A question of notice

Divorce|April 23rd 2015

The issue of how to fund matrimonial litigation is, in these post-legal aid days, more important than ever. One method is for the litigant to offer his solicitors a charge over property to secure their costs. This is what occurred in the recent financial remedies case ABC v PM & Another.

The case made the headlines because the husband, now an Anglican bishop, had been found to have failed to disclose “significant resources”. However, here I am not particularly concerned with that. I am concerned rather with the matter which went before Mr Justice Moor, namely the husband’s solicitors’ appeal against an order which had aside a charge over the former matrimonial home. This charge had been intended by the husband to secure unpaid costs.

The former matrimonial home was owned solely by the husband. When the marriage broke down the wife, who remained in the property, sought to protect her interest in the property by registering her ‘home rights’ with the Land Registry (for information regarding this procedure, see here). She subsequently issued divorce proceedings and a financial remedies application, seeking a transfer of property order. At the same time she further sought to protect her position by registering ‘restrictions’ against the property at the Land Registry requiring, amongst other things, that no transaction be registered against the property without notice first being given to her.

The hearing of the wife’s financial remedies application began on the 29th of April 2013. She had made it clear in a Case Summary that she sought the outright transfer of the former matrimonial home to her, amongst other orders.

The husband did not attend court on the 29th of April, but he did attend on the following day, which is when he executed the charge in favour of his solicitors. The husband had not informed the wife in advance of his intention to execute the charge – her legal team was told of it on the day it was done. They subsequently issued an application to have the charge set aside, under section 37 of the Matrimonial Causes Act 1973.

The husband’s solicitors applied to register the charge at the Land Registry, but for reasons that are not clear, the Land Registry cancelled the application.

On the 28th of October 2013 the court handed down its judgment on the wife’s financial remedies application. Amongst other things, the court ordered that the former matrimonial home be transferred to the wife absolutely.

The wife’s application under section 37 was finally dealt with in July 2014. The district judge was satisfied that, as required by the legislation, the husband had, at least as one of his purposes, executed the charge so as to defeat the wife’s claim. Further, as also required by section 37, he found that the husband’s solicitors had notice of the husband’s intention to defeat the wife’s claim. That had not been an actual notice, but rather ‘constructive notice’, i.e. in the circumstances they knew they should have made further enquiries, and these would have revealed the husband’s intentions. Accordingly, the district judge set aside the charge. The husband’s solicitors appealed against this decision, on the ground that the district judge was wrong to find that they had had constructive notice of the husband’s intention.

Mr Justice Moor dismissed the husband’s appeal. He was satisfied that the husband’s solicitors knew something that, as mentioned, should have led them to make further enquiries. In particular, they knew that the wife was seeking an outright transfer of the property, and that she had registered a restriction against the title to the property. Despite the latter, they had not given any notice to the wife of the intention to charge the property. If they had, the wife would have had the opportunity to apply to the court for an injunction preventing execution of the charge – she was entirely denied that opportunity. To find that they did not need to give the wife notice would mean that no litigant could rely upon a restriction.

The full report of the case can be found here.

Photo by Richard Cocks via Flickr under a Creative Commons licence

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