George v George

This is an application for permission to appeal an order of His Honour Judge Donald Hamilton, sitting in the Birmingham County Court on 25th October 2002.

The case has a complicated history, which is admirably summarised in the judgment of Judge Hamilton. The basic story is that the parties to the case, after the breakdown of their marriage and its dissolution, embarked upon complicated ancillary relief proceedings which did not come to trial until some three years after the dissolution of the marriage. One issue that emerged during the preparation of the case for trial in the Coventry County Court was whether a Swiss trust was the beneficiary by assignment of a debt due from the husband under a loan agreement for the repayment of capital sums and accrued interest advanced to fund works of improvement to the final matrimonial home.

When the case came for trial before District Judge Cotterill in the Coventry County Court in October 2000, an application was made for adjournment on the grounds that the Swiss trust was pressing the husband for repayment and that the issue of fact and law as to the enforceability of the debt should be resolved prior to the trial of the ancillary relief application. The district judge refused that application and proceeded to seven days of evidence. At the end of those seven days the case was adjourned part-heard.

Before the resumed hearing the Swiss trust issued a writ in the High Court to recover the debt. A fresh application was made for adjournment. That application was likewise refused by the district judge, but with an invitation to the husband to challenge the refusal by way of appeal. That invitation was not taken up. The evidence before the district judge concluded and he delivered his reserved judgment on 6th March 2001, his findings and conclusions being ultimately expressed in an order of 23rd August 2001.

Central amongst the findings of the district judge were these: first, that the debt and its subsequent assignment were not real transactions and that there was no real future liability threatening the husband at the end of the Queen's Bench proceedings; second, that the husband had been guilty of breach of the duty of full and frank disclosure and that he was entitled to undisclosed assets, the extent of which the district judge could not determine.

However, the outcome of the Queen's Bench proceedings proved to be the reverse of the district judge's finding. At the conclusion of a two-day trial before Black J, she gave judgment on 1st March 2002 for the Swiss claimant in sums amounting in their totality to approximately £500,000.

That development provoked the appeal to His Honour Judge Hamilton. He succinctly defined the issue raised by the appeal in paragraph 21 of his judgment, when he said:

“The question in this appeal, therefore, is what, if any, alteration should be made to the District Judge's order as a result of the decision now reached by Black J that this husband owes a very large debt which the District Judge found he did not owe and which did not figure in his balancing exercise?”

The judge answered the question essentially in his penultimate paragraph, when he said that the husband was facing a demand likely to exceed £500,000 or so. He continued:

“That, in itself, is said to be a reason for disturbing the order of the district Judge.

That seems to me the best point that could be made for Mr George on this appeal but it is not a good point because there are other assets which the district judge has found to be available to Mr George but not disclosed by him in these proceedings.”

The learned judge accordingly dismissed the appeal.

The application to this court for permission was considered by me on paper on 23rd December, when I adjourned the application to an oral hearing on notice. By agreement between counsel we have this morning extended that direction to provide “with appeal to follow if permission granted”. We have therefore effectively granted permission and heard the appeal to save the parties from two listings in this court with the consequential wastage of costs.

The basic question that we consider this morning, therefore, is this: was Judge Hamilton right to answer the question posed in paragraph 21 as he did in paragraph 30 of his judgment?

The first thing that I wish to record is that this is a characteristically concise and realistic determination by a circuit judge of the greatest experience. What, in the end, these parties dispute is the division of proceeds of intended sale of the final matrimonial home. The property has been on the market for some 18 months. The asking price is £950,000, but it is unlikely that a sale will be achieved at more than £850,000. Of that, it is common ground that the first £150,000 goes to a trust fund which is to be formed for the benefit of the only child of the marriage; so the pot that is available for division is about £700,000. The district judge decided that the wife should have three-quarters and the husband one quarter.

Even if the husband's share were adjusted upward to equality to reflect the outcome in the Queen's Bench proceedings, he would not have sufficient to satisfy the judgment debt. So in a sense any reopening is for little practical purpose. On the other hand, to deny the husband any judicial review, given the extent to which the judgment of Black J falsified one of the fundamental assumptions made by the district judge, would create in the mind of the husband and, I think, in the minds of many right-thinking outsiders, a sense of unease, if not a sense of injustice. The reasoning of the court below is by no means watertight. The existence of submerged and unquantified assets assumed by the district judge rests in a different ledger to the assets capable of description and quantification, which of course include the hard liability resulting from the outcome of the Queen's Bench proceedings. So I am persuaded, despite the submissions of Mr Willans as to the reality, that there must be some review of the order of 23rd August 2001.

We have heard much debate as to who should bear the responsibility for that review. The submission from Mr Healy has been that it should be a High Court judge, who would, in the course of two to three days, conclude a reappraisal without any sort of fresh beginning, but importing much of the fact established in the County Court trial. The rival submission from Mr Willans is that the case should return to District Judge Cotterill, on the basis that he is best placed to reconsider his own conclusion, given his profound involvement in the case. But the reply from Mr Healy is that that would be a denial of justice since the district judge would inevitably be prejudiced against his client, or since his client would inevitably have the perception of prejudice.

It has not been easy to resolve, within the relevant rules and practice, how best to direct this case. I have reached the eventual conclusion that the proper order is to allow the appeal against the order of 25th October 2002 and to remit the ancillary relief proceedings to the Family Division, reserved to Black J, to consider afresh the disposal of the proceeds of the forthcoming sale of the former matrimonial home in the light of her findings in the Queen's Bench proceedings in so far as they conflict with the earlier findings of District Judge Cotterill. I would be confident that the judge would conduct that review within the time span suggested by Mr Healy. Indeed, I would entertain the hope that she could complete the task more expeditiously.

It is easy with hindsight to perceive where this case has gone wrong. It cannot be right for the judge in ancillary relief proceedings to anticipate or to forecast the outcome of related proceedings in another Division or within another justice system, when the risk of false assumption can be eliminated either by adjourning the ancillary relief application to await the outcome of the proceedings in the other Division or by ensuring that both sets of proceedings are either allocated to the same judge or alternatively prepared and dispatched in tandem.

This case well illustrates the problems and the expense that flow from independent determination. I suspect that the present case is not an isolated or rare instance, and it may be that consideration should be given, perhaps by the President's ancillary relief working group, to ensuring that common practice is established between the family justice system and the civil justice system.

I have already indicated how I would dispose of the current application and appeal.

I agree with the order which my Lord proposes and with the reasons that he gives.

The judge, in his careful judgment in this case, said at paragraph 21 that:

“... the District Judge did not deny Mr George credit for his contribution in this marriage and in particular his contribution to the works done, including the improvements carried out, on the former matrimonial home vested in Mrs George. On the contrary, he acknowledged that all the money that was expended on that came, by one means or another, from Mr George, from his money-earning activities during the nineties or from borrowing. It all came from Mr George.”

However, it seems to me that the judge failed to take account of the fact that, on the district judge's approach, Mr George was not indebted to MSL in the sum of £400,000, and the parties now know that the husband is indeed indebted in that sum or thereabouts as a result of the judgment of Black J in the Rudischauser Treuhand proceedings. On the judge's approach, therefore, it seems to me that there was a failure to take account of the fact that the husband had failed to receive credit for the value of the improvements for which he was financially liable and obligated.

Accordingly, I agree that this case must be the subject of a fresh section 25 review and that the matter should be remitted to Black J. In my judgment she must consider the effect of her findings on the decision of His Honour Judge Cotterill. As I see it, she is not limited to the question of the proceeds of the property. She may consider other matters if she considers that that is the appropriate course in the light of her own subsequent findings and in the light of the fact that the court will be carrying out a section 25 review, albeit de novo.