Venue SITTING AT THE ROYAL COURTS OF JUSTICE, Royal Courts of Justice, Strand, London, WC2A 2LLDate 30 th June 2026
Before
MR. NICHOLAS ALLEN KC(Sitting as a Deputy High Court Judge)
Between
BYApplicantGCRespondent(No. 4: Indemnities)JudgmentThis judgment was handed down remotely at 10.30 am on 30 th June 2026 by circulation to theparties or their representatives by e-mail and by release to the National Archives.This judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the children and members of their family must be strictly preserved. All persons, including representatives of the media and legal bloggers, must ensure that this condition is strictly complied with. Failure to do so may be a contempt of court.
[1]On 21st November 2025 I handed down judgment following the final hearing in financial remedy proceedings brought by BY against GC. This judgment was published as BY v GC (No. 2) [2025] EWFC 397. My earlier judgment in relation to GC’s Daniels v Walker application (which I refused) was published asBY v GC [2025] EWFC 226, [2025] 4 WLR 111. My subsequent judgment in respect of costs dated 3rd March 2026 was published as BY v GC (No. 3: Costs) [2026] EWFC 50.[2]As previously I shall refer to the parties as ‘W’ and ‘H’ respectively.[3]The case was last before me on 13th May 2026 which was a hearing I convened in order to finalise the drafting of the order following my judgments of 21st November 2025 and 3rd March 2026.[4]Thereafter I was asked to determine one further issue in relation to the drafting of the order. It related to the terms of the transfer of W’s interest in Company P to H.[5]The issue was first raised by H (who appeared in person) at the very end of the hearing on 13th May 2026. H said he believed the need to transfer this asset to him had been inadvertently omitted from the draft of the order initially prepared on W’s behalf. He said that he had therefore raised this in an email to W’s solicitors but had not received a response.[6]I did not hear full argument on the issue on 13th May 2026 and directed that the terms of the transfer should mirror the order in relation to two companies, DS and OE, that were being transferred from H to W (see paragraph [239] of my judgment of 21st November 2025).[7]Neither Ms. Harrison KC (on W’s behalf) nor H demurred from this decision or otherwise sought to persuade me to adopt another position. The hearing on 13th May 2026 then concluded.[8]A disagreement subsequently arose as to which party should(i) be responsible for any tax that may fall due in respect of Company P prior to the transfer (and hence who should indemnify the other);(ii) indemnify the other for any losses, claims and demands for any acts taken or omissions made, outside of the ordinary course of business; and(iii) be responsible for the reasonable costs of the transfer.[9]This disagreement was referred to me by W’s solicitors on 18th May 2026. H confirmed on the same date that he was happy for me to determine the same on paper.[10]After considering the parties’ respective positions I circulated a written decision on 26th May 2026. For the reasons I set out in detail (including that no objection was raised by either party or on their behalf to my decision at the time) I saw no proper basis to change my mind from what I had decided on 13th May 2026.[11]A further issue has now arisen which has also been referred to me for determination. The parties’ positions are as set out in H’s emails sent to W’s solicitors (and copied to me) dated 8th June 2026 and 11th June 2026, W’s solicitors’ letter to me dated 12th June 2026, and H’s email to me dated 15th June 2026.[12]H continues to act in person in relation to implementation of my order. I understand that he continues to instruct solicitors but solely to deal with the W’s appeal against my order if permission is granted by the Court of Appeal.[13]The issue (again) relates to Company P which is being transferred from W to H. Paragraph 38 (iv) of my order (sealed on 10th June 2026) provides that: [W] shall be solely responsible for any tax that may fall due in respect of [Company P] prior to the transfer on the date 7 days from the date of receipt of the sealed order and shall indemnify the respondent in respect of the same in accordance with her undertakings herein and pursuant to the Tax Covenant annexed hereto.[14]This wording mirrors that at paragraph 37 (vii) in respect of the two companies, DS and OE, that are being transferred from W to H.[15]A Share Purchase Agreement (“SPA”) is being drafted between corporate solicitors that have been retained by the parties in order to give effect to paragraph 38 (iv) and other paragraphs.[16]H states the critical feature of that paragraph of my order is that the tax liability as identified is tax that may fall due in respect of Company P and that such liabilities are as a matter of fact liabilities of the company itself. Therefore if a pre-transfer tax liability arises, the primary taxpayer is not H personally but the company with any resulting reduction in value then suffered indirectly by him.[17]The draft tax covenant in respect of Company P within the SPA as drafted by H’s corporate solicitors (and where W is the Seller and H is the Buyer) therefore provides as follows [emphasis added]: TAX INDEMNITIES The Seller shall indemnify and keep indemnified the Company and/or the Buyer against all losses, liabilities, claims, demands, costs and expenses suffered or incurred by the Company and/or the Buyer arising out of or in connection with any Tax that may fall due relating to any period up to and including 2 June 2026 (such date being the date falling 7 days from the date of receipt of the sealed court order regarding the separation of the parties). The Seller shall indemnify and keep indemnified the Company and/or the Buyer against all losses, liabilities, claims, demands, costs and expenses suffered or incurred by the Company and/or the Buyer arising out of or in connection with any acts or omissions of the Seller (or her agents or representatives …) in relation to the Company, to the extent that such acts or omissions are undertaken other than in the ordinary course of business.[18]It is the words in bold that are in issue.[19]H states that these words do not introduce any new category of liability and are not an expansion of W’s obligation. It is said that the wording of the SPA is the contractual means by which the obligation imposed by the court order is given practical effect.[20]W accepts and acknowledges that in my written ruling of 26th May 2026 I determined and ordered that she indemnify H in respect of tax. In addition it is accepted that my order requires that W indemnify H in respect of all losses, liabilities, claims, demands, costs and expenses suffered or incurred by him arising out of or in connection with any acts or omissions of W in relation to Company P other than in the ordinary course of business. However, it is said that the SPA as drafted on H’s behalf is an attempt to broaden the extent of the order to include the requirement upon W not just to indemnify H, but to indemnify Company P in addition to H. It is said that as my written ruling of 26th May 2026 made clear, I was concerned only with W indemnifying H given I said at [25] that “I acknowledge that it is said on W’s behalf that she remains concerned that H is suggesting that she ought to be solely responsible for indemnifying him in relation to tax for a company for which H accepts she has not been responsible for running …” (emphasis added). The proposed SPA is said to go beyond the scope of my judgment and requires W to give an indemnity to the company.[21]It is also said on W’s behalf that such an order would also be outwith the jurisdiction of the court if it required W to indemnify a company and not to indemnify H.[22]W’s solicitors also observe that the tax covenant that has been drafted in respect of paragraph 37 (vii), which concerns the transfer of DS and OE from H to W, relates to indemnities as between W and H only.[23]H states that W’s solicitors appear to accept that W is responsible for tax liabilities at the time of transfer, but they seek to limit the means by which those liabilities can be enforced which cannot be correct. Whether recovery is sought by H in person directly (albeit he states it is impossible to imagine circumstances which would allow this) or by the company which has sustained the liability, the economic responsibility on W would remain the same. W remains responsible for the same pre-transfer tax liabilities which I determined she should bear.[24]H disagrees with the suggestion that his proposed drafting would be outside the jurisdiction of the court. It is said the court has already ordered the transfer of the shares and the allocation of responsibility for pre-transfer tax liabilities. The SPA is merely the implementation document required to give effect to that order. It is commonplace in share purchase transactions for tax covenants and indemnities to be drafted for the benefit of both the buyer and the target company because the company is often the entity which will suffer the primary loss. It is said that paragraph [25] of my ruling of 26th May 2026 does not assist W’s position. That passage records the concern raised on behalf of W. It does not show a finding that any indemnity must be restricted solely to H. Nor does it assist in the drafting of the documents necessary to implement the transfer. It is further said that the proposed drafting, as set out by H’s corporate lawyers, does not seek to improve H’s position beyond that which was ordered by me. It simply ensures that W’s responsibility for pre-transfer tax liabilities can be enforced effectively by the entity against which such liabilities may actually arise. It is therefore consistent with both the purpose and effect of paragraph 38 (iv) and does not constitute any enlargement of W’s obligations under the order and is consistent with the allocation of risk confirmed in my supplemental ruling. Determination[25]In my view the answer to the issue as referred to me is one of jurisdiction.[26]The jurisdiction of the family court is circumscribed with the court’s powers in respect of ordering indemnities limited to ordering one party to indemnify the other. The court cannot order one party to indemnify a non-party.[27]In CH v WH (Power to Order Indemnity) [2018] 1 FLR 495 Mostyn J was concerned with the question whether the court could order one party to use his or her best endeavours to procure the release of the other party from a mortgage on the property that he or she was to receive and, in any event, indemnify that other party against liability thereunder or whether this could only be dealt with by way of undertakings on the basis that such an order was outwith the jurisdiction of the family court.[28]Mostyn J stated as follows (emphasis added): [5] The order in respect of the mortgages derives from the standard form of financial order approved and adopted by the Financial Remedies Working Group in its first report of 31 July 2014. At para 84 of that report it was stated: 'A number of those responding to the consultation process queried whether, in relation to mortgage payments and other household outgoings, the court had power to direct one party to make such payments and/or indemnify the other against non-payment. Such obligations have traditionally been included as undertakings, but their inclusion as directions in the draft standard orders implied that the court had such powers when undertakings were not offered. Mostyn J has expressed the following view in justification of this inclusion: “Under the new s 31E(1)(a) MFPA 1984 in any proceedings in the family court, the court may make any order which could be made by the High Court if the proceedings were in the High Court. The High Court has power to order or decree an indemnity. This is an equitable remedy originally vested in the Court of Chancery which was subsumed into the High Court by the Supreme Court of Judicature Act 1873. It was the very relief initially ordered in Salomon v A Salomon and Co Ltd [1897] AC 22 (but which was later set aside by the House of Lords as offending the rule about the separate legal personality of companies). As to mortgage and other outgoings in my view the power to order A to make payment to B plainly includes the power to order A to make payments on behalf of B. The greater includes the lesser. It was necessary to spell out the power to order the payment of mortgage and other outgoings in Part IV FLA 1996 proceedings (see s 40(1)(a)) because the wider direct power does not exist in those proceedings. It would be anomalous if the power to order payment of outgoings only existed in Part 4 but not FR proceedings. It is necessary in my view for the court to have these powers if only to cover the position if someone is not prepared to give the necessary undertakings or is not participating in the proceedings.”’ … [8] It is elementary that the court cannot make orders outside its powers: see Livesey (formerly Jenkins) v Jenkins [1985] AC 424, [1985] FLR 813, at 444G and 813 respectively, where Lord Brandon of Oakbrook stated that there was nothing in s 23 or 24 of the Matrimonial Causes Act 1973 which directly empowered the court to make the order requiring the wife, following the transfer of the matrimonial home to her by the husband, to be solely responsible for the mortgage and all other outgoings on it. Such a provision, he said, should have been incorporated in undertakings. It is certainly true that the literal words of s 23 and s 24 do not provide for the court to be able to make consequential or supplementary provisions of this nature, in contrast to the terms of s 24A(2), which explicitly grants such a power when making an order for the sale of property. However, s 30 gives the court power when making a property adjustment order to direct that the matter be referred to one of the conveyancing counsel of the court for him to settle a proper instrument to be executed by all necessary parties. While this provision is now virtually obsolete it cannot be disputed that the instrument in question could contain terms which furnish all necessary indemnities and the obligations to pay instalments in relation to a mortgage secured on the property. So I do not agree that the provision in question is outside the 'parameters' of the Matrimonial Causes Act. [9] But that is not my main reason for disagreeing with the approach taken by the district judges in Southampton. My main reason is set out in the report of the Financial Remedies Working Group, set out above, with which, unsurprisingly, I agree. The basic mistake made by the judges in Southampton is to assume that their powers are confined to the four corners of the Matrimonial Causes Act. The Family Court has all the powers of the High Court. The High Court unquestionably has the power, as part of its equitable jurisdiction, to order an indemnity. If awarded, that represents a legal right in favour of the person so indemnified. The court can award an injunction in support of a legal right. To order someone who has been ordered to indemnify the other party in respect of a mortgage to use his or her best endeavours to keep up the payments on that mortgage is of the nature of an injunction in support of a legal right. In my opinion, this provision is squarely within the power of the High Court to order, and is therefore within the power of the Family Court.[29]This authority has been subsequently referred to both in Guidance from the President and in published judgments.[30]In the President’s Guidance Jurisdiction of the Family Court: Allocation of cases within the Family Court to High Court Judge Level and transfer of cases from the Family Court to the High Court issued on 28th February 2018 and updated on 24th May 2021 it was said inter alia that: [15] Section 31E(1)(a) of the 1984 Act provides that “In any proceedings in the family court, the court may make any order … which could be made by the High Court if the proceedings were in the High Court.” This does not permit the family court to exercise original or substantive jurisdiction in respect of those exceptional matters, including applications under the inherent jurisdiction of the High Court, that must be commenced and heard in the High Court. It does, however, permit the use of the High Court’s inherent jurisdiction to make incidental or supplemental orders to give effect to decisions within the jurisdiction of the family court. Thus, for example, the family court can:(a) issue a bench warrant to secure the attendance of a judgment creditor at an enforcement hearing: see Re K (Remo: Power of Magistrates to issue Bench Warrant) [2017] EWFC 27; and(b) require a party to use his or her best endeavours to procure the release of the other party from mortgage covenants: see CH v WH [2017] EWHC 2379 (Fam).[31]In AP v ALP and Others [2018] EWHC 2758 (Fam) Moor J relied on CH v WH (Power to Order Indemnity) in order to require H to give W an indemnity in relation to French tax following on from the sale of a French property. He stated as follows [emphasis added]: [140] … the Husband took the entire proceeds, even though the Marriage Contract provided that the Wife should have them. I am not satisfied as to where the money went and he certainly did not leave any money in France for tax should any be due. I am therefore of the clear view that he must indemnify the Wife for any tax liability. I am satisfied I have jurisdiction to so order (see CH v WH [2017] EWHC 2379). Indeed, if the Husband is right that there is no liability, he has nothing to fear. A claim against the Wife could completely wipe out her assets, particularly if it was for around €12 million as once suggested.[32]In Loggie v Loggie [2022] EWFC 2 Mostyn J was concerned with an application by the wife that the husband indemnify her in respect of £65,603.60 owed to her former solicitors that related to fees incurred by an SJE in financial remedy proceedings. At [25] Mostyn J stated he was “satisfied that there is jurisdiction for the indemnity sought to be ordered for the same reasons I gave in CH v WH (Power to Order Indemnity) [2018] 1 FLR 495”.[33]CH v WH(Power to Order Indemnity) was also cited in Re K (Children) (Powers of the Family Court) [2024] 1 FLR 1261 where Sir Andrew McFarlane P stated that [emphasis added]: [33] Instances of the application of s 31E MFPA 1984 in practice are found in: … (2) CH v WH (Financial Provision: Approval of Consent Order) [2017] EWHC 2379 (Fam), [2017] 4 WLR 178, sub nom CH v WH (Power to Order Indemnity) [2018] 1 FLR 495. The family court can require a party to use his or her best endeavours to procure the release of the other party from mortgage covenants.[34]In Re A and B (Schedule 1: Arbitral Award: Appeal) [2024] 2 FLR 807 Cobb J (as he then was) stated (emphasis added): [98] The Family Court has power, in a financial remedy dispute, also to release parties from a mortgage and/or to indemnify the other against liability. This was considered, and confirmed, in CH v WH [2017] EWHC 2379 (Fam), [2018] 1 FLR 495.
(a) of the Matrimonial and Family Proceedings Act 1984) …
[35]In Hersman v De Verchere [2024] 2 FLR 1011 Moor J stated (emphasis added): [26] There is then the question of my jurisdiction to make the orders sought by the Husband. I am quite satisfied that I have jurisdiction to do so. The first point relates to the Husband's application that the Wife indemnify him against the mortgage liability incurred during the period that she has wrongly occupied Chalet Pearl. The case of CH v WH [2017] EWHC 2379 (Fam), [2018] 1 FLR 495 is clear authority for the proposition that a judge has power to order an indemnity ...[36]In my view what is clear from both the President’s Guidance and these six judgments is the power of the family court to order an indemnity is limited to ordering one party to indemnify the other rather than indemnifying a third party. I am unaware of any authority to the contrary.[37]A company is of course a third party with independent legal personality. In Prest v Petrodel Resources Limited & Others [2013] 2 FLR 732 Lord Sumption stated: [8] Subject to very limited exceptions, most of which are statutory, a company is a legal entity distinct from its shareholders. It has rights and liabilities of its own which are distinct from those of its shareholders. Its property is its own, and not that of its shareholders. In Salomon v A Salomon and Co Ltd [1897] AC 22, the House of Lords held that these principles applied as much to a company that was wholly owned and controlled by one man as to any other company.[38]In my view the court therefore has no jurisdiction to order one party to a marriage to indemnify a non-party to the proceedings and in particular (in this context) indemnify a company which has its own legal personality distinct from its shareholders.[39]This conclusion is consistent with the views expressed by the editors of Rayden & Jackson (albeit expressed in a slightly different context): [11.698] The court cannot, exercise its power of transfer in derogation of the rights of third parties; it can only deal with property to the extent that one of the spouses is entitled to it, whether in possession or in reversion. The reference to property in the MCA 1973, s 37 is a reference to property in s 24, accordingly, 'property' cannot mean any property generally whoever it may belong to and it cannot attach itself (for example) to property belonging to a company.[40]I have considered whether this issue could be dealt with by way of (for example) a contingent lump sum order payable by W. However it is clear from the wording of MCA 1973 s23(1)(c) that the court’s ability to order a lump sum is restricted to an order that “either party to the marriage shall pay to the other such lump sum or sums as may be so specified” (emphasis added). As has been confirmed by case law (for example Wodehouse v Wodehouse [2018] EWCA Civ 3009) the court therefore has no power to order one party to the marriage to pay a lump sum either in favour of – or indeed against - third parties.[41]It is a matter for H as to whether he considers there is (or may be) an alternative jurisdictional mechanism to secure the order he seeks. If so, he will need to make a formal application in relation thereto.[42]I am of course aware that pursuant to(i) FPR 2010 r9.26B(1) the court may direct that a “person or body” be added as a party to proceedings for a financial remedy if (in essence) it is “desirable” to do so in order that the court can “resolve ... matters in dispute in the proceedings”; and(ii) r9.26B(4) the power can be exercised on the court’s own initiative or on application of an existing party or person or body who wishes to become a party. These provisions are indistinguishable from CPR 1998 r19.2(2).[43]There are a number of reported authorities on when (and when not) to accede to an application made for joinder.[44]I do not express any view as to whether this would or would not be an appropriate application to make. That is a matter for H.[45]A separate question is the merits of the application itself. Even if satisfied that there is a jurisdictional route available to make the order that H seeks, it may or may not be appropriate to make such an order on the facts.[46]So far as I recall I have no evidence as to what the quantum of the tax liability in question may be, by whom it has been incurred (whether by W or otherwise), and whether (for example) it was inevitable or avoidable. This is all material information of which I would need to be aware.[47]If this issue is pursued by H by way of a formal application, I am likely to list a further oral hearing to determine the question of jurisdiction and, if appropriate, the merits. The costs of any such hearing will of course be live.[48]For the present, however, I conclude that I can (and do) require W to indemnify H but I do not have the jurisdiction to require W to indemnify Company P as a non-party with its own legal personality.[49]The SPA is designed to give contractual effect to the court’s order. For the reasons aforesaid, I therefore prefer and adopt the wording in the tax covenant as advocated for on W’s behalf.[50]That is my judgment.