Taylor v Taylor

J U D G M E N T

uesday, 20th July 2004

1. LORD JUSTICE THORPE: There have been ancillary relief proceedings between Mr and Mrs Taylor that culminated in orders made by the district judges on 4th June 1999 and 22nd May 2000. It is not necessary to go into much detail, it is enough to say that there were three opticians businesses which needed to be sold up and the proceeds of sale divided between the parties.

2. The root order, which was made in the Blackburn County Court on 17th June, recorded in the ultimate recital:

"Upon the parties agreeing that the companies be sold forthwith, such agreement providing for the sale of the practices in the respective companies, either as a group or individually, and with agents and the prices to be agreed, and at a price to be fixed by the court, and that pending sale the husband should draw no more than £1,500 net per month from the company by way of income, and on sale the net proceeds should be divided equally."

3. The later order was necessary because of the parties' inability to agree the mechanics of sale, and accordingly the later order provided that Patrick Myers be appointed as an appropriate selling agent in respect of the parties' optical practices. A detailed order then defined Mr Myers' responsibilities.

4. With the passage of time the wife became suspicious that the husband was cheating on the deal. She was convinced that he was drawing more than £1,500 a month out of the business. She also thought that he was helping himself to stock in trade and removing from the business ancillary assets, such as furniture, in the trade premises.

5. Accordingly she applied to the court by application dated 23rd September 2003 for directions in relation to various issues, including the sale of one or other of the shops, the manner in which the proceeds of sale had been dealt with, and particularly she sought disclosure from her husband of all books and accounts and accounting records, including day-to-day management reports and books. She also sought from him disclosure of all documentary evidence supporting alleged debts and liabilities. She sought verification of the final stock valuation: the value for the fixtures, fittings, equipment and vehicles sold, et cetera, et cetera.

6. That application was supported by an affidavit from the solicitor then acting for her, dated 15th October. On the previous day, 14th October, she applied to the court for injunctions preventing the husband from disposing or entering into agreement to sell the two shops that were still on the market, and that application came before the court without notice on the following day, 15th October, when an order was made by the district judge restraining the husband from selling, or entering into agreement to sell, the two remaining practices. Although the order is rather ineptly drafted, it is plain to me that that relief was intended to run for 15 days, namely until an inter partes hearing on 30th October.

7. For some reason the 30th October did not happen, and on 6th November the husband applied for the discharge of the without notice injunction. That application, although dated 6th November, was not served on the wife's solicitors until the morning of 10th November, when they also received an affidavit from the husband which was stated to be in response to the wife's solicitor's affidavit of 15th October, and in support of his application to discharge the injunction.

8. So, on the following day, the day appointed for the return of the application of 6th November, counsel for the wife was faced not only with the husband's affidavit in response to the application of 23rd September, but also a skeleton argument settled by Mr Booth who was counsel for the husband on that day.

9. Mr Booth's skeleton argument set out the orders of June 1999 and 22nd May 2000 emphasising that the later order placed the sale of the businesses and the practices in the hands of Mr Myers. Mr Booth asserted that:

"Until the whole of the Company is sold there is to be no division of the net proceeds of sale. The proceeds of sale of part of the business belongs to the Company."

Accordingly he said that the notice of application dated 23rd September 2003 was misconceived in its entirety "for the brief reasons set out above." That skeleton argument he elaborated before the judge saying that the application of 23rd September was so transparently unfounded that it had better be summarily dismissed.

10. Counsel for the wife pointed out that this was a bit rich. He had had no notice of this application for summary dismissal, no application for summary dismissal had been lodged with the court, it was simply a creation of Mr Booth's skeleton which he had only just received. He had no opportunity to take instructions, his client was in the Caribbean, and there was a five or six hour time difference between Blackburn and the Caribbean.

11. That did not impress His Honour Judge Smith and we can see precisely why from the passage at page 10 of the transcript which my Lord has already emphasised during argument.

12. Counsel for the wife was referring to anxieties that his client had as to whether the agent, Mr Myers, was really obtaining the best market price for the businesses, when the judge intervened saying:

"Yes, but your argument is not with the husband, as I call him; it is with the agents who have been given the task by the court to effect the sale."

13. Counsel responded thus:

"Well, no, it is with the husband, to this extent: that the order which was made on the 4th of June 1999 left the management of these companies in the hands of the husband, and in exchange for his management of these companies he was to draw from the company a fee or salary, however you wish to describe it, of £1,500 per month... And it is the wife's case, particularly in relation to the Blackburn practice, that that has not been managed properly."

14. The judge's response to that was:

"Yes, but that is not the subject of the application today. The application today is to prevent the sale of the premises. If you have an argument with your fellow shareholder and co-director in company law, if I might so describe it, then there is an avenue for redress, no doubt."

15. It is not necessary to explore the transcript further. The point raised by the judge in that exchange recurs in his brief judgment explaining why he was not only lifting the injunction, but also summarily dismissing the application of 23rd September.

16. The judge was wrong to do that for the plainest of reasons. Firstly, it was procedurally unfair. There had been no application issued for summary dismissal. The evidence in response to the application of 23rd September had only been served on the wife the previous day. She had had no opportunity to reply to it. There was, already, a date in the court calendar for the determination of the application of 23rd September, namely, 2nd December.

17. The second reason why the judge was plainly wrong, in my opinion, is that he failed to perceive that if there was evidence of the husband's breach of the ultimate recital of the original agreement, that is to say, if there was evidence that the husband had been helping himself to more than £1,500 per month, or had otherwise been raiding the company's stock and chattels to his own advantage, that had to be litigated in the ancillary relief proceedings.

18. The division of assets between the parties was controlled by the consent orders. The implementation of those orders was the responsibility of the ancillary relief court. The application of 23rd September properly invoked the court's investigation and determination of implementation, and the judge could not label the application of 23rd September inapt or without proper foundation by a reallocation of the investigation to some other court and some other proceedings uncommenced.

19. Mr Booth has done his best, but I regard the application that he mapped out in his skeleton argument as being one that, on a fair view of affairs as they stood on 11th November, was hopelessly over ambitious. It should have failed and not succeeded. The wife is manifestly entitled to the investigation and determination that she seeks, and manifestly entitled to full discovery in advance of that determination.

20. Accordingly, the application for permission should, in my view, be granted. The appeal should be allowed. There should be a setting aside of so much of the order of 11th November as purports to adjudicate on the application of 23rd September. That application should be remitted to the County Court for proper determination at the earliest possible date.

21. LORD JUSTICE CLARKE: I agree. The purpose of that part of the wife's application for disclosure of books of account and the like was expressed to be to enable her to verify the payments out from the company by the husband to himself. That is to verify whether he took more than the £1,500 per month allowed under the order of 4th June 1999. If he did he was in breach of the undertaking he gave to the court on 4th June.

22. The wife's application thus arose directly out of an order made in ancillary relief proceedings. The wife was, in my judgment, entitled to have the application determined in such proceedings. Indeed, it is difficult to see on what basis the husband could properly refuse to disclose such documents, or if he did, why an appropriate order should not be made.

23. In any event, the wife's application was a matter for determination by the judge hearing the application in ancillary relief proceedings; yet the wife has so far been denied an opportunity of having her application determined. I agree with my Lord that the judge's refusal to determine it was wrong in principle and that, for the reasons he has given, this application for leave to appeal should be granted and the appeal should be allowed.

ORDER: application for leave to appeal granted and appeal allowed with costs of today.