KSO v MJO & Ors [2008] EWHC 3031 (Fam)

[2008] EWHC 3031 (Fam)Case No HG07D00256
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Date 8 December 2008
NEWCASTLE-UPON-TYNE DISTRICT REGISTRY
(In Private)
The Law Courts
The Quayside
Newcastle-Upon-Tyne NE1 3LA
Before
MR JUSTICE MUNBY
Between
KSOPetitioner(1) MJORespondents(2) JMORespondentPSOIntervener
Mr James Turner QC (instructed by Stowe Family Law LLP) for Petitioner (wife)Mr Valentine Le Grice QC (instructed by Ward Hadaway) for First Respondent (husband)Mr Philip Moor QC (instructed by) and Mr Ian Kennerley (of Dickinson Dees LLP) for Second Respondent (husband’s father) and the Intervener (husband’s mother)Hearing Hearing dates: 17-19 November 2008
JudgmentMr Justice Munby :
[1]These are ancillary relief proceedings.[2]The wife issued her petition for divorce in the Harrogate County Court on 25 May 2007. Subsequently, and in circumstances I must shortly describe, the husband’s father was joined as a respondent and his mother as an intervener. I shall, for convenience, refer to the parties as the wife, the husband, the father-in-law and the mother-in-law.[3]There are two children of the marriage, daughters aged 14 and 12 respectively.

The proceedings

[4]The proceedings have had a somewhat complex history, reflected in the fact that by the time the matter was before me the court file was some five or six inches thick. I summarise that history but only to the extent necessary for immediate purposes.[5]The wife served her Form A on 1 June 2007. Her Form E followed on 24 July 2007 and the husband’s on 27 July 2007. The parties’ Replies to the Questionnaires which each had served on the other (the wife on 22 August 2007 and the husband on 3 September 2007) were exchanged on 9 October 2007. Both served a Schedule of Deficiencies. The husband replied to the wife’s Schedule on 23 November 2007; the wife to the husband’s on 11 January 2008, at the same time as the husband replied to the wife’s Schedule of Continuing Deficiencies. In the meantime, two things had happened. On 31 August 2007 the District Judge made an order, by agreement of the parties, for the sale of the former matrimonial home. That order has never been implemented. And on 30 October 2007, the wife had applied for maintenance pending suit.[6]The two Forms E and accompanying documents took up a total of 263 pages; the various Replies to Questionnaires, Replies to Schedules of Deficiencies and accompanying documents took up a further 237 pages – a grand total of 500 pages.[7]Amongst the documents attached to the husband’s Form E were two which bulk large in the issues I have had to consider. One, purportedly dated 2 September 1998, was an agreement expressed to be between, and signed by, the husband and the mother-in-law for the loan (“I … lend you”) of £30,000 by the mother-in-law to the husband “so that you can purchase [the matrimonial home]”. The document continued that it was understood by the husband:
“that this money is a loan and in the event that you come to sell [the property] that you repay to me the original loan of £30,000 plus 10.5% of future increase in the property value. This being the approximate percentage value of the capital I have invested in relation to the cost of [the property] at the time of purchase.”
[8]The other document, purportedly dated 1 February 2007 and signed by the father-in-law, was an acknowledgment by the father-in-law that the husband “has agreed to lend me approximately £500000 to complete the purchase of” a particular property and that “from the date of him paying the monies over to me interest will accrue at 7%”. The document continued, “This rate will apply to any further monies lent to me”.[9]I should explain that at about that time the husband had sold a business for which he had received net, in cash, a sum not that far short of £1,000,000 – to be precise, £919,491.35. In all the husband claims to have lent £517,532 to the father-in-law. What precisely happened to the other £400,000 odd was never made entirely clear to me, though a substantial amount apparently went in tax.[10]The wife suspected that the husband was involved, with the father-in-law, in various property transactions and sought to investigate these matters further in her Questionnaire. The answers provided were meagre. In reply to a question requiring the husband to state the extent of his interest in a property known as The Orchard, his only answer was that he had no interest in the property. In reply to a question referring to the wife’s belief that the husband might be involved in a deal relating to another piece of land, and which required the husband to “provide full details and supporting evidence of any other property transaction with which he is connected in any way”, his only answer was “the husband has no interest in this property” – which was not, of course, an answer to the question at all.[11]The wife’s response was to issue an application on 6 December 2007 for an order that the father-in-law attend an inspection appointment. On 11 December 2007 the District Judge made three orders: first, she ordered the father-in-law to attend an inspection appointment on 28 December 2007; second, she ordered the husband to respond by 8 January 2008 to the wife’s Schedule of Continuing Deficiencies; third, she adjourned the wife’s application for maintenance pending suit, the parties having agreed (as recited in the order) that the whole of the monies (including interest) repaid by the father-in-law to the husband was to be held on joint deposit in the names of the parties’ solicitors.[12]The sum as repaid by the father-in-law to the husband and paid into the joint account on 19 December 2007 amounted to £543,287.65. The order further recited the parties’ agreement that there should be paid out of the monies in the joint account(i) £53,856.97 to the wife’s solicitors and £48,048.40 to the husband’s solicitors in respect of their respective costs,(ii) monthly thereafter (a) £2,500 to each party’s solicitor on account of future costs, (b) £2,500 to each of the parties in respect of their maintenance and (c) £500 to the wife in respect of the children’s maintenance, and(iii) as and when they fell due (a) the outgoings (including the mortgage payments) on the matrimonial home and (b) the school fees and ‘extras’ for the two children. (The fine detail of this order has been varied from time to time; the details do not matter for present purposes.) By the end of October 2008 over £370,000 had been withdrawn from the joint account in accordance with the orders of the court. The remaining balance as at the date of the hearing before me was only £168,701. The monthly drawings from the account (taking one month with another) are, I was told, something of the order of £19,000, so that, at the current rate of dissipation, the fund will be exhausted within 9 months![13]At the hearing on 28 December 2007 the father-in-law was ordered to produce various documents by 11 January 2008. Inspection duly took place on 10 January 2008. The documents disclosed included a number which, on the face of it, were privileged: see C v C (Privilege) [2006] EWHC 336 (Fam), [2008] 1 FLR 115.[14]On 30 January 2008 the mother-in-law applied to be joined as an intervener. At about the same time the wife applied for an order that the father-in-law be joined as a respondent, the grounds of that application being set out in an affidavit sworn by her solicitor, Mr Jonathan James, on 6 February 2008. On 7 February 2008 the District Judge made an order joining the mother-in-law as an intervener. At the same time she made an order joining the father-in-law as second respondent, the father-in-law being given liberty to apply within 14 days of service of the order for it to be set aside. Unsurprisingly, perhaps, on 26 February 2008 the father-in-law applied for the setting aside of the order joining him. On 17 March 2008 he applied for permission to appeal out of time from the orders affecting him made by the District Judge on 11 December 2007 and on 28 December 2007 – essentially on the ground that the District Judge had been wrong to order the disclosure of privileged documents.[15]The next day, 18 March 2008, the proceedings were transferred to the Newcastle-Upon-Tyne District Registry.[16]The father-in-law’s appeal came on for hearing before Holman J on 19 May 2008.[17]Before Holman J the wife took two key points in response to the father-in-law’s appeal. In the first place, she said, the order of the District Judge, properly construed, did not require the disclosure of any privileged documents. So, she said, the appeal was misconceived. Secondly, however, she said that, the contentious documents having in fact been handed over, for whatever reason, the appeal was not best calculated to achieve the father-in-law’s real objective – which was, presumably, that the privileged documents should not be used – and that if his objective was to be achieved he would have to persuade the court to grant an injunction of the kind considered in Al Fayed v The Commissioner of Police of the Metropolis [2002] EWCA Civ 780, (2002) Times 17 June. So, she said, the appeal was pointless. Various other points were taken which I need not take up time rehearsing. In the upshot, the father-in-law was left to go away and consider matters. Holman’s J’s order provided that the matter, including the adjourned appeal and any application by the father-on-law for an injunction, was to be listed for hearing by me on 17-19 November 2008.[18]Two days later, on 21 May 2008, the father-in-law issued an application for the return of the privileged documents and for an injunction.[19]On 7 August 2008 the husband applied for an increase in his monthly maintenance payment from £2,500 to £6,000; on 2 September 2008 that application was amended to include an application for release of a further £50,000 to the parties’ lawyers in respect of their costs. In the meantime, on 22 August 2008 the mother-in-law had served a draft Claim Form and Particulars of Claim setting out her claim in relation to the £30,000 she had lent, whilst on 29 August 2008, the father-in-law had issued an application for an order that his appeal and his application for an injunction be withdrawn. He has, I am told, waived privilege.[20]On 8 September 2008 the matter came before the District Judge – District Judge Powell. As Mr James Turner QC later observed to me, the District Judge was “overwhelmed with applications and issues” – a state of affairs for which the District Judge cannot possibly be blamed and which, I have to say, hardly reflects very well on the parties. He declined to order the increase of the husband’s monthly maintenance payment. He adjourned everything (including the father-in-law’s application and the mother-in-law’s claim) to be heard by me at the hearing already fixed for 17 November 2008.[21]Wisely, and appropriately, the District

Judge included in his order a direction that:

“the solicitors for the parties (including the [mother-in-law]) shall by 4 pm on 22 September 2008 prepare and file an up to date agreed case summary to include the nature of the [wife’s] case in relation to the [father-in-law] and draft directions for consideration by Munby J with a view to avoiding further costs and wastage of court time”
(emphasis added). The order continued with a direction that:
“immediately upon receipt by the court of the agreed case summary … it, and the court file, shall be referred to Munby J for his consideration.”
[22]On 18 September 2008 the husband issued an appeal seeking to challenge the failure of the District Judge to order increased maintenance. On 14 October 2008 the father-in-law applied to strike out the wife’s claim against him.

The prelude to the hearing

[23]I arrived at Newcastle-Upon-Tyne for my circuit sittings on 28 October 2008. I knew nothing of the case beyond the fact that it was an ancillary relief case listed before me for a three-day hearing starting three weeks later on 17 November 2008. I examined the court file. I was perturbed by what I discovered. In particular, I was concerned that the directions given by the District Judge on 8 September 2008 had seemingly not been complied with and that, in consequence, the very sensible case management arrangements the District Judge had put in place had been completely subverted. Nothing at this stage – it was by now 29 October 2008 – had been put before me and no-one had sought any case management directions from me. Most fundamentally, there was still, seemingly, no document setting out the wife’s case in relation to the father-in-law.[24]It was in these circumstances that on 29 October 2008 my Clerk, at my direction, sent an email to all the solicitors, pointing out that the District Judge’s case management plan had been frustrated and requiring that I be informed immediately whether the wife had yet formulated the nature of her case against the father-in-law and, if not, whether and when she proposed to do so.[25]As a result of my requests I received, amongst other useful material, a Case Management Note dated 30 October 2008 prepared by Mr Valentine Le Grice QC on behalf of the husband, a lengthy summary of the wife’s position dated 4 November 2008 prepared on her behalf by Mr James Turner QC and, under cover of a letter from the father-in-law’s solicitors dated 29 October 2008, copies of some recent party and party correspondence. Reading this material only increased my concerns. Although I did not at this stage have copies of the trial bundles, I was left with the distinct impression that the case had become bogged down in interlocutory wrangling, that little clear thought had been given to what one might call the strategic issues in the litigation, that the case was far from ready for trial (though to be fair to all concerned it had by now emerged that the hearing before me was not intended by anyone to be the final hearing) and, in particular, that it was far from clear exactly what I was supposed to be doing at the hearing on 17 November 2008 – and all this against the background, as it now emerged, that the assets were, on any view, very modest in the context of the general run of ‘big money’ cases and that the costs already incurred were, on any view, very substantial.[26]In relation to this latter point, Mr Le Grice in his document, commented – as it seemed to me with some degree of understatement – that the costs to date were “already disproportionate”. Having set out some helpful speculations as to what the overall costs might eventually amount to, he observed that “This might not be a “wipe out” for [the husband and the wife], but it might leave them with insufficient to house, let alone educate, the children.” The true picture, as it subsequently emerged at the hearing, was, unhappily, much worse – very much worse.[27]Amongst the letters sent to me by the father-in-law’s solicitors under cover of their letter dated 29 October 2008 was a letter they had written to the wife’s solicitors (with a copy to the husband’s solicitors) on 1 October 2008. The letter began as follows:
“We write … in the hope of seeking to engender some sense of reality and proportionality into this case and failing that, some sense of urgency. At the moment, the case is serving no other purpose than to haemorrhage costs and appears to have ground to a halt whilst Counsel in London contemplate yet further applications to be issued on behalf of each of the main protagonists. This in itself is serving only to engender further delay and increase the already disproportionate costs for which the parties are liable. Not only this, but the procrastination and delay is at risk of turning the hearing in November into no more than a costly directions appointment, at which there will no doubt be quite proper judicial condemnation of the lawyers who have caused or permitted this delay and incurred such disproportionate costs on behalf of their clients.”
[28]Observing that their clients, as parents and grandparents, were “saddened and bewildered by the course which this litigation has taken”, the father-in-law’s solicitors then proceeded to summarise and analyse the case as they saw it, before concluding:
“we hope that the contents of this letter may better assist your client in understanding what are the economic realities in this case and the assets that are actually available to be shared. If your client has been clinging to the fact that there are assets in the name of our client which may come to her rescue and render her costs proportionate, she will be sadly disappointed. In our respectful submission, it is now vital (indeed long overdue) that the parties begin to negotiate what would be a fair settlement, before the matrimonial assets are depleted even further by what would be utterly fruitless contentious litigation … We look forward to hearing from you within the next 7 days so that this matter can be progressed in a sensible, constructive and collaborative manner.”
[29]I am not of course privy to any without prejudice or ‘off-the-record’ communications there may subsequently have been, but I am not aware of there having been any meaningful engagement by anyone with these justifiably pointed and highly relevant remarks prior to my taking the matter in hand.[30]Having received all this material, my Clerk wrote again on my instructions. His email to the parties dated 3 November 2008 observed that I remained “profoundly concerned” about the case and that I could understand why the father-in-law’s solicitors had felt obliged to write as they did on 1 October 2008. The email made it clear that I was not prepared to allow matters to drift and that the immediate question was how best, and without continuing excessive expenditure of costs, to get the case into some kind of order before the hearing on 17 November 2008. I suggested that a meeting between Leading Counsel (all of whom were in London) might be appropriate to discuss, amongst other matters, how to get the litigation as quickly and cheaply as possible to finality. In the event that meeting took place on 5 November 2008. In a further email sent by my Clerk on 7 November 2008 it was made clear that whatever else was done at the forthcoming hearing I would be giving comprehensive directions designed to ensure the most effective disposal of all the matters in issue between the parties, including both the wife’s claims against the father-in-law and the mother-in-law’s claims.[31]Following this deliberately vigorous case management I received, in addition to the documents I have already mentioned, a note of the meeting between Leading Counsel on 5 November 2008, the husband’s amended Notice of Appeal dated 10 November 2008 against the District Judge’s order of 8 September 2008, a further Note dated 10 November 2008 prepared by Mr Le Grice in relation to the husband’s appeal, a Statement by the husband dated 13 November 2008 in response to Mr Turner’s position statement of 4 November 2008, a Statement by the father-in-law also dated 13 November 2008 and a Case Summary dated 14 November 2008 prepared on behalf of the father-in-law and mother-in-law by Mr Philip Moor QC and his junior Mr Ian Kennerley.

The matrimonial ‘pot’

[32]On the day of the hearing Mr Turner produced a schedule of assets and liabilities. I was also given details of each party’s costs to date. This information served merely to confirm, if only in terms even worse than I had feared to imagine, the dreadful picture which had already emerged from reading between the lines of the various documents I had by then seen.[33]Leaving on one side any claims the wife might have in relation to the father-in-law, the only disclosed assets of any value were(i) the balance of £168,701 in the joint account and(ii) the former – and as yet still unsold – matrimonial home, originally asserted by the husband in his Form E to be worth £1,500,000 (the wife’s figure on her Form E was £1,250,000) but now agreed on the basis of a recent valuation to be worth only £850,000, from which there would fall to be deducted not merely the costs of its realisation but also a mortgage debt of £318,194. So the two major assets were worth only £675,507. Other assets (bank accounts, chattels, motor cars and pension funds) were worth a further £143,339. So the grand total amounted to only £818,846. As against this there were liabilities (excluding costs not yet paid and the mother-in-law’s claim) totalling £324,327. So the net ‘pot’ was, seemingly, £494,519 – before making provision for the mother-in-law’s claim.[34]Between them the parties had incurred costs down to the end of the hearing before me which, in the aggregate, amounted to the staggering sum of £553,460. Of this £276,471 had already been paid. The balance of £276,989 remained to be paid. The wife’s costs amounted to £220,751, of which £110,907 had been paid and £109,844 remained to be paid. The husband’s costs amounted to £212,570, of which £101,352 had been paid and £111,218 remained to be paid. The father-in-law’s costs amounted to £120,139, of which £64,212 had been paid and £55,927 remained to be paid. The mother-in-law’s costs were, in contrast, so modest that I leave them out of account.[35]Accordingly, the net ‘pot’ of £494,519 fell to be reduced by the unpaid costs of £276,989, leaving available for distribution, as matters stood before me, the miserable sum of £217,530 – and that before making any provision for the mother-in-law’s claim or for the ongoing costs of the litigation from and after the end of the hearing before me.[36]Another, and more useful, way of analysing these astonishing figures is to add back in the costs already paid so as to value the ‘pot’ before allowance is made for the costs. On this basis the ‘pot’ was [£494,519 + £276,471 =] £770,990. Of that the lawyers would take £553,460 – no less than 71.78% – leaving a mere £217,530 – a wretched 28.22% – for distribution between the husband and the wife and their children. By the end of the hearing the position had slightly ameliorated. The practical effect of the costs orders I made in relation to the father-in-law’s involvement (paras [56], [72]) was that only something of the order of £40,000 of his costs was going to have to come out of the matrimonial ‘pot’. But against that ‘saving’ of some £80,000 there has to be set £52,500, the crystallised amount of the mother-in-law’s claim (para [44]). So the amelioration – the additional funds available for the ‘pot’ – comes to no more than a modest £27,500 or thereabouts.[37]I shall return to this aspect of the matter later. Here I need only add that the estate agent particulars which I had required Mr Turner to produce suggested that suitable alternative accommodation for the wife and children would cost at least £200,000. The children’s school fees are running at approximately £30,000 per annum. One girl has another 4 years at school, her younger sister 6 years. I was told that pre-payment ‘up front’ covering all the remaining fees would cost something of the order of £250,000. So the available ‘pot’ would just about suffice to pay for a home for the mother and children or for the school fees, but not for both, though on either basis the husband would be left with nothing or virtually nothing.

The issues

[38]Faced with this appalling state of affairs it seemed to me that the first essential was, if at all possible, to remove both the mother-in-law and the father-in-law from the litigation. The second of these tasks proved not to be difficult, for at the outset of the hearing Mr Turner told me that the wife was no longer pursuing her claims in relation to the father-in-law. So the question of a possible OS v DS hearing (see OS v DS (Oral Disclosure: Preliminary Hearing) [2004] EWHC 2376 (Fam), [2005] 1 FLR 675) which had been canvassed between Leading Counsel fell away. The only remaining issue there was, inevitably, a dispute as to costs.[39]I said that I proposed first to deal with the question of the mother-in-law’s claims, then to deal with the question of the costs in relation to the father-in-law, before proceeding to an immediate FDR, which it seemed to me would in the circumstances be better considered before turning to deal with the husband’s appeal.

The issues – the mother-in-law’s claim

[40]The mother-in-law’s claim was set out in the Particulars of Claim dated 22 August 2008 to which I have already referred. Bearing in mind that the document dated 2 September 1998 on which her claim is founded repeatedly refers to the advance as a loan, the Particulars of Claim is a rather curious document: cf Hashem v Shayif [2008] EWHC 2380 (Fam) at paras [112]-[117]. It pleads that the wife was aware of and encouraged the mother-in-law to believe that she agreed to the terms of the loan agreement and that she is accordingly estopped from denying the terms of repayment. It then pleads that the property is held on a constructive trust under which the mother-in-law is entitled as tenant in common as to £30,000 and 10.5% of the increase in the gross value of the property. It then pleads in the alternative that she is entitled to repayment of the sum of £30,000 together with either a sum representing 10.5% of the increase in the value or interest in accordance with section 69 of the County Courts Act 1984.[41]The wife’s position, as set out in a witness statement dated 14 March 2008 was that the mother-in-law is entitled to be repaid the £30,000 in full but should not receive any payment in addition to that. In other words, the wife was not asserting that the mother-in-law’s payment of £30,000 had been a gift.[42]I suggested that the only real issue was whether the mother-in-law could hold the wife to payment of ‘interest’ equal to 10.5% of the increase in value or whether her claim was confined to interest at the statutory rate. I pointed out that the wife admitted that the £30,000 had to be repaid, that it was unrealistic for her to imagine that she would succeed in proving that the loan was intended to be interest-free, and that the interesting questions in relation to estoppels and constructive trusts were really neither here nor there since, even if the mother-in-law had nothing more than a claim in debt against the husband, she would in principle be able to obtain a charging order against his interest in the former matrimonial home. So, one way or another, the £30,000 and at least interest at the statutory rate was almost bound to be removed from the matrimonial ‘pot’.[43]I enquired whether anyone had calculated the difference between ‘interest’ representing 10.5% of the increased value and interest at the statutory rate. As I had rather anticipated, no-one had thought to do the calculation, and as I had also anticipated (bearing in mind the fact that the money had been lent some ten years ago and bearing in mind also the recent dramatic fall in the value of the property) the calculation, when it was done, showed that the amount in dispute was not that large and certainly, it might be thought, not large enough to make it worthwhile keeping the mother-in-law as a party to the proceedings. I adjourned.[44]The parties returned to tell me that the mother-in-law’s claim had been compromised on the basis that she would be paid £52,500 on the sale or transfer of the former matrimonial home, that sum to be paid without interest but to be secured in the meantime by a charge. It was agreed that there should be no order as to costs. I made the appropriate order by consent, directing at the same time that the mother-in-law cease to be a party to the litigation.

The issues – the claim in relation to the father-in-law

[45]The wife’s case in relation to the father-in-law is to be found set out in Mr Turner’s ‘Summary’ dated 4 November 2008. It is expressed as follows: The materials disclosed by the father-in-law following the inspection appointment suggest, when considered in the light of the other surrounding circumstances, that (and I quote):
“the real property enterprises carried on, nominally, on behalf of the father-in-law have in fact been carried on by the husband either for his own sole benefit, or for the joint benefit of himself and his father and/or others” and that accordingly “the husband has a beneficial interest in those enterprises and in the assets and/or profits and future profits thereof.”
It follows, says Mr Turner, that such financial resources should be regarded as available (or potentially available) to the husband for the purposes of the wife’s application for ancillary relief and should be treated as resources against which orders made in connection with that application can be enforced.[46]Mr Turner emphasises that the wife is not asserting that she has any claim against the father-in-law. As he puts it, “she asserts no free-standing case of entitlement on her own behalf as against the father-in-law”, her case in relation to the father-in-law being that it is the husband, not she, who appears to have an interest in assets held in his (the father-in-law’s) name.[47]Mr Turner submits that in these circumstances it was entirely proper for the wife to join the father-in-law as a respondent, even though no relief was being sought by her directly against him, for he was a person of the kind described in RSC Order 15 rules 6(2)(b)(i),(ii): see T v T and others (Joinder of Third Parties) [1996] 2 FLR 357. I entirely agree that, assuming it was appropriate to bring the father-in-law into the proceedings, a proper method of doing so was by his joinder pursuant to RSC Order 15 rule 6(2)(b). But that begs the logically prior question of whether it was in fact appropriate to bring him into the proceedings at all.[48]I should add that in his oral submissions Mr Turner went even further, asserting, as I understood his submissions, that joinder was justified to “find out” if there was a claim against the father-in-law or in order to “get the full picture.” I do not accept this. It seems to me, with all respect to Mr Turner, to confuse a person’s involvement as a potential witness or source of disclosure (discovery in old-fashioned terminology) with his involvement because there is, within the meaning of rule 6(2)(b)(ii), some “question or issue” existing between him and some other party to the proceedings. RSC Order 15 rule 6(2)(b) applies in the latter but not, as it seems to me, in the former case. And, I might add, Mr Turner’s proposition goes beyond anything to be derived from T v T and others (Joinder of Third Parties) [1996] 2 FLR 357.[49]The evidential basis of the wife’s claim in relation to the father-in-law is to be found set out in the affidavit sworn by her solicitor, Mr James, on 6 February 2008 to which I have already referred. I need not go into details, though Mr Turner took me through the highlights of the documents analysed by Mr James.[50]As Mr James pointed out, the documents contain many references, for example, to the husband being the solicitors’ client, to the husband as giving instructions and taking decisions and to the husband as being the proposed purchaser.[51]Now that may be so, but it is a very striking feature, both of the analysis in Mr James’s affidavit and of the analysis in Mr Turner’s ‘Summary’, that they are almost completely silent on what might be thought to be a highly significant issue: the issue of who – the husband or the father-in-law – was actually funding or procuring the funding for these transactions. The husband’s case, mirrored, unsurprisingly, in all respects by the father-in-law’s case, was simple. The only money the husband had ever provided was the £517,532 he lent to the father-in-law as evidenced by the loan agreement dated 1 February 2007. Moreover, he was throughout acting on behalf of the father-in-law pursuant to a Power of Attorney given to him for that purpose in 2003. It was the father-in-law who otherwise provided the necessary funds or the security on which money was borrowed from other lenders. Furthermore, as we have seen, the whole of the £517,532 had been repaid, with interest, on 19 December 2007, before the father-in-law was even brought into the proceedings (the inspection appointment was on 28 December 2007 and the father-in-law was not joined as a respondent until 7 February 2008).[52]Mr Turner’s response (though it was hardly to be found anywhere in his ‘Summary’) was twofold. First, he suggested that, even if the loan was that and nothing more (a proposition which he did not accept, though he shrank from asserting that the loan agreement dated 1 February 2007 was, as a document, other than it purported to be), the profit earned on the transaction funded by the husband had been applied to fund the next transaction, so that in some way I did not really understand – no doubt the fault is mine rather than Mr Turner’s – the husband could be said to have contributed financially to both transactions in the character of purchaser or joint venturer rather than mere lender. Secondly, and in the alternative, he suggested that the husband’s contribution to the joint venture – a contribution which gave him a claim against the father-in-law – was his expertise and the work he did rather than anything pecuniary.[53]Needless to say, both Mr Moor and Mr Le Grice, albeit from their somewhat different forensic perspectives, disputed the whole of this. There never was, they say, any sensible basis for bringing the father-in-law into the proceedings.[54]Before I pass from his topic there is one other point to be made. Mr Turner was justified in observing that all his client had ever been ordered to do by the court was to set out the nature of her case, but he was not, in my judgment, justified in his further submission that it was not at present appropriate, in the circumstances of the case, for the wife to serve points of claim of the kind referred to in TL v ML and others (Ancillary Relief: Claim Against Assets of Extended Family) [2005] EWHC 2860 (Fam), [2006] 1 FLR 1263, at paras [35]-[36]. I do not agree. This is yet another case where, to adopt the words I used in A v A [2007] EWHC 99 (Fam), [2007] 2 FLR 467, at para [24], what in my judgment were the manifold difficulties in the wife’s case:
“would have been more pitilessly exposed, and at a much earlier stage in the proceedings, had the presentation of her case been exposed to the intellectual discipline which is one of the advantages of any system of pleading. Moreover, if the wife had been required to plead her case everyone would have had a much clearer idea, and at a much earlier stage, as to exactly what she was or was not asserting and as to exactly what the husband and the interveners were or were not saying by way of defence.”
[55]This is not, I emphasise, a call for formality for the sake of formality. It is not a call for a return to a system of the arid technicality which, at least in legal folklore, will always be associated with the name of Parke B. It is, on the contrary, a suggestion for the wider adoption of a sensible and appropriate practice that might do something to stop, in their tracks and before ruinous costs are incurred, cases which, even if not, as sometimes, devoid of all merit, are unlikely to be of any real profit to those tempted to pursue them.

The issues – the costs of the father-in-law’s involvement

[56]As I have already said, Mr Turner told me at the outset of the hearing that the wife was no longer pursuing her claims in relation to the father-in-law. He was therefore content to submit to an order that the father-in-law cease to be a party to the litigation. For his part, and as presaged in the application which his client had made on 29 August 2008, Mr Moor submitted to an order, which in the circumstances I was more than content to make, dismissing both the father-in-law’s appeal and his application for an injunction. Realistically Mr Moor conceded that the father-in-law had to pay the wife’s costs of the appeal and the application for an injunction. The parties were unable to agree the quantum of those costs, which I accordingly ordered to be assessed if not agreed.[57]This left in issue the costs of the father-in-law’s participation in the proceedings other than his costs of the appeal and the application for an injunction. Mr Moor submitted that those costs should be paid by the wife. Mr Turner submitted that there should be no order as to those costs but that if the father-in-law was to be awarded any costs those costs should be paid by the husband. Only as a last resort did he promote as an alternative the submission that, if costs were to be awarded in favour of the father-in-law as against the wife, she should be able to recover those costs from the husband. Each of those last two propositions was, of course, disputed by Mr Le Grice.[58]As will be appreciated, these arguments involved in part a dispute as to whether any order to be made should be in a form somewhat analogous to what in other Divisions would be thought of as a ‘Bullock’ order or in a form somewhat analogous to a ‘Sanderson’[59]Counsel were, correctly, agreed both that I had jurisdiction to make an order in either form and that the appropriate form of order was a matter of discretion to be determined in accordance with normal principles and having regard to all the circumstances of the case.[60]A significant part of the father-in-law’s costs had been incurred before he was joined as a party and in the course of complying with the order made at the inspection appointment. Helpfully, and appropriately, Mr Turner accepted that, one way or another, the father-in-law was in principle, and other things being equal, entitled to recover these costs, either as pre-litigation costs properly recoverable as part of his litigation costs or in accordance with the rule that the costs incurred by a third party attending an inspection appointment or complying with an order for disclosure will be ordered to be paid by the parties, usually in the first instance by the applicant for the inspection appointment – here the wife: Totalise plc v The Motley Fool Limited [2001] EWCA Civ 1897, C v C (Costs: Leave to Appeal) [2006] EWHC 624 (Fam), [2008] 1 FLR 136, at para [4]. Mr Turner accepted that there was therefore no reason to distinguish between the father-in-law’s costs incurred in complying with the orders dated 11 December 2007 and 28 December 2007 and his costs incurred following his joinder on 7 February 2008. He was, in my judgment, correct to do so.[61]In these circumstances there were three questions for me to decide. First, was the father-in-law entitled to his costs, or should there be no order as to those costs? Secondly, if he was entitled to his costs, was he entitled to an order against the wife, or should the order be against the husband? Thirdly, if he was entitled to an order against the wife, was she entitled to an order over against the husband? I shall deal with these in turn.[62]Was the father-in-law entitled to his costs, or should there be no order as to those costs? Mr Moor’s contention was simple. The wife had brought the father-in-law into the litigation. She had failed completely – indeed, she had abandoned her case in relation to him. Costs should follow the event. She should pay his costs. Mr Turner sought to argue that there should be no order as to costs, in effect on ‘Boxall’ grounds (see R (Boxall) v The Mayor and Burgesses of Waltham Forest LBC (2000) 4 CCLR 258 at para [22], approved by the Court of Appeal in Brawley v Marczynski (Nos 1 and 2) [2002] EWCA Civ 756, [2002] EWCA Civ 1453, [2003] 1 WLR 813). He submitted that the wife had always had good grounds for bringing the father-in-law into the proceedings and that her withdrawal of the claim arose not from perception, let alone recognition, of any weakness in her case but for purely pragmatic reasons. The money put into the ventures by the husband had all been recovered. The profit from the first transaction had been rolled over into the second transaction, which, it had recently transpired, had unhappily made a substantial loss. So there was no financial benefit to be obtained in continuing to pursue what was otherwise entirely sensible and potentially productive litigation.[63]Mr Moor and Mr Le Grice begged to differ. The claim had always, they submitted, been if not doomed to failure most unlikely to produce anything of advantage. However it was dressed up – and they suggested that Mr Turner was really seeking to derive adventitious benefit from the absence of profit in circumstances where, profit or not, there was simply no basis of claim – the simple fact, they submitted, was that the wife’s withdrawal amounted in reality to ‘hauling down the flag’ in the face of what she had, very belatedly, finally come to recognise as the inevitability or near inevitability of defeat.[64]In my judgment, and essentially for the reasons given by Mr Moor and Mr Le Grice, this is a case where the father-in-law is, in principle, entitled to his costs. In seeking the joinder of the father-in-law, the wife, in my judgment, embarked upon an exercise which, not least on the basis of what was known to her at the time in January 2008, was fraught with difficulty and, I have to say, improbability of success. She had in her hands the document signed by the father-in-law. She knew that the money advanced to him by the husband had been repaid and was sitting safely in the joint account. How, then, did she think that she could get her case off the ground? She had – still has – no basis for impugning the document which, on its face, spelt out that the relationship between the husband and the father-in-law was that of creditor and debtor, and even if she might previously have harboured some hope that cross-examination might bring to light some different relationship, it is difficult to see how that would have got her very far once the money had in fact been returned, as it was in December 2007. I have already commented on the difficulties in the way in which Mr Turner put his case. The reality, I fear, is that the wife and her advisers were so beguiled by what they found in the documents produced by the father-in-law that they never really addressed what in my judgment was always the highly significant issue of who – the husband or the father-in-law – was actually funding or procuring the funding for these transactions.[65]In my judgment this is not the kind of case where, a good claim having become academic in the light of changed circumstances, it is appropriate to order that there be no order as to costs. Nor is it the kind of case where the practical difficulty of assessing the intrinsic merits or demerits of the claim similarly propels the court towards the default position of making no order for costs. I have more than adequate material upon which to base an informed view as to the wife’s prospects of success against the father-in-law. And that view, I am afraid, is stark and unhesitating: the wife embarked upon, and persisted for far too long in pursuing, a claim that in all probability was always flawed and which never stood any very great prospect of success. She chose to sue the father-in-law. She has failed. Costs should, in principle, follow the event. The father-in-law is in principle entitled to his costs.[66]Before passing from this issue I should mention one other matter relied upon by Mr Turner. He said that the father-in-law was to be criticised for bogging down the proceedings for over 6 months in an appeal and an application for an injunction which were devoid of merit, which had served no useful purpose (had, indeed, served only to delay matters and increase costs) and which had in the event been abandoned. Granted the premise, I do not see how it bears upon the matter in issue. The adverse order for costs to which Mr Moor has very properly submitted is the appropriate compensation for the wife in this respect. There is no reason why she should obtain any further benefit at the expense of the father-in-law. It was, after all, she who brought him into the litigation in circumstances where it might be said – as, indeed, both Mr Moor and Mr Le Grice said – that rather than criticising the father-in-law for his inappropriate conduct of part of the proceedings from March 2008 onwards she is more justly to be criticised for her failure adequately and appropriately to assess the merits of seeking his joinder at a time – in January 2008 – when she had obtained the relevant documents and could, and they would say should, have realised the many difficulties that stood in her way.[67]I turn to the other two questions, which can conveniently be considered together: If the father-in-law is entitled to his costs, is he entitled to an order against the wife, or should the order be against the husband? If he is entitled to an order against the wife, is she entitled to an order over against the husband?[68]I entirely accept that there may be ancillary relief cases where, in circumstances similar to this, the appropriate form of order would be that suggested by Mr Turner. It might, for example, be appropriate to leave the third party to his recourse against the husband if the two of them were in cahoots, if the husband or the third party had been guilty of significant non-disclosure and if the wife had, perhaps because of non-disclosure, been led to believe, with justification, that there really was a good case against the third party. But this, in my judgment, is not such a case. By the time the wife applied for the joinder of the father-in-law she had the documents – not least the documents disclosed by the father-in-law himself – and was in a position to make an informed decision about whether to proceed against him. In large measure she went into things at that point with her eyes open. Though the husband, in my assessment, must bear some measure of responsibility for the wife’s decision, it was not the major or predominating part. The father-in-law is, in my judgment entitled to look to the person who brought him into the litigation – the wife – for the costs to which he is entitled.[69]Is the wife entitled to an order over against the husband? Mr Turner referred me to the passage in J v V (Disclosure: Offshore Corporations) [2003] EWHC 3110 (Fam), [2004] 1 FLR 1042, at para [130], where Coleridge J said:
“If clients ‘duck and weave’ over months or years to avoid coming clean they cannot expect much sympathy when it comes to the question of paying the costs of the enquiry which inevitably follows. And that is so whatever the outcome eventually is and whatever offers have been made before final determination. Applicants cannot be properly and fully advised about the merits of offers by their lawyers unless the disclosure is full … and frank; all the cards must be put on the table face up at the earliest stage if huge costs bills are to be avoided.”
Here, he says, it is the husband’s ‘ducking and weaving’ which led to – indeed drove – the wife to bring in the father-in-law, so he should have to pay all the costs which I have ordered her to pay the father-in-law.[70]I agree with Mr Turner to this extent, that the husband bears some measure of responsibility for the wife’s decision to join the father-in-law. I have already referred to his inadequate responses to the wife’s Questionnaire – responses which, at least in some respects, were so contemptuous, so brazen, as to be calculated to arouse the deepest suspicions. But I return to the point I have already made: by the time the wife secured the joinder of the father-in-law she had obtained the relevant documents and, as Mr James’s affidavit shows all too clearly, had had every opportunity to examine and analyse them. In the circumstances she cannot, in my judgment, throw all the blame, all the responsibility, for the consequences of her decision onto the husband. Both, in my judgment, bear the blame, the responsibility, and both must bear the appropriate share of the consequences.[71]Inevitably, in this kind of situation, precision and absolute justice is not possible. I have to do the best I can in the light of all the information available to me. In my judgment, justice will best be done if I order the husband to pay the wife one-half of the costs she has to pay the father-in-law. That will, in my assessment, do broad justice as between the two of them.[72]For all these reasons at the end of the hearing I made orders(1) that the wife was to pay the father-in-law’s costs of his intervention in the proceedings (other than his costs of the appeal and the application for an injunction) to include his costs of the inspection appointment order made against him on 28 December 2007, such costs to be assessed if not agreed and(2) that the husband was to pay the wife one-half of the costs ordered against her by the previous order.

The FDR

[73]We then embarked upon the FDR. Naturally I say nothing about what happened save to record that by the end of the third day of the hearing, and despite many hours spent in negotiation and discussion outside court, the wife and the husband had been unable to reach any agreement. Perhaps that was not too surprising given how small the remaining ‘pot’ was and the seeming impossibility of meeting out of it even the most basic ‘needs’ of the parties.[74]At the end of the third day I adjourned, leaving the parties to consider whether they wished to continue the FDR, which I indicated I would be content to do, if they wished, after I had returned to London from circuit.

Denouement

[75]The denouement was, in hindsight, perhaps not altogether surprising. The litigation simply collapsed under the unsustainable burden of paying costs which had long since become wholly disproportionate to anything at stake and which, by the time the parties arrived at the FDR, had swallowed up a grotesquely large proportion of the never very substantial assets. On 26 November 2008 I received the news that the husband had earlier that day been declared bankrupt on his own petition.

Concluding observations

[76]Not for the first time I have here been faced with ancillary relief litigation conducted at ruinous expense to the parties. I should like to think it will be the last time, but I doubt it.[77]In A v A (No 2) (Ancillary Relief: Costs) [2007] EWHC 1810 (Fam), [2008] 1 FLR 1428, at para [269], I observed that in that case some 41.5% of matrimonial assets of £2,669,715 had gone in costs. I continued at para [270]:
“It may be that the ‘mega’ rich can afford to squander grotesque sums in costs. The allusion is, of course, to Moore v Moore [2007] EWCA Civ 361, [2007] 2 FLR 339, at para [6]. Lesser mortals cannot. Costs in too many so-called ‘big money’ cases – in modern conditions many such cases do not in truth involve ‘big’ money at all – are, as here, grossly disproportionate to either the amounts or the issues at stake. I have had occasion before to deplore the expenditure – one is tempted to say the waste – of money in such cases: see, for example, Re G (Maintenance Pending Suit) [2006] EWHC 1834 (Fam), [2007] 1 FLR 1674, at para [46]. Other judges have also expressed their concerns. A very recent example is provided by Wood v Rost [2007] EWHC 1511 (Fam), [2007] All ER (D) 198 (Jun), where, speaking of a case which had been conducted at “vast expense,” the Deputy Judge lamented that the late Mr Charles Dickens was no longer alive to write a 21st century sequel to Bleak House. The simile, if I may say so, is all too apt. The accusatory finger which in the 19th century was appropriately pointed at the High Court of Chancery is, in the modern world, more appropriately pointed at the Family Division.”
[78]Only a few weeks later, in Whig v Whig [2007] EWHC 1856 (Fam), [2008] 1 FLR 453, I had occasion again to lament what I described (at para [88]) as “ruinously expensive” ancillary relief proceedings. In that case the ancillary relief proceedings had been overtaken by the husband’s bankruptcy – on his own petition – and the aggregate costs of both sets of proceedings amounted, as I explained, to more, on the husband’s view, than the net aggregate value of the identified family assets and not far short of what the wife said they were worth. I commented at para [5]:
“One wonders with astonishment at what has been going on. One can only speculate as to what anyone thinks they could possibly hope to salvage from this expensive and utterly futile fiasco.”
[79]A year earlier, in C v C (Costs: Leave to Appeal) [2006] EWHC 624 (Fam), [2008] 1 FLR 136, at para [19], I had commented on how costs amounting to no less than £394,275 had been spent in the course of ancillary relief proceedings which had been commenced scarcely three months earlier and which had, as to the substance of the matter, not yet progressed very far despite the intensity of the interlocutory skirmishing.[80]The picture is deeply dispiriting. And it is not as if it is only the adults who suffer from the consequences of such folly. The luckless children do as well. The present case is a sobering, and for me deeply saddening, example. If, instead of spending – squandering – over £430,000 in costs, the wife and the husband had been able to resolve their differences at a more modest and, dare I say it, more seemly level of costs, there might very well have been enough left in the matrimonial ‘pot’ to house the wife and children and to enable the children to remain at their school, whilst still leaving something more than a mere consolation prize over for the husband. As it is, it is hard to see much being left from the wreck, not least after the trustee in bankruptcy has had his costs, expenses and remuneration. It is difficult not to be reminded at this point of Jarndyce v Jarndyce (see the Appendix). And the wife and the husband – and for this purpose I refer to them as the mother and the father, for that is what they are – are faced now with the wretched and thankless task of trying to explain to their daughters how it has all come to this.[81]Something must be done about the problems highlighted by this and by too many similar cases. We simply cannot go on as we are. The expenditure of costs on the scale exemplified by this and by too many other such cases is a scandal which must somehow be brought under control.

order

see Bankamerica Finance Ltd v Nock [1988] AC 1002 at page 1007. A ‘Bullock’ order (see Bullock v London General Omnibus Co [1907] 1 KB 264) is an order that the successful defendant recovers his costs as against the claimant, the claimant being entitled to recover as against the unsuccessful defendant not merely his own costs of the action but also the costs he has been ordered to pay the successful defendant. A ‘Sanderson’ order (see Sanderson v Blyth Theatre Co [1903] 2 KB 533) is an order that there be no order as to costs as between the successful defendant and the claimant but an order that the unsuccessful defendant should pay all the costs of both the claimant and the successful defendant. In effect Mr Turner was saying that if the father-in-law was to recover his costs the order should be, as it were, in ‘Sanderson’ order form; Mr Moor was saying in effect that if there was to be any question of the husband having to bear any part of the father-in-law’s costs the order should be, as it were, in ‘Bullock’ order form.

Cited in 6 later judgments