Wright v Wright [2010] EWHC 1808 (Ch)

[2010] EWHC 1808 (Ch)Case No 9BM30278
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue BIRMINGHAM DISTRICT REGISTRY, Birmingham Civil Justice Centre, Bull Street, Birmingham B4 6DSDate 15 July 2010
Before
HHJ DAVID COOKE
Between
Adam Darryl WrightClaimantAnthony Darryl WrightDefendant
Andrew Maguire (instructed by ORJ Solicitors LLP) for ClaimantDavid Stockill (instructed by ESN Solicitors) for DefendantHearing Hearing dates: 3-4 June 2010
Judgment

HHJ David Cooke :

[1]This claim is brought by Mr Adam Darryl Wright against his father, Mr Anthony Darryl Wright (known as "Tony"). The claim and counterclaim reflect an unfortunate but clearly deep split in the family, with the claimant and his mother Mrs Jennifer Wright (who is now divorced from the defendant) on one side, and the defendant and Adam's sister Emma on the other. In the course of this judgment I will from time to time use the first names of the family members, with the aim of improving its clarity but not of showing any disrespect to any of them. It is relevant to the events that unfolded that Adam and Tony share the same initials, "AD Wright", as will appear.[2]Adam's main claim is that a property, 5 Wyndley Close Sutton Coldfield, purchased in 2002 and registered in his father's sole name, is and has always been held on trust for Adam as the sole beneficial owner. He seeks an order that it be transferred to him, and also equitable compensation for the fact that, he alleges, his father has encumbered the property with a second charge to secure an advance of £75,000 for his own purposes and in breach of trust. Tony maintains that the property is owned by him beneficially as well as legally, so there can be no breach of trust. Further, he counterclaims for the payment to him of various amounts as follows: i) £155,650, being one quarter of the net proceeds of sale of 78 Rosemary Hill Road, Streetly, the former matrimonial home of Tony and Jennifer Wright. That property was ordered to be transferred to Jennifer in a consent order made after their divorce, but it is Tony's contention, denied by Adam, that he nevertheless retained an interest in it, and that he was entitled to "his" half of the proceeds of sale which were paid to Adam and Emma "for safekeeping". ii) £61,874 representing half the proceeds of sale of another property, 3, William Court, Clarendon Road, Edgbaston. That property was inherited by Tony and his stepbrother Roland Turner from their mother. Shortly before its sale, Tony's interest was transferred to Adam who then received a half share of the sale proceeds. Tony's case is that this constituted a loan; Adam maintains it was a gift. iii) £51,150 derived from a cash free lump sum benefit paid under a pension policy held by Tony. The lump sum was paid out by way of cheque made out to "A D Wright" which was, with Tony's consent, paid into an account held by Adam. Again Tony maintains that this was a loan and Adam that it was a gift. iv) £1000 paid by Tony as the purchase price of furniture bought from a shop in Spain for the property at 5 Wyndley Close. Tony's case is that he paid for this at Adam's request and was promised reimbursement; Adam's position is that it was a birthday present to him.[3]Central to an understanding of the various transactions that have been at issue in this case are the circumstances that arose following the sale of a family company in 1998. That company was called Euro Batteries Distribution Ltd, and it was sold to an Italian competitor called Fiamm for some £2.3 million. Mrs Jennifer Wright held some of the shares, and received approximately £500,000, with the balance going to Tony. From that, he paid capital gains tax on behalf of both of them, amounting to about £600,000 and therefore presumably leaving him with net proceeds of approximately £1.2 million.[4]Tony Wright stayed on as a director and employee of the company under its new ownership. However in or about late 2002 Fiamm discovered that he was simultaneously running a separate limited company, Platinum Batteries Limited, in competition with the business they had paid for, and they commenced a claim seeking damages of up to £12 million. I do not have the principal documents relating to this claim in the trial bundle, but it appears that the claim was issued in late 2002 and that the allegations were that Tony was in breach of his obligations under the sale and purchase agreement, and also as a director and employee. There were a number of defendants in addition to Tony Wright, but not including Mrs Jennifer Wright.[5]Tony Wright plainly did not have the resources to meet this claim if it was successful for anything like the amount sought. It is accepted that the threat of the litigation caused him to become ill through stress. It is also clear from the evidence that he began a process, in which the other members of the family cooperated, of dispersing and concealing his assets with a view to frustrating any recovery by Fiamm.[6]On 22 July 2003 Mr Alberto Villa, the chairman of Fiamm, received an anonymous letter making various allegations about the steps Tony was taking. All the witnesses in this case suspect they know the identity of the individual who sent this letter, but I will not mention the name they gave, since that person has not been called as a witness or otherwise given the opportunity to respond to what was said in evidence before me. The letter included the following:
“ I have heard that he [Tony Wright] is expecting to lose any case which you may bring against him and he is already taking various steps to diminish his wealth so that he will not have sufficient assets in his own name to meet the full claim. You will no doubt be aware that, apart from his home in Streetly, he also owns a property in Spain which he is attempting to dispose of so that the proceeds can be dispersed at an early date … I have been informed that he is at present regularly transferring cash to Spain and himself, his wife and his children have all visited Spain to take cash out on each visit. … shares which were held in his name in England have already been transferred into the names of his children in order to reduce his assets … he owns investment properties in the Birmingham area and he is attempting to dispose of these with a view to transferring the proceeds out of the country … He owns a property jointly with his brother in the Birmingham area. The property is let and was originally owned by their mother … The initials of one of his sons are identical to his own initials and the son has openly let it be known that his father has passed over cheques made out to him directly to the son who has banked them in his name …during the last year he paid the deposit on a property which is held in the name of this son. Mrs Wright was well aware of her husband's actions in setting up Platinum… her assets have apparently remained intact while her husband is fast disappearing in various directions… ”
[7]In many if not all respects, this letter appears to have been accurate. There was a property at Mijas in Spain, and it was on the market. There was a property jointly held with Tony's brother (ie the William Court property). Although the pension fund monies were not paid to Adam until 2006, it seems clear from a handwritten note made by the pensions adviser who was involved at the time (page 646) that he was familiar with a practice on Tony's part of obtaining cheques for payment to what he referred to as "the other A D W", which may well have begun much earlier. Tony Wright had in April 2002 paid the deposit on the property at Wyndley Close, although there is no evidence to show that he was aware of a potential claim at that time, and the property was in fact registered in Tony's name and not Adam's.[8]The receipt of this letter caused Fiamm to make an ex parte application for a worldwide freezing order, which was granted by Neuberger J on 29 July 2003. Tony Wright swore an affidavit dated 8 September 2003 setting out his assets (page 152), which I summarise as follows: i) four properties jointly held with Jennifer, namely 78 Rosemary Hill Road (the value of which he estimated at £650,000) and three investment properties estimated to have a combined net equity value of approximately £155,000 ii) the flat at William Court, estimated to be worth £80,000 iii) a life insurance policy worth approximately £22,000 and a personal pension plan with a transfer value of approximately £214,000. iv) Cars worth £35,000, and shares in another family company, Euro Wheels Limited, estimated to be worth £4000. v) Bank accounts jointly held with Jennifer containing approximately £20,000.[9]The affidavit concluded with the following:
“11. (a) … for the avoidance of any confusion and for completeness, I am advised that I should list the further properties where I am shown solely or jointly as the legal owner but in respect of which I do not have in fact any beneficial interest. … because I do not have any beneficial interest in these properties, I do not seek to estimate their value. (b) the properties in question, all purchased before the commencement of these proceedings, are: (i) 5 Wyndley Close Four Oaks … held in my name for the sole benefit of my son, Adam Wright, who at the time of acquisition was under 18 years of age. (ii) 2 Roman Place … held jointly by myself and my daughter Emma Wright , and in respect of which Emma is solely beneficially entitled. (iii) a villa at Mijas ... Spain held in the joint names of my wife Jennifer and myself and in respect of which Jennifer is solely beneficially entitled. ”
[10]Adam, Emma and Jennifer Wright all swore affidavits in the Fiamm proceedings confirming that they were respectively the sole beneficial owners of the properties referred to in paragraph 11 of Tony Wright's affidavit, and denying that any cash or other assets had been transferred to them or taken out to Spain by them.[11]In February 2003, Tony Wright and Jennifer Wright separated. Mrs Wright began proceedings for divorce and ancillary relief. A decree nisi of divorce was pronounced on 18 August 2003. In due course a consent order was agreed in the ancillary relief proceedings, which was approved by a district judge on 15 June 2005. Decree absolute was pronounced the same day. The consent order provided for a distribution of assets which was heavily weighted in favour of Mrs Wright, including the transfer to her of the jointly held matrimonial home at 78 Rosemary Hill Road. Tony Wright's case is that the separation was one of convenience and the transfer of assets to Mrs Wright was part of a scheme to get them out of his hands and protect them from any judgment that Fiamm might obtain. It was always the intention, on his account, that after the Fiamm litigation had concluded there would be an apparent reconciliation, and in the meantime Mrs Wright was holding the assets transferred, or at least half of them, for him. Mrs Wright's evidence is that the separation and divorce were genuine and that she had no intention of any future reconciliation. She formed another relationship after the separation, which she disclosed to Tony Wright in July or August 2005 (ie after the consent order had been agreed and made and the property transferred under it). Tony Wright's case is that this came as a complete surprise to him. If, in his eyes, the divorce and ancillary relief settlement had been concocted as part of a scheme to protect his assets, it must have become clear at that stage that it was going badly wrong and that Jennifer at least could not be relied on.[12]Relationships however appear to have continued to be good between Tony and his children Adam and Emma. In about November 2005 Tony's share of the property at William Court was transferred to Adam. The property was on the market and eventually sold for £125,000, completing on 12 May 2006, whereupon Adam received half the net proceeds, amounting to £61,874. A month later in June 2006 Tony took the tax-free lump sum payable under his pension policy (£51,500) and caused it to be paid, as described above, into Adam's account. Shortly after that on 18 August 2006 Mrs Wright completed the sale of 78 Rosemary Hill Road and was persuaded, in circumstances to which I shall have to return, to pay some £310,000 from the proceeds equally to Adam and Emma, which she did on 21 August 2006. Also in August 2006 Tony Wright completed a Land Registry form TR1 intending to transfer the property at Wyndley Close to Adam, although the intended transfer was not registered because the mortgagee would not agree to the transfer.[13]The threat of the Fiamm litigation continued to hang over Tony Wright for some considerable time. It appears that in January 2005 the first of two settlements had been reached, pursuant to which the defendants agreed jointly and severally to make a payment to Fiamm of £350,000 in full and final settlement of the original claim. The terms of that order were not however complied with and it seems that negotiations continued between the solicitors acting for Tony and those acting for Fiamm, ultimately resulting in a further compromise agreement on 8 March 2007 under which Fiamm agreed to accept £60,000 from Tony in full and final settlement of all its claims against him arising under the first compromise. That amount was paid, from monies provided by Emma which she regarded as held on Tony's behalf, and it was only then that the cloud finally lifted.[14]In May 2007 the Spanish furniture was paid for. Thereafter, it appears that relationships between Tony and Adam deteriorated rapidly. Adam and Emma between them owned a company called Planet Wheels Limited, and Tony and Emma came to the view that Adam, who was principally responsible for its management, was not doing a good job and generally spending too much time on holiday and living the high life. A number of crisis meetings were held, but no consensus was reached. In October 2007 things were so bad between them that Tony served a statutory demand on Adam for payment of the amounts that he now counterclaims in these proceedings. That demand was ultimately set aside. During 2008 mortgage arrears began to accumulate on the property at Wyndley Close with Adam and Tony blaming each other for the fact that payments were not made. In April 2009 the mortgagee issued possession proceedings, obtaining an order for possession in June 2009 which was suspended when Adam paid off the arrears. Shortly after that, he issued this claim. 5 Wyndley Close[15]I turn to consider the particular matters at issue in this claim, starting with the ownership of the property at 5 Wyndley Close. Adam's case, supported by his mother, is that it was always intended that this property would be bought for Adam, so that he could "get on the first rung of the property ladder". A similar arrangement had been made a little earlier for Emma when the property at 2 Roman Place had been purchased, in joint names of Tony and Emma but regarded by the family as belonging solely to Emma. According to Adam, he was told to go and look for a property that could be bought him, and he identified and negotiated the purchase of the Wyndley Close property. It appears from the correspondence and other documents from the file of Mr Moore, the solicitor instructed (beginning at page 264 in the bundle) that he initially regarded his clients as Tony and Jennifer Wright. On his file copy of a letter dated 21 January 2002 however he noted in manuscript "Adam Darryl Wright 18th on April 4th" and it is clear that he was instructed by Tony and Jennifer that the intention was to make the purchase in Adam's name.[16]The contract was signed and dated 7 February 2002, naming Adam as the purchaser (page 281). On 15 February 2002 Tony Wright wrote to Mr Moore (page 289) saying "I would be grateful if you could arrange completion on or after 4 April 02, when my son Adam Wright will be 18 years of age and then in a position to sign for the property in his name. The HSBC are aware of this situation and I am acting as a guarantor for Adam". It was intended that the mortgage would be provided by HSBC, although the mortgage offer is in Tony's name and there is no documentary evidence to back up Tony's assertion that Adam would be the mortgagor and he a guarantor. It is common ground however that the builder who was selling the property would not agree to wait until 4 April, and ultimately both the mortgage offer and transfer were completed in Tony's name rather than Adam's. They were registered in October 2002, apparently just before the Fiamm claim commenced.[17]Tony and Jennifer Wright consistently thereafter maintained the position that the Wyndley Close property was held on behalf of Adam. In relation to the ancillary relief proceedings, Mr Moore wrote a letter, presumably at Tony's request, dated 20 March 2003 (page 314) saying "further to the above matter we confirm that … as your son was not old enough at the time of completion and with the fact that the mortgage offer came in your name the property has been registered to you. This will have to be taken into account in the divorce proceedings."[18]It appears that two versions of a form E financial statement were prepared for Tony Wright; a handwritten one which made no mention of the Wyndley Close property, and a typed one which included it as an asset in his name in section 2.2 (page 592) but on which at another point (page 596) he (as I find) wrote in manuscript "Adams" against the entry for the property. On 11 September 2003 Mrs Wright's solicitors wrote saying "at 2.2 your client makes reference to 5 Wyndley Close. We should be grateful if your client were able to confirm that this property should have been transferred to their son Adam on his eighteenth birthday on 4 April 2002." In response to this, Tony Wright's matrimonial solicitor wrote on 14 November 2003 "we have instructions that our client holds this property [5 Wyndley Close] as trustee for his son Adam since at the time of purchase Adam had not attained 18. Lee Crowder solicitors' conveyancing department are currently preparing the necessary transfer so that the property can be transferred to Adam. Indeed we are told that the contract initially was in Adam's name before it was appreciated that he was under the age of 18."[19]In July of that year the freezing injunction had of course been obtained. This appears to have prompted Tony Wright to try to have the property transferred into Adam's name. At page 315 of the bundle is a letter to Tony from the mortgagee HSBC sent on 7 August 2003 saying "in accordance with your recent request please find enclosed a copy of the charge certificate. This shows that you are the owner of the property. To the rear is a copy of the transfer document showing the name Adam Darryl Wright deleted." In response, Tony Wright wrote a somewhat frantic letter dated 11 August 2003 saying "you have misunderstood the requirement, in fact the property should be in the name of Adam Darryl Wright and it is my name, Anthony Darryl Wright that should have been deleted. Kindly call me to confirm that you will rectify this error immediately."[20]On 19 August 2003 Mr Mills, a partner at Lee Crowder acting for Tony Wright in relation to the Fiamm claim wrote to him as follows “I refer to our telephone conversation this morning and would confirm that having spoken to Terry Moore, the solicitor who dealt with the purchase of 5 Wyndley Close, he confirmed that the only reason the property is in your name is because Adam was under 18 at the time and could not hold property. Also the mortgage company required you as guarantor. Terry stated therefore that he was in no doubt whatsoever and his file clearly showed that although you hold the legal title you do so beneficially for Adam and that you have no interest in that property. In those circumstances, there is no need for you to try and change the title deeds at this stage and indeed both Terry and I hold the same view that to do so they will leave you in breach of the freezing order and liable to contempt of court proceedings.”[21]I put it to Tony Wright that what was going on at this time was that in response to the freezing injunction he had made a request to HSBC to alter their documents in an attempt to have the property transferred into Adam's name, but has been advised that it was not necessary to do so because of the evidence received from Mr Moore that the property had always been intended to be held on trust for Adam. He accepted that that was correct. Asked if it was part of a general strategy to put assets in Adam's name he said "yes I think that's about it".[22]Given all this evidence, Tony Wright's case that he is in fact the sole beneficial owner of the property obviously faces some considerable difficulty. In his witness statement in these proceedings, he attempted to deal with the affidavits sworn in the Fiamm litigation at paragraphs 13 and 14 (page 225). In relation to his own affidavit he said "I freely acknowledge that the contents of that affidavit were not entirely accurate and that at the time I did not give due consideration to the precise legal position. It is very difficult for me at this stage to acknowledge other than I was seeking to protect as far as I could assets acquired during the marriage for the benefit of my family." He went on to deny that Mr Moore had any authority to say what he had to Mr Mills, although this is not credible given that he had himself procured a letter to similar effect from Mr Moore in March that year. In relation to Adam's affidavit he said "in reality that statement was created to assist and support my own position and I believe that Adam concluded that affidavit in the knowledge that again he was seeking to support and protect the family assets".[23]This comes close, to put it no higher, to an admission of perjury on his own behalf and a similar allegation in respect of Adam. When giving his oral evidence about these matters, I was obliged to give him a warning against self-incrimination. In the end, he drew back in his oral evidence from what had been said in the witness statement. Mr Maguire put it to him that in fact he had told the truth and that affidavit about 5 Wyndley Close, to which he responded "that is correct at that time, yes. I was telling the truth. 5 Wyndley Close was held for the sole benefit of Adam." It was put to him that he was now trying to mislead the court by saying that the beneficial interest was held by himself, to which he said "no, that was my intention at that time." A little later on, he again said "that was my intention at the time" and when asked whether it was correct that his present position was that what was said in the affidavit is not true he said "what is? I can decide when and if I transfer of property" and later on "you can change your intention. Anybody can change their intention."[24]In so far as Tony Wright was suggesting that his affidavit only indicated an intention, subject to change, that the property would at some point in the future be held for Adam, that is clearly not what it said. Furthermore, such a statement, as I have no doubt Tony Wright well knew and was advised, would not have the effect of preventing Fiamm from having recourse to the property to satisfy any judgment. Only an already existing and vested beneficial interest would suffice and I have no doubt that that is what Tony Wright was asserting.[25]Tony Wright sought to give the impression in his witness statement that he had not been able to concentrate fully on matters or appreciate the significance of what was said in his affidavit as a result of the stress of the litigation. There is some support in the solicitor's documents and medical evidence obtained at the time, which show that for a short period he was regarded as unfit to respond to the freezing injunction, and that he was accordingly given extra time to do so. However it was not suggested, and in my view could not be, that this unfitness was still in existence at the time the affidavit was eventually sworn; nor could it possibly account for the fact that he instructed both Mr Moore (in March 2003) and his matrimonial solicitors (in November 2003) to give a similar confirmation about the beneficial ownership, nor the TR1 form he completed in 2006.[26]A point was also taken in the defence that any expression of an intention to create a trust at the time the property was purchased was ineffective because of the absence of written evidence signed by Mr Wright, as required by section 53(1)(b) of the Law of Property Act 1925. Mr Maguire submits, correctly, that Tony Wright's affidavit supplies that evidence. I do not accept Mr Stockill's submission that this evidence is insufficient because it fails to deal with other matters such as the way in which the property was to be managed; the trust in this case was entirely simple and straightforward and matters such as the management of the property by letting it out are not terms of the trust but powers of the trustee, which are regulated by the general law in the absence of any specific provision in the instrument creating the trust.[27]Mr Stockill also submitted that the fact that Tony Wright had subsequently charged the property to secure borrowings for his own purposes indicated that he did not regard the property as being held subject to a trust. In my view, those actions by Mr Wright reflect rather more the attitude he expressed in his evidence that "anyone can change their intention". Tony Wright, I am satisfied, is a person who regards himself as able to make and unmake arrangements to suit his convenience from time to time. He did not suggest in his affidavit that the trust he referred to was revocable, and no doubt it would not have suited his purpose at the time, which was to shield the property from Fiamm, to do so.[28]Nor is there any substance in the objection that the trust for Adam was much more generous than that for Emma, given that the deposit paid to acquire Wyndley Close was higher than that paid for the property at Roman Place which was regarded as hers. If, as was Tony's evidence, he and Jennifer would have wished to treat the children equally, it would not have been essential to establish arrangements that were equal at their outset and there would have been nothing to stop them evening matters up at a later date by making further provision for Emma.[29]I find therefore that Tony Wright did declare a trust under which the entire beneficial interest in the property at 5 Wyndley Close vested in Adam Wright at the time of its purchase, which trust is formally valid, being evidenced in accordance with the requirements of s53 by the affidavit signed and sworn on 8 September 2003. This makes it unnecessary to consider Adam's alternative case advanced in terms of constructive trust. 78 Rosemary Hill Road[30]I come on to the circumstances in which the property at 78 Rosemary Hill Road was transferred to Mrs Wright in the divorce settlement, the subsequent payment of part of the proceeds of sale to Adam, and the claim which Tony Wright makes to those monies. It is Tony's case, as I have said, that the separation and negotiations leading to the consent order were a collusive arrangement made between himself and Mrs Wright in order to put assets into her hands and away from any potential claim by Fiamm. I should make clear that it was not suggested by any of the witnesses that any of the firms of solicitors or counsel acting for either party in relation to the divorce was aware of any such arrangement.[31]Mrs Wright denied that there was any collusive aspect to the negotiations or consent order. I am bound to say that I did not find her evidence on that point entirely convincing. There are a number of matters in relation to the negotiations and the order made which either do not fit well with what one might ordinarily expect in a divorce settlement negotiated at arms length, or suggest that Tony was anxious to have a clean break settlement into effect before the claim against him could crystallise. In his manuscript Form E (page 590) said "a clean break is required in order that the financial situation is resolved now rather than at a later stage as I am likely to face bankruptcy". On 14 July 2004, the solicitors acting for Tony in the Fiamm litigation wrote to his matrimonial solicitors explaining that settlement discussions were under way with Fiamm and saying this "we are concerned that any settlement is likely to lead to further enquiries about Mr Wright's financial situation. Therefore please could you try to ensure that the matrimonial home at Rosemary Hill Road is conveyed into Mrs Wright's sole name as quickly as possible. I have no doubt that Mr Wright will co-operate fully to ensure that this is done."[32]It is common ground that neither party disclosed in the Forms E the existence of the property in Spain (which had been said in the affidavit as to assets to belong solely to Mrs Wright) or a number of Spanish bank accounts in Mrs Wright's name, or an investment property held by Mrs Wright in Manchester. In evidence, she said that it never occurred to her that she was required to disclose these assets, which I simply do not accept given that she was being advised of her obligations to make full disclosure by experienced matrimonial solicitors. A summary of the financial effects of the proposed order was presented to the district judge asked to approve it (page 618) showing combined assets of £1,173,637 of which £918,364 or 78% would go to Mrs Wright. A brief statement was made that the order involved Mrs Wright extinguishing debt owed to her by Tony of £405,000, which was explained as being amounts she had paid towards his legal costs of defending the Fiamm case. It may be that she had spent that amount, but no evidence of it appears to have been produced at the time and it did not entirely account for the disclosed difference of over £660,000 between the assets they respectively received. It does not appear that the court was told when approving the consent order of the 2005 compromise agreement pursuant to which Tony Wright was jointly and severally liable to pay £350,000 to Fiamm, although the existence of this liability on his part, just as much as the undisclosed assets on her part, would increase the true differential between their positions and clearly be relevant to the fairness of the division of assets.[33]In the light of these matters, and of Tony Wright's acceptance of a general intention on his part to protect his assets from Fiamm, I am satisfied that a large part of the motivation on his part at least for agreeing the terms of the consent order was to put assets into Mrs Wright's hands, and so as he thought protect them from action by Fiamm. I have no doubt that Mrs Wright was aware of that motivation. It is not however established by the evidence that Mrs Wright made any agreement with Tony before the consent order was made (even if it would have been enforceable, as to which see below) that she would be regarded as holding any of these assets on his behalf or return them at his request afterwards when the risk of a claim had gone away. I accept her evidence that by the time the consent order she had been involved in another relationship for some time, although she had not disclosed this to Tony. I believed Emma when she gave evidence of a conversation at a family occasion after the consent order had been made when Mrs Wright told Emma and her fiancé that she did not know how she was going to break it to Tony that there would be no reconciliation between them. It seems likely that she kept this position quiet in order not to disabuse Tony of his impression that assets would be safe with her, but there is no evidence before me from which I can conclude that she positively agreed in advance to hold assets for him in some way.[34]Even if there had been such an agreement, in my judgment it would not have been effective to ensure that Tony Wright retained any beneficial interest in assets ordered to be transferred by the consent order, after the time when that order came into effect. Such an order takes effect on the pronouncement of decree absolute (Matrimonial Causes Act 1973 section 24(3), in this case on the same day) and at that time its effect is to cause the beneficial interest in the assets ordered to be transferred to vest immediately in the transferee spouse, see Mountney v Treharne [2002] EWCA Civ 1174. It cannot be open to the parties to litigation to agree in advance with each other that they will procure an order from the court, but that the order will not in fact produce the legal effect it would ordinarily do. It must follow that even if (contrary to my finding) Tony and Jennifer Wright had in fact agreed before the consent order that he would retain a beneficial interest in 78 Rosemary Hill Road, when the order took effect the entire beneficial interest was nevertheless at that moment vested in Mrs Wright.[35]There would of course be nothing in principle to stop those parties from subsequently making an arrangement to vary the beneficial interests thereby established, provided that such an arrangement was effective on ordinary principles- such as a transfer by way of gift, a declaration of trust satisfying the formality requirements, or an agreement sufficient to be enforceable as a constructive trust. But the effectiveness of any such arrangement to confer any beneficial interest in property in my judgment would depend entirely upon what was done after the court order took effect, and not anything done or agreed before that moment. Any such previous arrangements (and I repeat that I have not found any sufficient evidence of any such arrangements in this case) would be swept away and nullified by the vesting of beneficial interest by virtue of the making of the court order.[36]Nor in my judgment could the parties have made an enforceable contract prior to the making of the court order that they would subsequently enter into a further transaction to undo its effect. I have not of course found that Tony and Jennifer Wright purported to make any such agreement, but even if they had, in my view it would have been unenforceable as contrary to public policy, since it would necessarily have involved an agreement to abuse the process of the court to present a false picture of their affairs.[37]The result is that whilst Tony Wright may, in a general sense, have felt that he was agreeing to the consent order in the ancillary relief proceedings in reliance on an expectation that Mrs Wright would afterwards do as he wished with the interest that he transferred to her, that expectation would not be enforceable at law or in equity, even if she had encouraged the expectation or agreed to do what he wished, and notwithstanding any detriment that he might have suffered by such reliance.[38]This is not a conclusion I come to with any reluctance; a husband who makes such an arrangement with a view to defrauding his creditors should have no expectation that the courts will come to his aid to recover the assets he wished to give the impression he had disposed of. He places himself entirely in the hands of his former wife and takes the risk that she may decide, for whatever reason, or even may all along have intended, not to do what he wants.[39]Nor, I should say, will the disposition necessarily be effective to defeat the claims of creditors, since if the court is satisfied on appropriate evidence that a consent order in ancillary relief has been produced by collusion with this aim in mind it may be set aside as a transaction at an undervalue or a transaction with intent to defraud creditors; see Haines v Hill and another [2007] EWCA Civ 1284.[40]The question therefore becomes whether Tony Wright is able to establish any mechanism, by trust or otherwise, by which Jennifer Wright has, subsequent to the consent order taking effect, created any right in his favour over the property (or sale proceeds) which was wholly owned by her in equity at that time (and also in law from the time of the transfer of the legal title to her one 30 June 2005). He of course bears the burden of proving such an arrangement. Mrs Wright's evidence was that at the time of the sale of the property she was contacted by Tony Wright and put under "incredible pressure" to transfer half the proceeds to him. She did not regard herself as obliged to do that; on her account the divorce settlement was not a collusion and the transfer of the property to her was to recompense her for the amounts she had paid out towards Tony's legal costs. Nevertheless, she felt bullied by him and in the end agreed, not that she would transfer any amount to Tony, but that she would transfer part of the proceeds to each of Emma and Adam. She instructed the solicitor Mr Moore (who by this time was acting for her) to that effect. Her view was that this was a gift by her and once the money was paid to Emma and Adam it was theirs to deal with as they wished.[41]The amount transferred was not in fact a full half of the net proceeds of sale. Mr Moore produced a document headed "Financial Statement-Sale" (page 643) showing the following: “ PROCEEDS OF SALE £822,538.25 Less Joint Marks and Spencers Card £3933.76 £818601.69 DIVIDED BY 2 Mr Wright £409,400.74 Mrs Wright £409,400.74 DEDUCT FROM MR WRIGHT'S SHARE Mrs Wright's inheritance £98,000 BALANCE TO MISTER WRIGHT £311,300 DIVIDED BY TWO GIVING: Adam Wright £155,630.37 Emma Wright £155,630.37"[42]These last amounts were transferred to Adam and Emma respectively. This provoked a furious letter from Tony Wright to Mr Moore dated 5 September 2006 (page 633) in which he complained that the amount deducted for the Marks & Spencer's card was incorrect and demanded that the amount deducted on account of the inheritance should be paid over to him. He attached a document setting out what he regarded as his three options and threatened that "if the balance is not forwarded to me immediately, it will leave me with no alternative other than to resort to options two or three as shown on the document."[43]Of the three options proposed, the first was that Mrs Wright should pay to Tony the full amount he considered due to him. He referred to Mr Moore's financial statement and the reference in it to "Mr Wright's share" and alleged that Mrs Wright had agreed with him to pay him half of the house sale proceeds and told the children that she would do so. The other options, which he threatened if she did not comply, were as follows:
“ Option 2. I proceed with discussions with Withers [the solicitors acting for Fiamm] and disclose the divorce as fraudulent. This will lead to a full investigation and probably criminal proceedings against both of us. If this becomes the case, your legal fees would be substantial to defend yourself… one way or another Withers will get what they want-be it from me or you. Option 3 I declare myself bankrupt. This will lead to a full investigation of joint finances for the last five years by a trustee appointed by Withers. They will pick up the transfer of shares and properties into the kids names (fraudulent activity as it was done post litigation), they will scrutinise your Form E and note that you have only disclosed £500 worth of jewellery, note no disclosure of your property and income from Manchester premises, discover that the property in Spain has not been disclosed… nor the funds into three Spanish bank accounts… they will question why you have subsequently sold the matrimonial home and already given £310,000 to me … I will also disclose that ... you willingly went along with the arrangement to divorce to hide and protect funds from Withers. Furthermore there was never any mention of us not getting back together until the last four weeks or so. None of us were aware of your decisions until very recently ”

Option 3

[44]If the allegations about transfer of property and shares to the children were true (and there is no obvious reason why Tony would invent them in such a document) that would be further confirmation that the anonymous letter was broadly accurate, despite the sworn denials of all four family members.[45]Mr Moore responded to this letter on 11 September 2006, saying that "whilst the contents of your letter and options are not in any way accepted by my client" Mrs Wright would nevertheless offer to provide Tony (on terms) with funds towards concluding a final settlement with Fiamm. In the end, he did not accept those proposals, although Mrs Wright did pay the £100,000 Tony was demanding into Emma's account, and he did not pursue either of the drastic options he had threatened. The second settlement with Fiamm was concluded, the £60,000 required being provided by Emma. Her evidence was that she regarded the monies that her mother had paid to her from the sale of Rosemary Hill Road has been held on behalf of Tony. Adam however took the view that what had been paid to him was money belonging to his mother, and denied any agreement on his part, or knowledge of any agreement on the part of his mother, that those funds would be held on behalf of Tony or paid over to him on his request.[46]Mr Moore wrote a further letter (page 640) dated 6 May 2010, shortly before the trial, enclosing what he referred to as "the original completion statement" showing the full amount of the completion proceeds being paid to Mrs Wright and saying "on the 21st August Tony phoned up in a state of some agitation and said that he did not agree to what was happening with regard to the proceeds of sale and obviously he had been speaking to you. He was extremely rude and upset my secretary no end on that morning. I then spoke to you and you were obviously in a state of extreme distress having spoken to Tony and it was agreed that the money would be split in a different way on your instructions and hence the statement was be done as per the one which shows that it was divided by two and makes reference to Mr Wright's share. I should explain that the use of the word share in that particular instance was only the basis of the amount that it was agreed would be given to him although he was not entitled to it as the property had been transferred to you in 2005 and was sold in your sole name".[47]Mr Moore did not give evidence himself, and that letter was not formally put into evidence by any of the witnesses although it is in the trial bundle. It is at best hearsay and so of a very low evidential weight. Nevertheless it does have the ring of truth, particularly against the background of Tony Wright's extremely bullying letter to Mr Moore and Mrs Wright's evidence of the verbal abuse and pressure that he put on her.[48]I accept Mrs Wright's evidence and find that she was put under great pressure by Tony to transfer what he regarded as his entitlement from the sale proceeds into the names of Adam and Emma. I have no doubt that it was Tony's expectation that they would agree to deal with those monies at his direction. I have equally no doubt that if asked in the context of the Fiamm litigation he would have maintained that the monies did not belong to him. Mrs Wright agreed only to the extent of transferring monies to the children. It was her intention that this would result in the money belonging to them, and was therefore a gift to them. I am not satisfied that she agreed to transfer the money to Tony, or for Tony's benefit. This could not therefore be the basis of a constructive trust of the monies in favour of Tony (such a trust would in any event have required proof of detrimental reliance on his part) or any enforceable contract to pay the monies to him (which would in any event have required consideration on his part).[49]The result is that when the monies were paid to Adam and Emma respectively they became the owners of those amounts. They were under no legally enforceable obligation to deal with them as Tony wished. As it happens, Emma has agreed to do so; that is a matter for her and is not in issue in this case. Adam, I find, has not and is entitled to refuse. Tony's counterclaim in respect of those monies fails.

William Court and pension monies

[50]In relation to the flat at William Court, I heard evidence from Tony's half brother, Roland Turner, in addition to the principal witnesses in the case. He and Tony inherited the flat on the death of their mother in 1990, and Mr Turner gave evidence that they agreed in 2005 to sell two garages associated with it. Tony's share of those proceeds was, he said, paid by cheque to "A D Wright" and paid (by Mrs Wright) into Adam's account. This was further support for the existent of a practice of diverting assets into Adam's name and also indicates that other family members were aware of it. Mr Turner went on to say that Tony agreed to sell the flat in order to use his share of the money to help Adam and Emma start up a new business. He understood that it would be invested into a new company they were forming, called Planet Wheels Limited. He recalled Tony discussing this as a loan he expected to recover within two or three years. Mr Turner had given the initial instructions to solicitors in connection with the sale in October 2005, and was involved when in November of that year the property was transferred from the names of Tony and himself into the names of Adam and himself. His written evidence was that this was because Tony was still at the time unwell and did not want to be involved in dealing with the flat. He thought that Mrs Wright had instructed the solicitors to make the transfer to Adam. In fact it appears from the documents provided by the solicitor that Mr Turner himself took the lead in giving all instructions relating to the sale, including the instruction that Tony's share in the property was to be transferred to Adam (see page 656). The transfer was made in December 2005 (page 660).[51]The evidence given by Tony and Adam in relation to this sale was somewhat vague. Tony said that he went to the solicitors and signed the transfer to Adam, but was not advised about it. He had intended to make a loan to Adam personally, which Adam in turn would lend to the limited company. He did not say that he had not understood the effect of the transfer of the property. He did not for instance assert that Adam was holding the property on trust for him, or explain why it might have been more convenient to proceed in this way rather than selling the property himself and lending the proceeds to Adam once they had been received. He did not explain why it made sense to lend money to Adam alone for him to inject into the company, when Emma held 40% of the shares in the company. It was clear from the minutes of the various meetings held in relation to financial problems at the company that in the course of those discussions Tony had taken the view that when the monies from the sale of the flat were paid into the limited company they represented a loan by him and not by Adam.[52]Adam's written evidence was that his father had told him that he wanted to give him some money to help establish the Planet Wheels business and would transfer his half share of the flat for that purpose. He denied any discussions to the effect that the transaction was by way of loan to him. By the time he gave his oral evidence however he gave the impression of having difficulty recalling that title to the flat had been transferred to him, although it is clear from the documents that he was aware of this at the time and gave instructions as to the payment of his share of the sale proceeds.[53]I think it is highly likely that what was in Tony's mind throughout was a further attempt to conceal part of his assets by causing the sale proceeds to be paid to Adam. I am in no doubt that it was intended that ultimately those monies would be put into the Planet Wheels company. Whether this arrangement would have survived any investigation by Fiamm may be open to question, since the existence of Tony's interest in the flat had been disclosed to them in his affidavit setting out his assets. But he may have hoped that if there was no flow of cash in his name (and he made it clear that throughout this period he was not operating a bank account, maintaining improbably that it was not possible for him to do so) the matter would not be picked up.[54]The transaction that Tony in fact entered into was not a loan but a transfer of his share in the flat to Adam. There was no consideration for this, but on ordinary principles and in the absence of evidence of any contrary intent a transfer from parent to child is taken as a gift, applying the presumption of advancement. Given the varying and incomplete accounts of this transaction, there is in my judgment no sufficient evidence from which any contrary intent can be inferred.[55]In particular, I take into account the fact that although I have reservations about the extent to which reliance could be placed on any of the witnesses, Tony Wright's evidence in my view was particularly unreliable. He was prepared to enter into a series of transactions designed to frustrate the claim against him which he himself described as "fraudulent", and having attempted to explain away in his witness statement in these proceedings the affidavit he swore for the purpose of the freezing injunction, he went back on that explanation in his oral testimony. Furthermore, if as I have found his intention was so far as possible to put his interest in the flat beyond Fiamm's reach, that could only be done if the transfer to Adam was effective to dispose of his own interest in it.[56]I find therefore that the effect of that transfer was to make a gift of Tony's interest in the flat to Adam. Thereafter, the proceeds of sale corresponding to that interest belonged to Adam and he was not under any enforceable obligation to pay them back to Tony or deal with them at his requirement. The position again was that Tony had put himself in the hands of his donee, without any lawful means of thereafter securing the performance of his wishes. His counterclaim for recovery of those proceeds therefore fails.[57]The position is in my judgment the same in relation to the monies deriving from the pension fund. I am in no doubt that he intended to transfer them to Adam, and that this was to prevent Fiamm from taking enforcement action. Again, there is no reliable evidence to rebut the presumption of advancement and indeed the inference to be drawn from Tony's intentions is that the transfer was meant to be an outright gift to Adam. Again, his counterclaim fails.[58]It should not be thought that I am saying that such a strategy is an effective method of defeating the claims of creditors. If the evidence before me had emerged in the course of enforcement proceedings by Fiamm there would have been no defence to a claim to recover the value transferred pursuant to section 423 of the Insolvency Act 1986. One may of course doubt whether the evidence would have emerged in those circumstances, but that is a different matter.

Furniture

[59]In relation to the payment for the furniture, there is a straight conflict between the evidence of Adam and Tony. It is accepted that Adam had gone to Spain to celebrate his birthday, so it is not unbelievable that his father should have agreed to make him a present of the furniture. Although Tony denied this, he did not, for instance, say that he would not have bought the furniture as a present because he had already given Adam some other present. His account was that Adam had told him that he had ordered some furniture without having money to pay for it, had asked Tony to do so and promised to repay him on his return to England. In my judgment, although as I have said I had reservations about the evidence of all the witnesses, Adam's is more reliable than that of Tony, and I therefore find that Tony has not made out his claim that there was any promise to repay the money he spent. That part of the counterclaim also fails.

Equitable compensation

[60]It remains to consider the two claims made by Adam for equitable compensation. It is not disputed that the facts alleged would, if proved, found the court's jurisdiction to make such an award. The first is in respect of the additional borrowings of £75,000 secured on the Wyndley Close property in order to raise funds for another of Tony's companies. On the face of it, this was a breach of his duties as trustee. Indeed it is clear that he had previously been advised in writing by his solicitor that this was so; see the letter written on October 2003 at page 562. Although Tony maintained that Adam was aware of the intention to charge the property, Adam said that he had not given any consent to this charge and in my judgment the evidence presented is nowhere near sufficient to overcome the strict prohibition against self-dealing by a trustee. Adam is, accordingly, in my judgment entitled to compensation in equity for the loss to the trust property resulting.[61]It will be necessary to hear submissions in order to determine the amount of that compensation, as I was not addressed on it in detail. It is however Adam's pleaded case that the sum of £51,500 paid to him from Tony's pension was paid as compensation for that additional borrowing, from which it would seem to follow that he must give credit for that amount. It appears that he did not in fact apply the whole of it to reducing the capital amount outstanding, although there is no apparent reason why he could not have done so. Provisionally, therefore, it seems to me that it is likely that the credit given would have to be by way of assuming that the opportunity could have been taken to pay down the capital at that time.[62]The second respect in which equitable compensation is sought is in relation to an allegation that Adam was prevented from making mortgage repayments on the property at Wyndley Close during 2008 and 2009 by Tony's refusal to authorise the mortgagee to deal with him. In relation to that claim, I am not satisfied that it was made out on the evidence. It was not said, for instance, that Tony had taken any specific step to stop Adam from making payments which he clearly had been able to do in the past. It seems that payments had previously been made by Adam or by Mrs Wright or both of them, and no credible reason was given why that should suddenly had ceased to be the case. Nor was there any explanation of what changed to allow Adam to clear off the arrears to avoid enforcement of the possession order. Rather, I had the impression that Adam had taken the decision himself to stop making mortgage payments, presumably because he thought it to his tactical advantage at that time. His claim for relief in that respect is therefore refused.[63]I will list a short hearing at which this judgment can be handed down, and I invite the parties to seek to agree the form of order required to reflect it. If that order cannot be agreed, or if extended time is required to deal with matters arising, the parties shall provide an agreed time estimate and I will hand down the judgment and then adjourn the hearing for that purpose.