A Third Party and a Third Bite at the Cherry : Overlapping Chancery and Ancillary Relief Applications.

29 MARCH 2012
Edgerton v Edgerton [2012] EWCA Civ 181

This was a pragmatic decision of the Court of Appeal involving some legal and procedural juggling to ensure a hard done by wife gets a second (or is it third?) bite of a cherry that might not even exist.

This appeal was brought by the Husband and the Intervenor (“S”) in ancillary relief proceedings. In a somewhat bizarre turn of events the appellants did not turn up at the appeal yet their appeals were allowed in part. It proved to be something of a pyrrhic victory.

Essentially the ancillary relief proceedings involved a multi-million pound business asset that the wife needed to ensure was counted as matrimonial asset. Between the FDR and the Final Hearing, S, the husband’s business partner issued a partnership claim asserting that the business asset was his and his alone, and therefore outside the matrimonial “pot”. The husband and wife were defendants in that claim. However an unintended consequence of the two proceedings being separated at a directions hearing was that the legally aided wife had to act as a litigant in person in the Chancery Division matters, no doubt as a result she did not comply properly with some administrative processes and found herself effectively debarred from defending the civil action. This left H as the only defendant and, surprise, surprise he settled the matter in a consent order conceding the business asset to S and therefore removing it from the “pot”.

The First Instance Judge in the AR proceedings then permitted the W to try to re-litigate the business asset issue in those proceedings. H and S appealed on the basis that the issue had already been determined by the Chancery court and sought a release from their undertakings (made to avoid a s37 freezing of their assets) not to dispose of the business asset.

The CoA found that it could not be right that the Order of the Chancery Division (albeit by consent) that the business asset was owned solely by S could be ignored, and potentially contradicted by the Judge hearing the ancillary relief proceedings. This would clearly be an impossible state of affairs and must be prevented by a form of estoppel.

Therefore, H and the intervenor win, right? Well, no. Or at least, not yet. On the basis that W would apply to have the Chancery Division Order set aside the Court ordered that that application and the ancillary relief proceedings would be consolidated and heard in the Family Division. Given then that the matters might still be live H and S were not released from their undertakings.

Of more general import was the CoA endorsing the approach promulgated by Nicholas Mostyn QC (as he then was) in TL v ML [2006] 1 FLR 1263 where preliminary issues involving third parties are concerned:

“36. In my opinion, it is essential in every instance where a dispute arises about the ownership of property in ancillary relief proceedings between a spouse and a third party, that the following things should ordinarily happen:

i) The third party should be joined to the proceedings at the earliest opportunity;
ii) Directions should be given for the issue to be fully pleaded by points of claim and points of defence;
iii) Separate witness statements should be directed in relation to the dispute; and
iv) The dispute should be directed to be heard separately as a preliminary issue, before the FDR.

37. In this way the parties will know at an early stage whether or not the property in question falls within the dispositive powers of the court and a meaningful FDR can take place. It also means that the expensive attendance of the third party for the entire duration of the trial can be avoided. …”

Matthew Barry