2001/216
COURT OF
APPEAL
26th
October 2001
|
Before:
|
R.C.
Southwell, Esq., Q.C., President;
P.D. Smith, Esq., Q.C., and
M.G. Tugendhat, Esq., Q.C.
|
|
Between
|
Helen
Christina Matthews née Jasper
|
Plaintiff
|
|
|
|
|
|
And
|
Ian
Victor Matthews
|
First
Defendant
|
|
|
|
|
|
|
Ian
Victor Matthews and Conrad Edwin Coutanche as Trustees of the Lord Matthews
Trust
|
Second
Defendants
|
|
|
|
|
|
And
|
Southgate
Investments (1996) Limited
|
Third
Defendant
|
|
|
|
|
|
|
Matthews
Farms Limited
|
Fourth
Defendant
|
Appeal by
the Second Defendants from so much of the Judgment of the Royal Court of 28th
June, 2001, as directed that an interim injunction, obtained by the Plaintiff
against the Second Defendants should be continued.
Advocate
A.D. Hoy for the Plaintiff;
Advocate
A.D. Robinson for the Second Defendants.
JUDGMENT
tugendhat
ja:
Introduction
1. This
is an appeal by the Second Defendants, the Trustees of the Lord Matthews
Trust, from the interlocutory
judgment of the Royal Court, Samedi Division, given on 28th June 2001, in so
far as that judgment ordered that there be re-imposed an order in the terms
of the order of the Royal Court
dated 16 May 2001. The order of 16
May 2001 had been granted without notice, and had been discharged by the Royal
Court in their judgment of 28th June, 2001 (that being a part of the order in
respect of which there is no appeal by the Second Defendants). There is no
cross appeal.
2. The
Second Defendants at the time when each of the two orders were made were Mr
Matthews, who is named as the First Defendant in his personal capacity, and Mr
Coutanche. In addition to the appeal itself, there is an application for
permission to introduce into the evidence the fact that Mr Matthews resigned as
trustee with effect from 29 June 2001. There can be no objection to that fact
being communicated to the Court. There is, however, an issue as to whether it
is a change of circumstances at all, and, if it is, whether the possible
consequences of it can properly be raised in this appeal without the Royal
Court having first been given an opportunity to review its order in the light
of this new fact.
3. The
terms of the order of 16 May, 2001, which were re-imposed on 28 June, 2001, are
as follows:
Disposal of Assets
(1) Until Judgment herein or further Order,
service of this Order of Justice upon the Defendants shall operate as an Immediate Interim Injunction
restraining the First and Second Defendants, as Trustees of the Lord Matthews
Trust, whether by themselves or by their respective servants, agents or by any
company or trustee acting on the Trustees' behalf without the leave of
the Royal Court or the prior written consent of the Plaintiff's Advocate
in writing from entering into any transaction whatsoever which shall have the
effect of diminishing or passing out of the control of the Trustees all or any
of the assets of the Lord Matthews Trust wheresoever and specifically as
beneficial owner of Matthews Farm Limited restraining the Trustees from
disposing of or charging howsoever the property Waverley Farm and/or the shares
or stock in Matthews Farm Limited held howsoever by the Trustees.
(2) Provided always that the prohibition
contained in paragraph 1 above shall not apply to the following:
a. A
payment to the First Defendant of a sum not exceeding £30,000 per month
for his own living and legal expenses and such sum as is necessary to meet the
costs of maintaining the children of the marriage of the Plaintiff and First
Defendant.
b. Such
transactions as may reasonably be entered into in respect of the day-to-day
running of any investment portfolio operated by the Trustees.
c. Such
transactions as may reasonably be entered into by way of a variation of any
property investment (other than the ownership of Waverley Farm) held directly
or indirectly by the Lord Matthews Trust.
Provided always that no such transactions envisaged by paragraph 2 above shall have
the effect of diminishing all or any of the assets or the value of the Lord
Matthews Trust.
VARIATION OR DISCHARGE OF THIS ORDER
(3) The Defendants (or anyone notified of this
Order) may apply to vary or discharge this Order (or so much of it that affects
that person) but anyone wishing to do so must first give the Plaintiff's
Advocate not less than 12 hours notice.
4. The
matter has a complicated history, which is summarised by the Royal Court in
paras 2 to 32 of their judgment which I gratefully adopt.
(2) The
Hon. Ian Matthews is the only son of Lord Matthews of Southgate who, before his
death (on the 5th December 1995) lived as a "Section K"
resident at Waverley Farm, St. Brelade. Lady Matthews predeceased her
husband. On 9th March
1995, Lord Matthews made a will of realty.
He gave his realty (if his wife should predecease him) to Matthews Farms
Limited. On 1st August
1995, the Lord Matthews Trust was established. The original (and still the continuing
Trustees) were Mr. Ian Matthews and Mr. Coutanche.
(3) Matthews
Farms Limited is a wholly owned subsidiary of Southgate Investments (1996)
Limited and that company is beneficially owned by Mr. Matthews and Mr.Coutanche
as Trustees of the Lord Matthews Trust.
Southgate Investments (1996) Limited is the holding company of other
property holding companies and of Matthews Breeding and Racing Limited which is
a bloodstock and breeding racing company.
There is no doubt that the Lord Matthews Trust is the ultimate
controlling party of Southgate Investments (1996) Limited and of its subsidiary
companies. The Directors of the
companies are, or were, Mr. Matthews, Mr. Coutanche and Mrs. Matthews. Mrs. Matthews is not a beneficiary in
the Trust. She is not named in it
at all. The beneficiaries are Mr.
Matthews and the three daughters of the marriage aged 12, 10 and 8. There is also a general charitable
beneficiary.
(4) As
we have said, Lord Matthews died on 5th December 1995. Mr. and Mrs. Matthews and their family
moved into Waverley Farm. Sadly,
the marriage broke down irretrievably.
In February 2000 Mr. Matthews went alone to a Health Centre in Florida
where he entered into an adulterous relationship which he admitted to Mrs.
Matthews on 11th June 2000.
The relationship is a continuing one.
(5) Mrs.
Matthews petitioned for divorce on 7th August 2000 on the grounds of
her husband's adultery.
Before bringing her petition for divorce, Mrs. Matthews lodged a caveat
or opposition with the Court against Mr. Matthews. Some exception has been taken to this
"opposition" by the
second defendants, although it only cited Mr. Matthews. It may well be that custom has enlarged
the original concept that the caveat or opposition had for its purpose in the
days of C.S. Le Gros. Nevertheless,
as Mr. Hoy has pointed out, the opposition was duly registered and no steps
were taken to set it aside. It
stood unopposed from 17th August 2000 and was renewed on the same
terms on 19th January 2001.
(6) There
then occurred the first extraordinary event. Mrs. Matthews' lawyer was Advocate
Voisin. He left the Island, having
given instructions to his office that a decree absolute was not to be applied
for. The clear object was
that if a decree absolute were granted to Mrs. Matthews she would no longer be
a "spouse" to enable the property to be transferred to her if such
an order were made on the ancillary matters still awaiting adjudication.
(7) There
was what is called "an administrative error" and a decree absolute
was applied for and granted on 15th January 2001. On his return, there was a flurry of
correspondence between Advocate Voisin and the Housing Law Officer. Occupation of Waverley Farm was secured
when the Housing Committee gave permission for Mrs. Matthews with the children
to reside there under Regulation 1(1)(g) (hardship).
(8) Advocate
Whittaker (who acted for Mr. Matthews in his divorce) was kept informed. Advocate Voisin issued a summons seeking
an order that the decree absolute be set aside. This was due to be heard by the Royal
Court on the afternoon of 30th April 2001.
(9) The
will of realty of Lord Matthews had not been registered since his death on 9th
December 1995. Mr. Coutanche in his
affidavit gave six main reasons for this.
(i) Emotional or sentimental.
As Mr. Matthews was the sole heir, it appeared to Mr. Coutanche that it
was "perfectly right and proper that Mr. Matthews should be the apparent
owner of Waverley Farm".
(ii) The registration of the will could have cost
£15,000. That was an
unnecessary expenditure. (We should
mention that the Trust has assets in excess of £23M.)
(iii) There was no practical reason (while the marriage remained
stable) for the early registration of the will.
(iv) There were technical reasons (concerning proposed housing
legislation) why the position would be more favourable for the family if the
property remained in Mr. Matthews' name.
(v) There was, in Mr. Coutanche's words "a
misunderstanding of the strict legal position on the part of Mr.
Matthews" and
(vi) "an element of oversight by the Trustees who either
inadvertently or collectively in light of the matters above mentioned allowed
the question of registration of the will to remain for future
consideration".
(10) We
pause to remind ourselves that the sole Trustees were Mr. Coutanche and Mr.
Matthews and some five years had elapsed since Lord Matthews' death.
(11) In
March 2001, Mr. Coutanche as Trustee was made aware of the granting of the
Regulation "g" consent.
That gave him some comfort as the main beneficiaries of the Trust were
the three children. He revisited
his position "as Trustee" and decided that he would register the
will. It should be pointed out that
Mr. Matthews was, like his late father, a person who had been granted consent
under Regulation 1.1.K of the Housing regulations.
(12) Mr.
Matthews demurred. Mr. Coutanche
insisted. The will was registered
on 4th April 2001. There
was clearly some tension between Mr. Matthews and Mr. Coutanche.
(13) Mr.
Matthews' first affidavit makes mention of the fact. He said that Mr. Coutanche "knew
that he should have registered the will sooner. He knew that if steps were taken by the
Plaintiff in the divorce proceedings which would have the effect that Waverley
Farm could not be vested in the Trust, he could be actioned for breach of
trust". Mr. Matthews goes on
his affidavit to say that "Unlike Mr. Coutanche, I am not a professional
man with obligations owed to his partners.
My inclination was to maintain the status quo. My thinking on this was that if Waverley
Farm was not available to the Plaintiff and the children in the long term then
there existed the possibility that they would leave Jersey. Above all else, I wanted to avoid that
situation occurring because I did not want the children to feel that I had
driven them and their mother out of their home".
(14) Mr.
Matthews' affidavit evidence talks of the tension that gradually
developed between himself and Mr.
Coutanche. His remarks are somewhat
critical. He says at one point,
"I believe that Mr. Coutanche's concern had more to do with a
failure on his part to vest Waverley Farm in the trust in the first
place." No doubt Mr.
Coutanche will draw comfort from the fact that he may be replaced shortly as a
Trustee by Mourant & Co. Trustees.
(15) Mr.
Coutanche (and this Court is not in any way adjudicating upon his possible
motives) eventually persuaded Mr. Matthews to put him in funds for the
necessary stamp duty. On 4th
April, Mr. Coutanche registered the will.
Mr. Matthews was out of the jurisdiction until 27th April.
(16) Before
he left he swore his affidavit of means, assisted by Advocate Whittaker. In that affidavit under "Is
property owned?" he wrote "sole name under intestacy of father
(will not yet registered)" and noted that Waverley Farm had been
purchased "by deceased parent" and inherited on 5th
December 1995. The will of realty
of Lord Matthews was attached to the affidavit.
(17) Mr.
Coutanche wrote to Advocate Whittaker on 4th April 2001 to say that
he had registered the will. It was
registered on that day. Advocate
Whittaker wrote back to say that she would inform Advocate Voisin.
(18) On
30th April the Royal Court sat to hear argument. Advocate Preston appeared to represent
Mrs. Matthews - (Advocate Voisin was deeply involved in another matter in
the Royal Court). Advocate
Whittaker appeared for Mr. Matthews.
At the hearing, the second extraordinary event occurred. No mention was made during the hearing
by Advocate Whittaker (who had not earlier informed Advocate Voisin) that the
will had been registered. Even when
Advocate Preston referred to the opposition in place against Mr. Matthews as
owner of the property, nothing was said.
(19) When,
on the evening of 30th April, Advocate Voisin discovered that
Waverley Farm was now owned by Matthews Farms Limited, it is fair to say that
he was indignant. Suspicions began
to grow.
(20) It
must be said that Mr. Matthews in his first affidavit alleges that he told Mrs.
Matthews "during a family dinner at the Noble House Chinese Restaurant on
28th April 2001" that the will had been registered. Mrs. Matthews in her third affidavit
(sworn on the day of the hearing before us) says "He told me casually in
the car. Even so, I would not have
understood the consequences for me of that action in the context of casual
conversation during my daughter's birthday, without the benefit of on the
spot legal advice".
(21) This
is not a hearing on disputed facts.
The Court, now aware of the true situation, granted leave to the
Petitioner to withdraw her application, ordered costs on an indemnity basis
against the Respondent from 4th April and noted an undertaking by
the advocates to the Trustees of the Lord Matthews Trust (as beneficial owners
of Matthews Farms Ltd.) that:
"the company will not dispose of the property Waverley Farm,
Le Mont Arthur, St. Brelade, nor will the Trustees permit the disposal,
directly or indirectly, of the shares held in the company".
(22) On
1st May a caveat or opposition was obtained against Matthews Farms
Limited. That did not satisfy the
Plaintiff entirely and on 1st May and 3rd May she swore
affidavits to support an Order of Justice which would grant injunctive relief
and which sought damages for the registration of the will which, it was
claimed, was "effected in order to circumvent the caveat".
(23) In
her first affidavit Mrs Matthews asks the Court not to order fortification of
her undertaking in damages as she was not in a financial position to support
such fortification. The Order of
Justice convened Mr. Matthews, the Trustees of the Lord Matthews Trust, Southgate
Investments (1996) Limited and Matthews Farms Limited but it only enjoined the
two Trustees. The injunction was
wide ranging. It allowed Mr.
Matthews a monthly sum of £30,000 but it was an order that would, if
granted, preclude any assets from moving out of the control of the Trust.
(24) As
a result of the actions taken by Mr. Matthews and the other parties, the
Plaintiff feared that
"they may be intending to transfer or otherwise dispose of
other assets situate in Jersey or elsewhere or, alternatively, that the
Trustees of the Lord Matthews Trust may otherwise be intending to dispose of
assets within the Lord Matthews Trust, in any such case to the detriment of the
Plaintiff in any claim which she may make in respect of ancillary
relief".
(25) It
may be that Mrs. Matthews was concerned about a sentence in Mr. Matthews'
affidavit (paragraph 17) which reads:-
"it is clear that the Plaintiff is looking to the Trust
Capital to set her up in the lifestyle to which she has become accustomed.
We do not know, and in this hearing we do not need to know, what
motivated the parties.
(26) Advocate
Preston attended ex parte upon the Deputy Bailiff to obtain injunctive
relief. The Deputy Bailiff
indicated to Advocate Preston that he approach the Trustees with a view to
"obtaining such undertaking from the Trustees so as to prevent any diminution
in the value of the trust which would have the effect of supporting or
compromising Mrs. Matthews' claim for ancillary relief since her
divorce".
(27) Correspondence
was exchanged. Draft undertakings
were submitted. It all came to
nought. In the general context of
professional mistrust an unanswered telephone call took on what might now seem
an unmerited importance.
(28) On
8th May 2001, in the course of these abortive negotiations, Mr.
Coutanche wrote (on his firm's notepaper) and said:
"The obtaining of ex parte injunctions would be totally unjustified
and could cause untold damage. You
should therefore treat this letter as notice that if there is to be any
application for injunctive relief I would wish to be heard through my legal
representative. Such injunctive
relief would be totally unjustified".
(29) The
terms of the Order of Justice were amended slightly, correspondence (including
the letter of 8th May) was enclosed in a bundle and the learned
Deputy Bailiff also asked Advocate Hoy, who was now handling the matter, to
give a "full and proper explanation as to why he considered it necessary
to apply for injunctive relief".
(30) That
affidavit was sworn on 20th June. The Deputy Bailiff signed the Order of
Justice granting the injunction on 16th May. The injunction, as we have said, only
injuncts the Trustees.
(31) Since
the injunctions were imposed, the Trustees have sought permission from Advocate
Hoy to sell two properties.
Permission was sought on 4th June. Consent (subject to the terms of the
injunction that the sale proceeds remain with the Trust and subject to the
injunctions) was given on the same day.
(32) Both
properties were in London. One was
to be sold for £3.3M, the other for £1.5M. Those sales have only fuelled Mrs.
Matthews' suspicions, particularly when she says that her former husband
has applied for a "green card" as a U.S. resident alien. We do not speculate on unsubstantiated
motives. We note that the Trustees,
one of whom is the senior partner of one of Jersey's largest law firms,
are within the jurisdiction of the Court.
5. The
ancillary matters referred to in paras 6, 34 and 43 of the judgment of the
Royal Court are the claims of Mrs Matthews which are conveniently to be found
in her affidavit of means. These
include:
(a) " the ownership of Waverley Farm so as
to provide a home for myself and the children of the marriage; ...
(d) the ownership of the apartment in Spain and
the car kept in Spain;
(e) a cash sum to enable me to purchase and
furnish a three bedroom flat in London which will be particularly required when
the children undergo secondary education in England;
(f) a cash sum of £6,000,000 so as to
provide during my lifetime for my anticipated living expenses as set out in the
schedule to this affidavit;
(g) a further cash sum to reflect my past
contribution to the marriage in support of the Respondent and for my
responsibilities in caring for and bringing up the children of the marriage;
(h) such further or other sums as the Court may
consider appropriate in the circumstances;
or that the Royal Court should make such order as may be appropriate
in respect of a variation of the Lord Matthews Trust so as to satisfy any award
made to me as set out above."
6. By
an Order of Justice dated 7th August 2001 the hearing of the
ancillary matters has been fixed to take place for two weeks in April
2002. The trustees have been
convened as third parties. At the
present time, Advocate Robinson has told us, the trustee has not yet decided
what his stance should be with regard to these claims.
7. We
have also been told that the Royal Court has yet to rule upon the final relief
claimed in the Order of Justice of 16 May.
It follows that we can take no view on whether the will was registered
lawfully. The claim has not been
struck out. The relief claimed
includes a prayer that the Royal Court may...
(2) Make such Order as may be appropriate with
reference to the breach by the First Defendant of the caveat or
"opposition";
(3) Make such Order as may be appropriate with
reference to the First Defendant executing an Affidavit of Means on the 30th
March 2001 which failed to disclose his then presumed intention;
(4) Make such Order as to damages and/or Order
that the registration of the Will of the Late Lord Matthews be declared void ab
initio and should be set aside...
8. The
grounds of appeal are three:
(i) The
Royal Court misdirected itself in holding that the test to be applied in
determining whether to re-impose the injunction was one of balance of
convenience;
(ii) The
Royal Court erred in failing to consider adequately or at all the risk of
dissipation of assets when deciding to re-impose the injunction;
(iii) The
Royal Court failed to consider adequately or at all the fact that the Trustees
of the Lord Matthews Trust are obliged to protect the interests of the minor
beneficiaries.
9. The
approach of this Court to an appeal from the making of an interim injunction of
this kind is set out, as is common ground between the parties, in the judgment
of Southwell JA in A E Smith & Sons Limited v L'Eau des Iles
(Jersey) Limited 1999 JLR 319 at 321-322.
"The starting point in relation to this application for leave
is that the Royal Court has exercised a discretionary power in refusing to
order the provision of security for costs.
The approach to be adopted by the Court of Appeal when hearing an appeal
from such an exercise of a discretion by the Royal Court was spelled out by
this court in Abdel Rahman v Chase Bank Trust Co. (C.I.) Ltd (1984 J.J.
at 133-134). The court's
exercise of its discretionary power is to be set aside only where the court (a)
has acted on a wrong view of the relevant principles of law; (b) has taken into account immaterial
matters or failed to take into account material matters; (c) has reached a plainly wrong
decision; (d) has been unable to
take into account a material change of circumstances occurring after the court
reached its decision; or (e) has
reached its decision in a manner which will result in injustice to one of the
parties.
It is for Smith to show that one or more these grounds for
interfering with the Royal Court's exercise of its discretion exists in
the present case."
Whether the Royal
Court misdirected itself on the test to be applied in re-imposing the
injunction.
10. In
considering whether to re-impose the injunction the Royal Court referred (at
para 40 of the judgment) to s.37 of the Matrimonial Causes Act 1973 of England
and Wales, and noted that there was no equivalent jurisdiction in Jersey. The
Royal Court than stated that 'there is ... a well worn path way of
inherent jurisdiction', a proposition that is not in dispute. The Royal
Court directed themselves as to their inherent jurisdiction by reference to the
inherent jurisdiction of the court in England and Wales, as set out in Khreino
v Khreino (No 2) [2000] 1 FCR 80, and Shipman v Shipman [1991] 1 FLR
250. At para 43 of the judgment the
Royal Court said:
'When the
ancillary matters come for adjudication the Greffier will no doubt take into
close account the provisions of Articles 28, 29 and 29A of the Matrimonial
Causes Law. Whether or not Mr Matthews has, by virtue of his interest under the
"ultimate trust" in Clause A7 of the Trust sufficient interest to
enable the Court to order the sale of property "in which or in the
proceeds of sale of which either or both the parties to the marriage has or
have a beneficial interest, either in possession or reversion" remains to
be seen'.
11. The
provisions of the Matrimonial Causes (Jersey) Law 1949 (as amended)
referred to by the Royal Court give to the Court power to order transfer or
settlement of property, financial provision for a party to a marriage in cases of
divorce and sale of property. They are articles which will be relevant in
considering the financial relief which Mrs Matthews claims.
12. The
submissions of both parties are made on the basis that the English authorities
set out the ambit of the inherent jurisdiction under Jersey law.
13. In Khreino
at p84h Thorpe LJ said:
'... Family Division judges day in day out exercise the
inherent jurisdiction to grant injunctions to ensure that one spouse does not
selfishly or irresponsibly salt away, squirrel away or spirit away family
assets which may be in his name but which must be carefully preserved pending
the ultimate judicial determination as to what proportion of that asset must be
either transferred to or made available for the benefit of the applicant spouse.
The power is so widely used that it is perhaps not entirely surprising that
there is little direct authority other than those cases to which I have
referred [ie Shipman v Shipman, Roche v Roche (1981) Fam Law 243
and Harrow London BC v Johnstone [1997] 2 FCR 225, [1997] 1 All ER 929].
It is often the way that the more widely used is a power and the more widely it
is recognised the less easy it is to find specific authority that establishes
its existence'.
14. Although
Thorpe LJ refers to the freezing order in that case as a 'Mareva
injunction', it is to be noted that he does not cite as authority for the
jurisdiction of the Family Court the very well-known line of case commencing
with Mareva Compania Naviera SA v International Bulk Carriers SA [1975]
2 Lloyd's Rep 508; [1980] 1 All ER 213n. A consideration of the other
cases Thorpe LJ does cite shows that this is because the jurisdiction of the
Family Court was exercised before 1975, and so is independent of the Mareva
jurisdiction strictly so called. It is a fact that the expression 'Mareva
injunction' has commonly been used for any freezing order, including
orders to restrain a breach of trust, which have nothing to do with the Mareva
decision itself. So we attach little significance to the use of that expression
by Thorpe LJ. For the same reason we attach no significance to the fact that,
at para 1 of the judgment, the Royal Court also referred to the injunction in
this case as a Mareva injunction.
15. In Roche
Ormrod LJ said :
'Apart from s.37 [of the Matrimonial Causes Act 1973 of
England and Wales] and its predecessors the court has jurisdiction to preserve
specific assets which are the subject matter of proceedings pending the
determination of the issues involved, for example an injunction restraining the
other party from removing out of the jurisdiction liquid assets pending a
hearing - for the obvious reasons that he or she could put the assets
somewhere where they cannot be reached. Another example is in the Married
Women's Property Act 1882 proceedings, where an interest is claimed in a
house or chattels. It is common form to apply to the court for an order to
preserve chattels or preserve the matrimonial home pending the hearing of
proceedings. With respect to the learned judge, I think he was wrong in
thinking that this was an application under s.37. It seems to me that it was an
application under the general powers of the court to preserve specific assets
which are the subject matter of proceedings pending the determination of those
proceedings. Smith v Smith [(1973) SJ 525] was also such a case ...
It is interesting to notice that on April 6 1973 Faulks J - a very
experienced Judge in this Division - gave a wife leave to apply out of
time for a lump sum order and granted interim injunctions restraining the
husband from dealing with the £2,500 which his solicitors were then
holding - an award of damages to him following a car accident in a car
driven by his wife'.
16. In Shipman
Anthony Lincoln J dealt with the matter as follows at p 252:
"The question then arises whether the court has an inherent
jurisdiction to order a freeze, and, if so, whether it should do so. In Roche
v Roche (1981) 11 Fam Law 243 the Court of Appeal exercised such
jurisdiction, taking the view that such injunctive power was available,
notwithstanding the enactment of s.37 of the 1973 Act ... Roche v Roche
is binding on this court ... It was followed by Sheldon J in Walker v
Walker (1983) 4 FLR 455, and I propose to do the same. For these reasons I
hold that I have an inherent jurisdiction to restrain the husband...
Counsel for the husband urges me to have regard to the many restrictions and
safeguards surrounding the use of worldwide Mareva injunctions, and to
assimilate the use of, and procedure for, injunctions in the Family Division to
those in commercial law. In my view the matrimonial field calls for a different
approach...".
17. We did
not call upon Advocate Hoy in oral argument. In his written Contentions he accepted
that Shipman is not authority for the proposition that the test is
simply one of balance of convenience. But he did submit that guidance
could be obtained from cases based on trust claims. He referred to a case where an interim
order was sought to preserve a fund which was claimed to be subject to a trust,
resulting from the defendant having received it knowing it to be a trust fund
which was being misapplied ("knowing receipt"): Polly Peck International plc v Nadir
(No 2) [1992] 4 All ER 769. In
that case there was both a knowing assistance claim (which is not a proprietary
claim) and a knowing receipt claim (which is a proprietary claim). The following passages from the
judgments in that case are of assistance.
They clearly show the difference between, on the one hand, a true Mareva
injunction (which is a freezing order in aid of a claim which is not
proprietary) and on the other hand, an order to preserve property which is the
subject of the action. Scott LJ
said at p784c-785c:
"In summary, therefore, it comes to this. PPI has a claim against the Central Bank
that, although a possible one, is at present based on little more than
speculation. A Mareva
injunction will, inevitably, seriously interfere with the Central Bank's
normal course of business and will, quite possibly, destroy the Central Bank;
if the Mareva injunction is lifted, it is possible that a judgment
obtained by PPI will be worthless.
In my judgment, for two reasons the balance comes down against the
continuance of the Mareva injunction.
First, I regard PPI's present case against the Central Bank as
no more than speculative. Second,
it is, in my opinion, wrong in principle to grant a Mareva injunction so
as, before any liability has been established, to interfere with the normal
course of business of the defendant.
To impose a Mareva injunction that will have that effect in order
to protect a cause of action that is no more than speculative is not simply
wrong in principle but positively unfair.
I now come to the question whether a limited injunction preserving,
pending trial, the £8.9m should be granted. This would not be a Mareva
injunction. It would not be subject to provisos enabling the use of the money
for normal business purposes, or for the payment of legal fees, or the
like. There is, in general, no
reason why a defendant should be permitted to use money belonging to another in
order to pay his legal costs or other expenses. The objection in principle to the grant
of the Mareva injunction to which I have referred does not apply to an
injunction to preserve a fund that, in the contention of PPI, belongs to PPI.
In deciding whether or not an interlocutory injunction to protect
the £8.9m should be granted, the approach prescribed by American
Cyanamid Co v Ethicon Ltd [1975] I All ER 504, [1975]AC 396 should be
followed. First PPI must show an
arguable case. If an arguable case
is shown then the balance of convenience should be applied. If the scale appears very evenly
balanced it is then legitimate to take into account the strength or weakness of
PPI's case.
This is a case in which the balance of convenience does seem to be
very evenly balanced. An order
freezing £8.9m of the Central Bank's foreign currency reserves
will, although not as devastating in its effect as an order freezing
£23m-odd, none the less be likely to be damaging to the Central
Bank's credibility as a bank.
It is a sum sufficiently large to put the Central Bank in difficulties
if a run were to develop. On the
other hand, if an injunction is not granted, the £8.9m may disappear as a
traceable fund, leaving PPI merely with its claim for monetary compensation.
...
In view of the present weakness of PPI's case of knowledge and
in view of the late stage at which the tracing claim has been put forward, I
would not be prepared to grant an injunction restraining the Central Bank from
making any use of the £8.9m fund.
I would, however, be prepared, in principle, to grant relief on these
lines.
The Central Bank should be required, first, to earmark the
£8.9m in a separate account and, second, should be restrained from
dealing with the earmarked fund otherwise than in the normal course of business
and unless and to the extent that there are no other funds in England available
to be used. The Central Bank should
be required to inform PPI's solicitors in advance of any use proposed to
be made of the £8.9m and, at the same time, to give details of all
foreign currency reserves for the time being held in this country."
Lord
Donaldson of Lymington MR said, at p786j to 787b:
"Accordingly, in agreement with Scott LJ and for the fuller
reasons which he has so clearly expressed, I would discharge the injunction in
so far as it is based upon the Mareva jurisdiction. That does not dispose of the matter,
because in this court it has been sought to maintain the injunction, albeit for
a reduced amount, on the footing that it will be possible to trace £8.9m
remaining in the hands of the Central Bank as being in equity the property of
the plaintiffs.
This is a wholly different basis for an injunction, namely an
application under RSC Ord 29, r 2 for an order for the interim preservation of
property which is the subject matter of the cause or matter. If at the trial the plaintiffs can make
good their tracing claim, they will be in the position of secured creditors to
the extent, but very probably only to the extent, that the
£8.9m has not meanwhile been removed from the jurisdiction. In this context, unlike that of a Mareva
injunction, American Cyanamid principles do apply. Applying those principles I agree with
the order proposed by Scott LJ for the reasons which he has given."
18. In my
judgment the inherent jurisdiction of the Royal Court to grant freezing orders
in matrimonial proceedings is not same as the inherent jurisdiction recognised
in commercial cases starting with Mareva Compania Naviera SA v International
Bulk Carriers SA [1975] 2 Lloyd's Rep 508. In any event, commercial
cases are not the same as family cases, and I adopt the view of Anthony Lincoln
J that they 'call for a different approach'. Principles derived from contract or tort
cases cannot be applied automatically to matrimonial cases. In some respects it may be possible to look
to cases involving freezing orders in contract or tort cases for analogies with
similar orders in matrimonial cases. But the exercise must be carried out
bearing in mind the different features of the different types of case.
19. One
principle that obviously must be borne in mind in all cases is that the court
will not make an injunctive order in any kind of proceedings merely on the
basis that it will do no harm. It follows that there must be some threshold
threat or risk of some dealing with, or loss of, the assets sought to be
frozen. The Appellant submits that
there must be risk of dissipation. He submits that 'the test is whether
the refusal of a Mareva injunction would involve a real risk that judgment in
favour of the Plaintiff would remain unsatisfied', citing Ninemia
Maritime Corporation -v- Treve Schiffahrtsgesellshaft GmbH (The Niedersachsen)
[1984] 1 All ER 398, 419h. The test is formulated in that way because the claim
in that case was for damages for breach of contract. In such claims the fact
that a judgment will be unsatisfied will not dissuade the court from entering
judgment. But that test will not be
applicable where the claim is for an order of a kind which the court will not
make if to do so would be futile. For example, Courts will not grant
injunctions which are incapable of being performed. So a judgment for
injunctive relief is unlikely to 'remain unsatisfied'. Similarly,
an order for the transfer or sale of property is unlikely to be made if, were
it to be made, it would remain unsatisfied because the asset had been
dissipated.
20. So where
a claim involves not debt or damages for breach of contract, or damages in
tort, but some proprietrary remedy, the basis of the Court's jurisdiction
is not the Mareva line of cases at all. It is the much more ancient
jurisdiction to 'preserve...the subject matter of proceedings pending
the determination of the issues involved', to use the words of Ormrod LJ
in Roche. The risk in
ancillary proceedings on a divorce is not just that the Court will make an
order that will remain unsatisfied. It is also the risk that the Court will not
be able to make the appropriate order at all, because an asset which the other
spouse did control at the start of the proceedings has been dissipated or has
passed out of his or her control.
21. In his
written Contentions, Advocate Hoy does not identify the test in question. He
points to the way the Royal Court considered the matter, to support his
submission that the test was satisfied. This approach is understandable. The
matrimonial cases do not include a statement of what the test is in principle.
Rather they include examples of where the test was applied, from which it is
possible to infer what the test was that was being applied.
22. In Roche
Ormrod LJ applied the test in this way. He said:
"This is clearly a case where no hardship will be caused
whatever to the husband by restraining him from disposing of part of the sum of
damages, when he recovers them, provided the proceedings for ancillary relief
are dealt with quickly. This court will take steps to see that that is done. I
can see no reason why the court should not make such an order and the more the
husband protests and refuses to give any assurance that he intends to leave
some of this money in liquid form, the more anxious the court is bound to be.
One wonders why all this fuss is being made about such an order".
23. In Shipman
Anthony Lincoln J said this at p253:
"As in all such cases of injunctive process, the balance of
convenience has to be considered ... To my mind the circumstances here call
for the injunction to continue. If it were discharged, the husband could well
change his intentions, however genuine and well-disposed to the wife his
present state of mind may be. Both he and the assets are out of the jurisdiction. Left
without a job, and with new responsibilities, he will be faced with a temptation
to eat into the whole of the fund".
24. In T v
T and Others [1996] 2 FLR 357 Wilson J gave judgment refusing to discharge
an order that Jersey trustees be joined as parties to a wife's claim to
freeze the assets of her husband.
In the course of that judgment he described earlier proceedings in which
he had granted the freezing order against the husband. He said at p359:
"When she launched her proceedings for divorce, the wife
obtained, first of all on an ex
parte basis and then on an inter partes basis continued consensually for a
short period of time, a Mareva injunction restraining the husband from
disposing of his assets, including the assets of the trust.
On 31 August 1995 the matter came before me for consideration as to
whether the Mareva injunction should be further continued. By that time there had been an exchange
of affidavits. In her affidavit
which had launched the interlocutory proceedings, the wife had asserted in
terms that the husband exercised effective control over the settlement. By the consensual continuation of the Mareva
order dated 26 July 1995, the husband had been ordered to serve an affidavit of
means by 21 August 1995. He did
serve an affidavit of sorts dated 30 August 1995. That, as his counsel was to concede on
the following day, could not properly be described as an affidavit of
means. Although he mentioned the
setting up of the trust as being for family purposes and as a tax planning
device, he did not in terms deal with the allegation which the wife had made in
her affidavit that this was a settlement over which he had effective
control. Indeed, as appears from a
letter which the wife's solicitors wrote to the husband's
solicitors on 30 August 1995 and which was never the subject of a denial, there
had been a telephone conversation on that date - 30 August 1995 -
between the solicitors in which the husband's solicitor had specifically
asserted that the husband in no way accepted that he had any control over the
assets of the trust or the actions of the trustees. When, on the following day, the matter
came before me, Miss Bradwell, then as now appearing for the husband, on
instructions was unable to depart from the stance which her instructing
solicitor had there adopted: in other words, there was not only no concession
of effective control over this fortune, there was a denial. In those circumstances I continued the Mareva
injunction which had been made; but more relevantly, I made the order joining
the trustees as second respondents which it is now sought to have set aside.
...
The application by the trustees to set aside that order is opposed
by the wife; but it is also opposed by the husband through Miss Bradwell, who
adopts many of the arguments advanced by Mr Pointer against the setting aside. She contends that it is highly desirable
that the trustees should remain as parties to these proceedings; should,
insofar as they can, be bound by the outcome of them; should be subject to
discovery; and should be given the maximum encouragement to come in and give
evidence before me.
I will be hearing this claim for ancillary relief, as I have said,
in March 1996; and prior to that time it would be premature for me to express a
view as to the motivation of the husband for instructing Miss Bradwell to take
that line. Only at the end of the
hearing in march 1996 will I be able to form a view as to whether the
husband's stance in the matter today is cosmetic, designed to create in
my mind, even at this interlocutory stage, a distance between himself and the
trustees which may bear no relation to reality but which, as the husband might
think, might serve his interests well in March 1996. ...
I have already decided - and I am not urged to review this
aspect of my decision on 31 August 1995 - that this wife should have what
I then described as 'copper-bottomed security' for her claims. When I survey the nature of the other
assets of the husband which I froze, so largely tied up in Bermuda, and even
when I add whatever might be the value of the Cheshire house and whatever might
be the value of the investments and loans to the three private companies, I am
not satisfied that there is the copper-bottomed security to which, for her
protection, I aspire. ..."
25. Since the
jurisdiction here in question relates to the subject matter of these
matrimonial proceedings, and it is not known what the ultimate determination of
the rights of the parties will be, the parties in these proceedings stand on a
much more equal footing than the parties to a claim for debt or damages for
breach of contract, so far as interim relief is concerned. In a contract claim,
where a freezing order is granted, it interferes with property of the defendant
in which the claimant claims no rights. It is no concern of the claimant how
the judgment he obtains is eventually satisfied, so long as it is satisfied.
The Court will not readily interfere with undisputed property rights, unless
the risk of dissipation is proportionate to such an invasive measure. In a matrimonial case the court is often
preserving assets which, if the claim succeeds, will be awarded to the
claimant. There is therefore much less concern at the possibility of a wrongful
interference with the Defendant's property rights. The risk is
symmetrical. If the order ought to be, but is not, made, it is the claimant's
property rights that will have been interfered with.
26. It
follows that in matrimonial cases the threshold test for the risk of
dissipation or loss of the assets sought to be frozen can justifiably be lower
than would be the case in the Mareva cases.
27. From the
matrimonial cases cited above, it appears that in matrimonial cases the English
courts have not yet gone so far as to assimilate the test to the Cyanamid
principle which was applied, in the case of Polly Peck, to a proprietary
claim for knowing receipt. The
courts appear always to have found some risk that, unless the order was
granted, the assets in question might not be preserved until the court had had
an opportunity to determine what, if any, order to make in favour of the
applicant spouse. It seems to me
that in matrimonial cases it is better to avoid the expression balance of
convenience and speak instead of the balance of justice - compare Francome
-v- Mirror Group [1984] 1 WLR 892,898, per Sir John Donaldson MR. The plaintiff spouse must at least show
a good arguable case to assets to be frozen, or to a sum or sums of money
equivalent in value to the assets to be frozen (as may be appropriate). If that test is satisfied, then the
Court may make the order if it appears that there is a risk which is real (and
not fanciful) that the assets may not be preserved until the final
determination of the rights of the parties. The order must be one that is just in
all the circumstances. The order
must not be disproportionate to the object to be achieved. In many cases there will be a limit
specified - that is a value below which the assets must not be reduced by
the defendant. There may be other conditions
to be satisfied, depending on the circumstances of the case.
Whether the Royal Court
failed to consider adequately the risk of dissipation
28. The
relevant passages of the judgment of the Royal Court are paras 34, 45-51, which
read as follows:
Para 34 It is
inconceivable that Mrs. Matthews will not, in due course, have an award for
financial provision. She occupies a
large house with three minor children and is still maintained by Mr. Matthews
on a voluntary basis.
Para 45 The main source
of Mr. Matthews' wealth lies within a Trust in which Mrs. Matthews has no
stated interest. Whether or not
some order will be made whereby Mr. Matthews will be held to have had effective
control over the trust funds as a Trustee and/or income beneficiary is not for
us to say.
Para 46 Mr. Robinson has
argued that we should not reinstate the Order, in any event. He argues most firmly that there is no
"solid evidence" of the risk of dissipation of assets by the
Trustees (Mr. Coutanche and Mr. Matthews) to warrant the making of the
injunction against them and secondly he says that this is not an appropriate
case for granting Mareva relief over assets held in the name of third
party Trustees.
Para 47 The situation
has changed. We now have a third
affidavit of Mrs. Matthews sworn on 22nd June (the day of the
hearing) and delivered to us during the hearing. The delay is explained by the statement
that Mr. Matthews' affidavit dated 8th June 2001 was only
received by Michael Voisin & Co. during the morning of 19th June
2001. It runs to fourteen pages and
48 paragraphs.
Para 48 In her most
recent affidavit Mrs. Matthews says this:-
"Ian Matthews explains in his Affidavit (at paragraph 12) that
the marriage broke down when he "met someone in the United
States". At the time, my
former husband had gone to the United States in order to attend a health
clinic, called the Pritikin clinic, in Miami, Florida. There were then no difficulties in our
marriage. During that extended trip
abroad, Ian Matthews formed a relationship, which he still maintains. I was concerned at the time that Ian
Matthews was in a vulnerable position in virtue of attending a health farm) and
the abruptness of his affair caused me to question his emotional well
being. I was concerned that he had
become vulnerable to unscrupulous avaricious feminine advances. To have an affair was, in my view,
completely out of Ian Matthews' character.
He remained in the United States for an extended period of time with
the woman that he met and with her family.
During this period, I was concerned about attempts to dissipate
assets. I knew, of course, that my
former husband's principal assets were contained within the Trust.
Since the injunctions, Ian Matthews has informed me on a number of
occasions that he would resist any claim I made on the former matrimonial home,
Waverley Farm, and that he required substantial funds with which to buy a
property in the United States in order to be with Elizabeth Lehr in great
comfort. Indeed, he told me that he
was considering selling the London flat, owned by the Trust, and had been
looking at substantial private houses in the United States, accompanied by
Conrad Coutanche. He told me that I
and the children would have to live elsewhere. I am unsure about the pressures
Elizabeth Lehr has been exerting on Ian Matthews to take assets to the United
States.
Since Ian Matthews started his affair with Elizabeth Lehr, he has
returned to Jersey and in turn returned to the United States, with little or no
notice".
Para 49 On 8th
May 2001, when the abortive negotiations were in train for a form of
undertaking, there had obviously been a discussion about the sale of a property
in Commercial Street. Since then
the two substantial properties in London have been sold and Mr. Matthews has
applied for a "green card" from the United States Immigration
Department. We view with some cynicism
the rush to register Lord Matthews' will of realty and with some disquiet
the way that the two Trustees dealt with the matter. We have not seen any trust minutes but
they might have eased our disquiet considerably.
Para 50 The consent
requested by Advocate Robinson in regard to the sale of the London properties
was dealt with timeously (within three and a half hours) and we cannot see that
the Trust has suffered. Its main
intention is perhaps best explained in Lord Matthews' Letter of Wishes to
his two Trustees.
"The function of my Trust is to protect its capital for future
generations and to protect my assets against certain unascertained liabilities
of my heirs".
Para 51 The
injunctions will not, in our judgment, inconvenience the Trust. If there are any problems then the
Trustees must return to Court.
We are concerned to maintain the balance of convenience.
29. In the
light of the test which I have held to be applicable to matrimonial cases, it
is clear that no fault can be found with the approach of the Royal Court to
this issue which would justify this Court interfering with the exercise of the
discretion of the Royal Court.
Whether the Royal
Court failed to consider adequately the fact that the Trustees of the Lord
Matthews Trust are obliged to protect the interests of the minor beneficiaries
30. The Royal
Court noted at para 51 that the Trustees could return to the Court if they
found themselves in difficulty on any particular matter. In para 31 the Royal
Court noted that the Trustees had sought consent for the sale of two properties
while the injunction was in force, and that permission had been given on behalf
of the Plaintiff on the same day.
Before us Advocate Robinson stressed the independence of Mr
Coutanche, who is now the sole trustee.
But the extent of any control that Mr Matthews has over the settlement
is one of the issues in the ancillary proceedings. The Court cannot prejudge this.
31. The
status of the Defendant is, of course, a relevant factor on an application for
injunctive relief. But in order to reach the conclusion they did, the Royal
Court did not need to conclude 'that Mr Coutanche would allow himself to
be a party to any attempt to dissipate Trust Assets so as to render any
matrimonial award in favour of Mrs Matthews nugatory'. I quote from the appellant's
Contentions. I accept that it is
proper to have regard to Mr Coutanche's position as a senior Jersey solicitor
who is an officer of the court, and whose probity is not in question. But the
fact that Mr Coutanche's duties are to protect the beneficiaries, who do
not include Mrs Matthews, does not demonstrate any error on the part of the
Royal Court. The Royal Court did
have in mind the duties of the trustees.
In para 43 of their judgment, they said:
"Certainly Mr Matthews is the object of the Trustee's
discretion and he and Mr Coutanche are the sole Trustees of a Trust which was
set up basically for his and his children's benefit."
I have
already cited para 50 of the Royal Court's judgment which refers to
this. And if the Royal Court is
asked to vary this injunction the obligations of the trustee to the minor
beneficiaries will be one of the factors that they will be bound to take into
account.
32. I note
the Appellant's submission that "the Trust has assets in excess of
£23m. It is argued that dissipation of assets on a scale that would be
detrimental to Mrs Matthews' matrimonial claims would mean that the Court
considered that the Trustees, ... would wholly disregard the interests of
the minor children of the marriage".
But the submission is not well directed to the grounds of appeal. What
the Second Defendants ask in their notice of appeal and what Advocate Robinson
confirmed to us, is that the order should be set aside in its entirety. We are not asked to express a view as to
whether the order may provide greater protection for Mrs Matthews than is just
in the light of her claims to ancillary relief. We do not do so.
New Evidence -
the resignation of Mr Matthews as Trustee
33. Having
regard to the circumstances of this case described above, and to the matters
which the Royal Court took into account in exercising their discretion, the
resignation of Mr Mathews as trustee is not a material change of circumstance
such as would justify this Court in interfering with the Order of the Royal
Court.
Conclusion
34. For these
reasons, I would dismiss this appeal.
Post Script
35. I have
referred above in paragraphs 1 and 3 to the form of the order of 28 June
2001. The following observations of
Munby J in Harris v Harris unreported 27 April 2001 in the Family
division in England are of importance in relation to the drafting of
injunctions. It may be that the
practice in Jersey ought to be reviewed, in so far as injunctions are drawn up,
which refer to previous orders which have been discharged.
Munby J
said:
288 "It is an elementary principle of justice and fairness
that no order will be enforced by committal unless it is expressed in clear,
certain and unambiguous language. So far as this is possible, the person
affected should know with complete precision what it is that he is required to
do or to abstain from doing. The authorities setting out this sometimes
overlooked principle are legion....
289 A related principle is that an order should not require the
person to whom it is addressed to cross-refer to other material in order to
ascertain his precise obligation. ..."
In Rudkin-Jones -v- Trustee of the Property of the Bankrupt
(1965) 109 Sol Jo 334 the order as drawn read "It is ordered that an
injunction be granted in the terms of Notice of Motion for Injunction",
Lord Upjohn said:
"I do want to protest as strongly as I can at the granting of
injunctions in that form. It means then that the person against whom the
injunction is granted ... has to look at another document in order to see what
it is that he is enjoined from doing ... It cannot be too clearly understood
... that a person is entitled to look and look only at the order to see what it
is that he is enjoined from doing. He looks at that order and finds out from
the four walls of it and from no other document exactly what it is that he must
not do."
Authorities
Miler-v-Milner
Laboratories (2000) JLR 266.
Khreino -v- Kreinho [2000] 1 FCR 80: 184-189.
Shipman
-v- Shipman (1991) 1 FLR 250.
White -v- White [2000] 1 All ER 1: 190-208.
Re
First Express Ltd [1991] TLR 439.
1900
Trustee Co Ltd -v- Nurnberg Co Ltd [1998] JLR N-13.
Ninemia
Maritime Corporation -v- Trave Schiffahrtsgesellschaft m.b.H. und Co. K.G (The
Niedersachsen) [1984] 1 All ER 398.
B
-v- B (1982)3 FLR 298 CA.
Thomas
-v- Thomas [1995] 2 FLR 688.
T -v- T and Others (Joinder of Third Parties)
[1996] 2 FLR 357: 160-170.
Francome -v- Mirror Group [1984] 1 WLR
892.
Abdel
Rahman -v- Chase Bank (C.I.) Trust Company (1984) JJ 127.
A.E.
Smith and Sons Limited -v- L'Eau des Isles (Jersey) Limited (1999) JLR 319.
Mareva Compania Naviera SA -v- International Bulk
Carriers SA [1975] 2 Ll.R. 508 ; [1980] 1 All ER 213n.
Harris -v- Harris (27th April 2001) Unreported
Judgments of the High Court of England.
Rudkin-Jones -v- Trustee of the Property of the
Bankrupt (1965) 109 Sol Jo. 334.
Le Gros "Droit Coutumier de
Jersey" ; "De l'Opposition à la Passation
d'un Contrat Héréditaire" : 20-22.
Matrimonial Causes (Jersey) Law 1949: 23-31.
American Cyanamid Co -v- Ethicon Ltd [1975] 1 All ER 504: 37-45.
Roche -v- Roche (1981) 11 FAM Law 243: 46-47.
Polly Peck International Plc -v- Nadir and
Others [1992] 4 All ER 769: 129-147.
Matrimonial Causes Act 1973: 209-218.
Bank Mellat -v- Kazmi and Ors [1989] 1 All ER
925.
Gee: Marevan Injunctions and Anton Pillar
Relief (4th Ed'n): Chapter 14.
Archbold (2001 Ed'n): paras 28-30 to
28-59.
