts (so far as we can determine what the relevant facts are), and the conduct of the parties (so far as it is relevant).[47]The husband and Mr Shaikh have a powerful and simple point against Mr Sharpe’s proposed course. They can fairly say that(i) the wife had the opportunity to challenge the husband’s case as to the existence of the partnership and the ownership of the disputed assets, namely in the partnership action, as was indeed intended by the order of 28 April 2010,(ii) she failed to take advantage of that opportunity, and(iii) to permit her now to challenge the Chancery order would, in effect, be to let her in through the back door, when the front door had been firmly closed by District Judge Sykes in her debarring order of 26 October 2010, which the wife has never sought to appeal.[48]If it were not for the very unusual facts of this case, I would have concluded that this simple argument should prevail. It would normally be wrong to undermine the effect of an unappealed and carefully reasoned debarring order in earlier proceedings, by permitting the debarred party to apply to set aside the judgment subsequently obtained against her, simply because she now wishes to raise in subsequent proceedings the case which she could and should have raised in the earlier proceedings.[49]In this case, however, there are a number of points which, when taken together, persuade me that the wife should be granted the relief which she seeks, namely the right to seek to have the Chancery order set aside.[50]First, the practical problem for the wife was that she had LSC funding for the ancillary relief proceedings, but not for the partnership action, at least if it was heard separately from the ancillary relief proceedings. That was the effect of Judge Wallwork’s order of 28 April 2010. I consider that there is much force in the point that it was unrealistic to expect the wife, as a self-represented litigant with no legal qualifications, to pursue her case in the partnership action in an effective way, bearing in mind that she was saying that the partnership claimed to exist between both the other parties (who were represented and advised by solicitors and counsel)) was a fiction.[51]Secondly, the 28 April 2010 decision was made nine days after Judge Booth had ordered that the partnership action be heard with the ancillary relief proceedings. If that order had stood, there would not have been a problem about LSC funding. As mentioned above, I find it hard to understand why Judge Wallwork took a diametrically different line from that of a judge of co-ordinate jurisdiction in this way. The only development since Judge Booth’s order was the wife’s defence, which seems to me to have raised issues of fact, and not of partnership law. The potentially very serious consequences for the wife, in terms of her ability to get legal advice and representation, do not seem to have been considered: they would have represented a very strong factor in favour of not departing from Judge Booth’s order.[52]Thirdly, while there will, of course, be cases where the Family Court judge will direct that a preliminary issue as to ownership of assets, involving a third party, be heard in another Division as a preliminary issue, the better course is normally for the Family court to determine the issue – see TL v ML [2005] EWHC 2860 (Fam), [2006] 1 FLR 1263, paras 33-36, A v A [2007] EWHC 99 (Fam), [2007] 2 FLR 467, and Goldstone v Goldstone [2011] EWCA Civ 39. Continuity of judicial involvement is desirable both for efficiency and for consistency of decision-making. There will be cases where it may be appropriate to hive off some issues and send them to another Division of the High Court, but it should only be when relatively technical issues, outside the familiar family law territory, are likely to be raised and to play an important part.[53]I would take this opportunity to endorse what was said by Mr Mostyn QC sitting as a Deputy

Judge in the Family Division in TL [2006] 1 FLR 1263, paras 36-7:

‘36. In my opinion, it is essential in every instance where a dispute arises about the ownership of property in ancillary relief proceedings between a spouse and a third party, that the following things should ordinarily happen: i) The third party should be joined to the proceedings at the earliest opportunity; ii) Directions should be given for the issue to be fully pleaded by points of claim and points of defence; iii) Separate witness statements should be directed in relation to the dispute; and iv) The dispute should be directed to be heard separately as a preliminary issue, before the FDR. 37. In this way the parties will know at an early stage whether or not the property in question falls within the dispositive powers of the court and a meaningful FDR can take place. It also means that the expensive attendance of the third party for the entire duration of the trial can be avoided. … ’
[54]Fourthly, as Mr Sharpe says, if the husband had provided disclosure in the ancillary relief proceedings as he ought to have done, or if Mr Shaikh had not abandoned the loan action, and started the partnership action, the issue of the ownership of the disputed assets would have been decided in the Family Division.[55]Fifthly, I consider that it is also relevant that the debarring order was not made against the wife because she had been culpable in the way she had acted, or failed to act: it was made because she was impecunious and out of her depth. District Judge Sykes decided that, because she was representing herself, the wife was unlikely to satisfy her obligations in relation to the part 18 requests, and, because she was impecunious, the wife was unlikely to be able to afford the cost of getting expert evidence to support her case that some of the documentation (for instance, the alleged partnership agreement of 4 July 2002 and the alleged transfer of the share in Railbow in January 2008) relied on by the husband had been forged.[56]Sixthly, there are some curious facts which can fairly be said to call out for investigation, which will not occur if the wife is not allowed to seek to set aside the Chancery order and pursue her claim for ancillary relief. Two examples should suffice. It is a little hard to understand why(i) the husband apparently described his liability to Mr Shaikh as, in effect a debt, and Mr Shaikh originally brought his loan action, and(ii) Mr Shaikh then abandoned the loan action and started a fresh action on the basis of a partnership, which was not even mentioned in the original claim, and(iii) the husband then conceded the claim in that action. There may be a satisfactory explanation for this. (It may, for instance, be said that Mr Shaikh’s two actions were not mutually inconsistent – but, in that case one wonders why the debt action was abandoned and the partnership action started.) Further, Mr Sharpe told us that there are emails apparently passing between Mr Shaikh and the husband which strongly support the notion that the partnership was an idea dreamt up between them after the divorce proceedings had been contemplated. (It is only fair to add that we were also told that the husband’s case was that the wife had obtained access to his email account and had sent the messages herself.)[57]Seventhly, this is not merely a case of a party to an action, who has been debarred from defending, being bound by a decision reached by a judge after argument and evidence, or even being bound by an arm’s length settlement between the other parties to the action. The wife is currently bound by an agreement between the other parties to the action, which she contends is collusive or worse. To put the point another way, the wife is not merely trying to raise the arguments about fraud and collusion which she would have raised in the partnership action if she had not been debarred: she is trying to raise collusion, or even fraud, in relation to an agreement embodied in an order agreed after she had been debarred. On her case, there are, as it were, two layers of collusion or fraud.[58]Eighthly, it also seems to me that there is a powerful argument for saying that, by entering into the agreement embodied in the Chancery order, the husband was in breach of the Undertaking. The point may be no more than arguable, as there may be something in the argument that nothing in the order amounted to ‘deal[ing] with’ any of the disputed assets, merely a commitment to do so, although I have some difficulty with that argument in relation to 95 College Road. It may also be said (albeit I doubt that it would be thought to be persuasive) that, as the Chancery order was, ex hypothesi, made by the court, if it involved any ‘deal[ing] with’disputed assets, it was effected with ‘the leave of the Court’.[59]Finally, even though Judge Wallwork wrongly considered that estoppel did not apply, I derive support for my conclusion from the fact that, in his judgment of 14 April 2011, he clearly considered that it would be unjust if the existence of the Chancery order prevented the wife from raising in the ancillary relief proceedings the matter of the ownership of the disputed assets. He thought the wife had raised arguments which meant that ‘the fullest enquiry needs to be made’, and that ‘it would be wholly unjust … not to permit the matter to be further considered by the court in the ancillary relief proceedings’, bearing in mind ‘the overriding objective of fairness and justice in this case’. The Judge’s views are relevant as he is the primary decision maker, and, even though he may have been wrong on one point of law, so that we should consider the matter de novo,I think it would be wrong to do so in this case without having regard to his views. All the more so given that the Judge was exercising his ancillary relief jurisdiction.[60]The appropriate procedure to be adopted can be dealt with more shortly. Mr Sharpe has suggested that the wife should issue a claim as soon as possible out of the Chancery Division of the Liverpool District Registry to set aside the Chancery order on the ground of collusion and/or fraud, and that that action should be transferred to the Family Division of the Registry, where it should be listed for directions with the ancillary relief proceedings. In my opinion, that would be the appropriate course to take, for reasons which need no further amplification.[61]It would then be up to the Family Division Judge to decide how to deal with matters. He may well decide to determine(i) the wife’s claim to set aside the Chancery order (i.e. the new action) and(ii) the question of who owns the disputed assets as preliminary issues either together or sequentially, but it is very much a matter for the Judge how to proceed. The husband and Mr Shaikh have not been heard on this appeal, and they may have arguments as to how matters should proceed, so it would be inappropriate to say anything further on that topic.[62]I have not so far referred to the husband’s appeal in so far as it related to discharge from the Undertaking. In my view, the analysis in connection with that aspect of the decision of Judge Wallwork of 14 April 2011 is similar to the analysis in connection with his decision that the wife could run a case in the ancillary relief proceedings which was inconsistent with the terms of the Chancery order. Thus, in the absence of a claim by the wife to set aside the Chancery order, the Judge ought to have released the husband from the Undertaking, but in the light of the wife agreeing to issue and proceed with the new action, the Undertaking should continue for the time being.

Mr Shaikh’s appeal against the refusal to discharge the Injunction

[63]Provided that it should not be discharged on other grounds, the Injunction, which was intended to protect the wife’s ancillary relief claim, in so far as it related to the proceeds of sale of 30 Merrilocks Road, seems to me to be subject to the same considerations as the Undertaking.[64]However, the notice of appeal lodged on behalf of Mr Shaikh relies on a number of additional reasons why the Injunction should be discharged. These reasons, in summary, are as follows:• There was no satisfactory evidence of dissipation of assets;• There was no justification for the original application having been made without notice;• The wife’s cross-undertaking in damages could well turn out to be worthless;• The wife failed to file a formal application for the Injunction and to swear a full supporting affidavit;• The wife also failed to make full and frank disclosure.[65]Mr Sharpe very properly drew our attention to a recent decision of Mostyn J in ND v KP (Asset freezing) [2011] EWHC 457 (Fam), which rightly and clearly emphasises that the strict procedural and evidential requirements which apply to applications for freezing orders in the Chancery and Queen’s Bench Divisions, especially when the application is made ex parte, apply with equal force in the Family Division. As he said at[2011] EWHC 457 (Fam), paras 8, 12 and 13 ‘there must be a good case put before the court … that there is a likelihood of the movement, or the dissipation [or the like] with the intention of defeating the claim’, ‘there must be good reason … why a court should be moved ex parte’, and if it is so moved the applicant is ‘fixed with a high degree of candour’.[66]In this case, Mr Sharpe accepted that, if her ancillary relief claim failed, the wife’s cross-undertaking in damages would be of little value. But that is by no means an automatic bar to the grant of relief, especially in a case such as this where there is no evidence that the person subject to the freezing order will suffer damage as a result.[67]There is some force in the point that there was no need for the wife to have proceeded ex parte initially. However, it is not irrelevant that the injunction is directed to cash held by English solicitors acting for a foreign client, who had concealed from the wife that monies agreed to be held by the solicitors to abide the outcome of the ancillary relief proceedings had been released to Mr Sheikh. In the unusual circumstances of this case, therefore, I do not think that this is a weighty point in favour of Mr Shaikh’s appeal. In particular, I do not consider that it can justify reversing the Judge’s decision to continue the Injunction.[68]As to the argument that there was no evidence of risk of dissipation, the Judge considered that carefully in his judgment of 10 November 2011. He referred to the wife’s case as to the collusion or worse between her husband and Mr Shaikh, the evidence in that connection, and the conduct of Mr Shaikh in the proceedings as touched on above, saying that Mr Shaikh had failed to give ‘full and frank disclosure’. In the light of those matters, the Judge was persuaded that there was a sufficient risk of the money in question being dissipated. On the facts of this case, that was a conclusion which he was entitled to reach and which an appellate court should respect.[69]Mr Sharpe candidly admitted both to Judge Wallwork and to this court that the two complaints as to the serious procedural failures on the part of the wife, namely non-disclosure (albeit to a limited extent) and failure to comply with undertakings, were justified. The Judge described him as ‘hold[ing] his hands up’ and ‘throw[ing] himself on the mercy of the court’. The Judge then decided that the wife’s failures in this connection did not justify his refusing her the relief which she sought. Possibly influenced to some extent by the fact that Mr Shaikh has not pursued this appeal, I have reached the conclusion that this too was a conclusion to which the Judge was entitled to come.

Conclusion

[70]In these circumstances, the appeal of the husband on the question as to whether the wife is bound by the orders in the partnership action is allowed, but the husband’s appeal against the refusal to release him form the Undertaking, and Mr Shaikh’s appeal against the refusal to discharge the Injunction are dismissed, but only on terms that(i) the wife issues (by a date to be fixed by the court after written submissions from Mr Sharpe) a claim out of the Chancery Division of Liverpool District Registry to set aside the Chancery order,(ii) the wife applies promptly thereafter for, and pursues expeditiously, a transfer of that claim to the Family Division, and(iii) the wife then promptly applies for, and expeditiously pursues, an application for directions to be given in the ancillary relief proceedings and the transferred claim, and(iv) there be permission to any party to apply to this court in the mean time.

Lady Justice Rafferty:

[71]I agree.

Sir Mark Potter:

[72]I also agree.

Cited in 5 later judgments