FAMILY DIVISION
NICHOLAS MOSTYN QC SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
19 June 2001

LE FOE v LE FOE and another

WOOLWICH plc v LE FOE and another

W appeared in person
Timothy Becker for H
Gerald Wilson for Woolwich

JUDGMENT

NICHOLAS MOSTYN QC (sitting as a Deputy Judge of the High Court)

1. Before the Court are two distinct cases. First, there is an application for ancillary relief by Margaret Le Foe (“W”) made in judicial separation proceedings against Dominic Le Foe (“H”). Within the application for ancillary relief W applies for an order under s37 Matrimonial Causes Act 1973 setting aside a charge granted by H in favour of Woolwich plc over the former matrimonial home at 37/38 Ashley Gardens London SW7 on 16 August 1999. Secondly, there is a claim by Woolwich for possession of the property. The claim was issued in the Central London County Court, but was transferred to the Principal Registry of the Family Division. A direction has been made requiring both cases to be heard together by a Judge of the Division. The possession claim has been amended to seek in the alternative an order for sale of the property under s14 TLATA 1996 and additionally for a money judgment against H in respect of the sums owing under the charge.

The history

2. H and W were married on 2 April 1959. They separated, over 40 years later, on 25 November 1999. W is now aged 72. H is aged 69. They have three children Deborah, now aged 40; Sarah, now aged 38; and Ben, now aged 28. Deborah is married to a money broker and lives in London. She also has a property in France. She has 4 children. Sarah is a barrister specialising in crime. She is married to a barrister and has one child. Ben is unmarried and works for AOL in London.

3. The history of the financial relationship between H and W is by no means clear. Unfortunately W has appeared before me in person, having parted company with her solicitors Charles Russell in about January 2001. This has meant that her presentation of the history has not been with anything like the acuity and focus that would have been the case had she been represented by counsel. She has an innate tendency to exaggerate and to paint the lily; moreover she is consumed by a burning sense of grievance against H, which is to some considerable extent justified (as I shall explain below).

4. H was represented by counsel, but, as I shall explain below, he is a man with a long record of falsehood and deceit. It is very difficult to rely on uncorroborated statements by him. There is also a paucity of corroborative documentary evidence.

5. With these disadvantages, these are my findings as to the relevant financial history.

6. For the first 12 years of the marriage H and W lived in rented accommodation. In July 1971 two leasehold flats at 37 and 38 Ashley Gardens London SW1 were purchased in H’s sole name. They cost together about £35,000. A mortgage was taken from the Provincial Building Society in the sum of £15,000. This was for a 15 year term. It was redeemed by a remortgage to the Halifax Building Society in about 1983 when £6-£10,000 of the principal remained outstanding.

7. A considerable amount of building works were undertaken, not only to knock the two flats into one, but also in order to renovate the property comprehensively. The cost of this, and the £20,000 purchase money, derived from the proceeds of sale of a commercial property held in H’s sole name at 121 Victoria Street. Sir Arnold Silverstone very much wanted to buy this in order to undertake a wider development. It was in effect a ransom strip.

8. Initially Sir Arnold offered £4,000. But the offer soon rapidly increased. Both H and W are accomplished thespians, and are flamboyant characters. They decided to put on what was described to me as a “one act play” for which each thoroughly rehearsed their respective roles. They dressed soberly. W said that H dressed up as a lay preacher, although H did not quite agree with this. He did agree that W played the part of the dutiful wife doing her sewing by the fire. A maid was summoned to bring tea by the ringing of a bell. A solemn negotiation ensued at the conclusion of which £134,000 (an enormous sum in those days) was offered and accepted. From that sum H gave W a present of £5,000, which she used, in part, to buy furniture.

9. The two flats when knocked together provided a very large home, comprising 12 rooms in all, and as many as 4 bathrooms.

10. At the time of the purchase both H and W were working. H worked in a variety of roles: he told me that sometimes he had as many as 7 jobs at any one time. His work ranged from property management, to “crisis consultancy”, to acting as a theatrical impresario. W worked as an opera singer and broadcaster. Although I am sure that H earned more than W (he told me that the ratio of earnings was 80:20 or 90:10 in his favour) I have no doubt that the family economy depended for its function on W’s earnings. It was an arbitrary allocation of responsibility that H paid the mortgage, service charge, and outgoings, whereas W paid for day to day domestic expenditure. I have clearly concluded that W contributed indirectly to the mortgage repayments, the principal of which furnished part of the consideration for the initial purchase price.

11. The money paid by Sir Arnold Silverstone was used for the purchase and renovation of the flats, as mentioned above and for the purchase of various commercial properties, which have been referred to as the “Villiers Street Estate”. One of properties was the Players Theatre, a venerable institution, with which I deal below. The theatre (which is an unincorporated body operated as a members club) had a lease on the property governed by the 1954 Act. In addition H obtained a £100,000 overdraft from the National Westminster Bank for this purpose.

12. The Villiers Street Estate was later sold by H to a company called Gaiety Productions Ltd in exchange for a shareholding in that company. In 1985 Gaiety Productions Ltd was sold to Greycoat Ltd for the sum, I was told, of £300,000 - £400,000, which H used to settle all debts then outstanding by the company. In this way the landlord of the Players Theatre became Greycoat.

13. In 1973 another company called Boumain Ltd, which was owned and operated by H, and which held 2 Hotel properties in London SW7 at 13 Manson Street and 38 Onslow Gardens, borrowed £50,000 by way of overdraft from Williams and Glynn’s Bank, which was secured by mortgages on those properties and a second charge on the former matrimonial home. No waiver was sought from W: the second charge was, of course, executed well before the decision in Williams and Glynn’s Bank v. Boland.

14. Around 1977 - 1979 Boumain Ltd went into liquidation. Williams and Glynn’s Bank did not enforce the second charge, but interest continued to accrue. In about 1979 a loan of £67,000 was taken from another bank, possibly the National Australia Bank, which paid off the Williams and Glynn’s Bank overdraft. This new facility was supported by a second charge on the former matrimonial home. W knew of and consented to this charge.

15. In about 1983 a £170,000 repayment mortgage was taken from the Halifax. This was secured on Ashley Gardens. £35,000 was used to pay tax debts and the rest was used to discharge the first charge to the Provincial and the second charge to the National Australia Bank.

16. There is a chronological mystery about the Halifax loan. Both H and W were quite clear that this had been taken out in the early 1980s. H told me that it was effected in order to re-structure his finances following the failure of Boumain. Yet the entries at the Land Registry state quite clearly that the charge was created in March 1990. I was unable to resolve this discrepancy, but I do not think that anything significant turns on it. It does not appear that the instalments on the Halifax loan were kept up. The Halifax agreed to roll up some of the interest. A second charge was taken from the TSB in 1991 in the sum of £30,000 in order to pay some of the mortgage interest and to provide money for living expenses. By 1998 about £203,000 was outstanding under the Halifax mortgage.

17. I have stated above in Paragraph 12 how in 1985 the company Gaiety Productions was sold and that all debts of that company were discharged.

18. W has described to me how a feature of married life was the constant fending off of creditors. There were regular visits from Bailiffs which W would deflect by pointing to the diminutive size and young age of the children.

19. In 1995 W’s mother died a few weeks short of her 100th birthday. W inherited a flat in Charles Street, which was sold for £170,000. She used this to pay off the TSB debt, the accumulated Halifax interest, arrears of service charge and ground rent and other expenses. She also lent £33,000 to the theatre. She says in her Form E that she was promised 1½% interest per month.

20. I was fortunate to be given the evidence of Mr. Augustus Ullstein QC who is the Vice Chairman of a sub-committee which oversees legal and business affairs of the Theatre. His evidence was a breath of fresh air. He explained to me that the Theatre had been set up in 1933. He confirmed that H had “taken it over” in the 1970s, and that in about 1985 Greycoat became the Landlord, with the theatre having a lease under the 1954 Act. He explained how in 1997 there was a major crisis within the club with a member propagating false propaganda about it in order to try to cause it to fold. The Club set up a think-tank to which he was appointed a member. He confirmed the existence of the debt to W, but could neither confirm nor deny the asserted rate of interest. I showed him the 1999 accounts of the theatre and expressed the doubt whether it could repay the debt. Mr Ullstein told me that those accounts do not properly value assets of the club including a music library, a painted backdrop by Rex Whistler and 3,500 costumes. He told me that the club could certainly repay, in the reasonably near future, whatever was properly due to W, provided that it was not “a huge six-figure sum”. He confirmed that H had a charge over the assets of the club as an indemnity in respect of his liability as trustee of the lease and in respect of the personal guarantee he had given in respect of the club’s borrowings.

21. For the purposes of the ancillary relief proceedings I will have to assess the sum that I consider, on the balance of probabilities, W is entitled to recover from the Club.

22. In 1998 H and W agreed to re-mortgage the flats with the Woolwich in the sum of £250,000. H told me that this was to obtain a lower rate of interest. By that stage the Halifax debt was standing at about £203,000. The proposed re-mortgage did not proceed.

23. Between 1995 and 1999 W made substantial contributions from her inheritance. These are detailed in her Form E. What she said in essence was

23.1. She paid mortgage arrears of £55,628

23.2. She spent £9,000 in setting up the home so that she could run a bed and breakfast business, which commenced in about 1995

23.3. She paid all the future mortgage payments (this was to a large extent paid from the proceeds of the bed and breakfast business)

23.4. She paid off the TSB debt of £36,448

23.5. She lent the Theatre £33,000

23.6. She lent H £18,500 for the deposit on the purchase of a lease in Portland Place, which was lost

24. What W said in her Form E was put to H sentence by sentence. He agreed with almost every word of it. Unfortunately, W tainted the impact of the extent of her contributions by appending to her Defence and Counter-claim in the possession proceedings a Schedule of capital contributions said to have been made by her headed “Money paid in last 5 years” totalling £394,006. When I asked how this could be so, given that the inheritance was £170,000, W responded by saying that this was not what she paid, but what she felt H ought to repay her having regard to his misconduct. This is a good example of W’s tendency to exaggeration.

H’s fraud

25. In 1999 H embarked on a low, deceitful and ruthless subterfuge to strip the majority of the equity out of the former matrimonial home. He did this in the context of his decision to leave W for a much younger woman, with whom he had commenced an affair in about 1996. He told me that for the last 20 years the marriage had been unhappy for him and on occasions relations had been positively unfriendly, and that he and W had not slept in the same bedroom for 20 years. By the standards of matrimonial misconduct commonly encountered in these courts that struck me as a very slender basis for the apocalyptic course of action on which he then embarked.

26. On 10 May 1999 H completed an application form for a mortgage in the sum of £750,000 addressed to the Woolwich. On it he stated that he was separated from W. This was untrue. He furnished the Woolwich with accounts that stated that in the most recent accounting year he earned gross as a consultant the sum of £128,916, net £87,843. This was entirely untrue. His income was a tiny fraction of this. On 9 August 1999 he told the Woolwich that he had lived apart from W for 20 years, and that she either lived in France or in the flat in Charles Street, which had been long since sold. This was all entirely untrue. On the same day he signed pre-contract enquiries answering in response to the question inquiring as to the identities of all other occupants “only the borrower”. This was blatantly untrue. On 16 August 1999, the scheduled date for completion of the mortgage, he wrote to the Woolwich stating that he lived in the former matrimonial home alone and that no other party resided in it. This was entirely untrue. The mortgage was duly completed on that date.

27. H took the £750,000 and repaid the Halifax mortgage in the sum of £203,272. With the balance of about £547,000 he purchased a property at 31 Craven Street, London WC1 for £1,375,000 subject to another vast mortgage of £1,009,999 from RFC Mortgage Services Ltd. On that mortgage application he told another falsehood, namely that the outstanding mortgage on Ashley Gardens was only £203,000, when by that time he had completed the re-mortgage in the sum of £750,000. Therefore he put down £366,000 as a cash contribution to 31 Craven Street. The difference of £181,000 was applied in the payment of stamp duty, finder’s fee and conveyancing charges totalling about £60,000, and a further £60,000 as a mortgage fee. The rest was used in day to day living. He has allowed that mortgage to fall into arrears and a suspended possession order has been obtained. It is an astounding state of affairs that H, a man then aged 67, with no income to speak of, was able to borrow no less than £1.75m within such a short period of time.

28. During the hearing I required H to produce the mortgage application form for the RFC mortgage and the order for possession. When those documents were produced it became apparent that in June 1999 he had caused a Bahamian company called Aldwyn Investments to be set up, which company had been granted a tenancy in an initial annual rent of £48,000 which in turn had granted a sub-tenancy to H for a rent of £60,000. In the absence of any coherent explanation from H in the witness box as to the purpose for this I directed H to file an affidavit giving a full account of the purpose for what on the face of it seemed a very odd arrangement. That affidavit was duly produced and the explanation was that the objective was to channel untaxed off-shore some of the profits of the proposed bed and breakfast business that he intended to run from 31 Craven Street. It was also intended to be used to confound future possession proceedings. It is interesting that H was anticipating these before he had even purchased the property. Although I have viewed his explanations with some scepticism I have on the barest balance of probabilities accepted his assurance to me that the company has always been dormant; that it has never received any money; that it has never had a bank account; and that it will shortly be dissolved.

The separation and the subsequent proceedings

29. On 25 November 1999 H left W and a few days later presented a petition for divorce alleging 5 years separation. This was another untrue statement.

30. H stopped paying the Woolwich mortgage in December 1999.

31. He also failed to keep up the payments on the RFC mortgage. Possession was applied for. In his defence to those proceedings H relied on the tenancy agreement which he had granted to Aldwyn Investments supplying very large sums of rent as grounds for inviting the court not to order possession. This was a false defence since H did not admit that Aldwyn was his alter ego, nor that it would never be in a position to pay the rent. H candidly admitted to me that the whole arrangement was a device to fend off the mortgagee. A suspended possession order has been obtained by the mortgagee. H has defaulted on the terms of suspension.

32. On 10 March 2000 W presented an answer and cross-petition (for once properly so called) for Judicial Separation. She then issued proceedings for ancillary relief. The suit was compromised on the basis that the petition would be stayed and a decree of judicial separation would be pronounced on the prayer of the cross-petition.

33. On 28 July 2000 the Woolwich issued possession proceedings in the Central London County Court. In September 2000 W was joined to those proceedings. In October 2000 the Woolwich was joined to the ancillary relief proceedings as intervener. In that month W applied to set aside the charge under s37 Matrimonial Causes Act 1973. On 13 Oct 00 directions were given which provided that in the event of transfer of the possession proceedings to the Family Division the various applications were to be heard together by a High Court Judge. On 4 May 2001 the claim for possession was amended to include an application for sale under s14 TLATA 1996, and the amended claim was transferred to the Family Division by District Judge Lightman.

34. On 30 May 2001 W applied for permission to amend her defence to the possession proceedings to include a claim of negligence against the Woolwich.

35. The various issues for determination came before me on Monday 11 June 2001, and were tried over the remainder of that week. I immediately made an order requiring proper agreed (if possible) valuations to be taken of the two properties, in circumstances where no current, let alone agreed, valuations had been prepared. I refused W’s application to amend her defence. Reference may be made to the ex tempore judgment I gave on that day in that regard. I also later made an order for the valuation of the parties’ chattels.

The valuations

36. The valuations of the properties (which were agreed by the valuers of all three parties) were as follows

36.1. Ashley Gardens: £1.25m if sold as a whole or £750,000 per flat if they were restored into two units. I was told by Mr. Smith, Woolwich’s valuer, that reinstatement would cost about £10 - £20,000. I will take the mid figure of £15,000, giving a true gross figure, before the costs of sale for the value of Ashley Gardens of £1,485,000

36.2. Craven Street: £1.6m

37. The sums owing to the mortgages are as follows:

37.1. Woolwich: £855,727 principal and interest and £34,775 costs of these proceedings recoverable as an indemnity under the mortgage deed, giving a total of £890,921

37.2. RFC: £1,157,277

The consequence of H’s actions

38. The following table analyses the consequences of H’s actions

* Mr. Wilson, counsel for the interveners, would have me add £25,000 unpaid interest to the Halifax debt, pointing out, fairly enough, that since December 1999 nothing has been paid towards the Woolwich debt. He therefore asks me to conclude that had the re-mortgage not occurred a similar default would have occurred from that date on the Halifax mortgage. I am not prepared to reach that conclusion. From 1995 the Halifax mortgage had been more or less kept up to date, and I have no reason to suppose that had H not behaved in the way that he did that this would not have continued until the resolution of any ancillary relief dispute between the parties.

39. Essentially the dispute that I have to resolve is where this loss of £292,128 should fall. This is easily stated, and it is the fact that in conventional ancillary relief proceedings it would be possible, using the flexible discretionary powers of the court, to allocate the resources so that debts are paid and the residue divided fairly between H and W.

The issues to be tried

40. But because valuations are necessarily only informed professional estimates, and the actual prices received on sale may differ, perhaps significantly, from the agreed figures, and because further unquantifiable interest will accrue before sale, it is necessary for me to define and determine the strict rights at law of H, W and Woolwich in the properties. Therefore I have to decide the following issues:

40.1. Is the Woolwich entitled to a money judgment against H in the amount of the debt?

40.2. What beneficial interest, if any, does W have in the former matrimonial home?

40.3. Was she in actual occupation at the time of the creation of the charge? If so, does she have an interest that overrides the interest of the Woolwich? If so, to what extent?

40.4. Does the charge amount to an avoidable disposition within s37 Matrimonial Causes Act 1973? If so, should the court exercise its discretion to set it aside?

40.5. If all or part of the charge survives W’s claim to an overriding interest or her claim under s37, should there be an order for possession, or alternatively an order under s14 TLATA 1996?

40.6. What order for ancillary relief should be made as between H and W?

Is the Woolwich entitled to a money judgment against H in the amount of the debt?

41. H does not dispute that Woolwich are entitled to judgment. It will therefore be entered in the sum of £890,921. Under the CPR it will become payable within 14 days of judgment, and thereafter will carry interest at the judgment debt rate of 8%. Woolwich accept that from that point they will not be entitled to charge the daily interest accruing under the mortgage agreement of £139.87 per day.

What beneficial interest, if any, does W have in the former matrimonial home?

42. The principles to be applied in determining this question are summarised in the speech of Lord Bridge of Harwich in Lloyds Bank v. Rossett [1990] 2 FLR 155. That case was in the familiar genre of case, such as this, where a mortgagee was claiming possession and the wife or partner of the mortgagor was claiming a beneficial interest in the property which by virtue of her actual occupation overrode the interest of the mortgagee. The House of Lords decided in that case that Mrs Rosset did not have a beneficial interest in the property in question. Lord Bridge stated at (at p163 - 164)

The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share, however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do.

43. It is pertinent to note that in the final sentence of the passage I have quoted Lord Bridge does not state the proposition he advances in absolute terms. In my view what Lord Bridge is saying is that in the second class of case to which he is adverting, namely where there is no positive evidence of an express agreement between the parties as to how the equity is to be shared, and where the court has fallen back on inferring their common intention from the course of their conduct, it will only be exceptionally that conduct other than direct contributions to the purchase price, either in cash to the deposit, or by contribution to the mortgage instalments, will suffice to draw the necessary inference of a common intention to share the equity.

44. Mr Wilson has naturally enough seized upon the words “direct contributions” and says that in this case it is common cause there were no such contributions by W. He says that at its highest her contributions to the mortgage repayments were indirect; and I have found that to be the case in Paragraph 10 above. He says that her contribution in enhancing the source of the non-mortgage element of the purchase price from Sir Arnold Silverstone is entirely irrelevant, because it was not a direct contribution by her in money. He raises an interesting point that the parties did not need the mortgage at all, but only took it out in order to obtain a tax saving. In such circumstances he says the taking of the mortgage can be ignored, and the property can be treated as if bought solely for cash, provided exclusively by H.

45. He does not dispute that W’s later contributions from her inheritance could be taken to infer a fresh common intention from about 1995, but says that its extent should be determined strictly by reference to the mathematical resulting trust approach. He says that the value of the property at that time was about £1m and that W’s true capital contributions at that time were about £100,000 and that therefore her beneficial interest should be fixed at no more than 10%. Alternatively, he says that W should have a beneficial interest of zero, but should be entitled to recover her contributions from H under the principles of equitable accounting.

46. I reject the argument that the mortgage was unnecessary. If it were to be allowed the court would be drawn into a lengthy inquiry in cases such as these of analysing the exact state of the parties’ economies at the time of purchase and making value judgments about whether a mortgage was economically necessary at that time and if so in what amount. The task of the court is difficult enough in this area without having to grapple with these hypotheses. The court must look at what actually happened and if a mortgage was taken, must inquire as to the extent to which the parties contributed to it.

47. The next question is whether an indirect contribution to the mortgage will suffice to draw the necessary inference. I do not believe that in using the words “direct contributions” Lord Bridge meant to exclude the situation which obtains here. In Gissing v. Gissing [1971] AC 886 Lord Diplock referred to just such a case. He said (at p910 -911)

There is no suggestion that the wife’s efforts or her earnings made it possible for the husband to raise the initial loan or the mortgage or that the relieving of the husband from the expense of buying clothing for herself and for their son was undertaken in order to enable him the better to meet the mortgage instalments or to repay the loan

Mr Wilson argued that because Lord Diplock was not addressing the scenario there mentioned I could not draw any conclusions as to what his decision would have been if he had. But I believe that Lord Diplock is saying quite clearly that if that was the situation, which I find to be the case here, then such would suffice to draw the necessary inference.

48. The same point was addressed by May LJ in Burns v. Burns [1984] FLR 216. He stated (at pp 241 - 242)

In the light of all these cases, I think that the approach which the courts should follow, be the couples married or unmarried, is now clear. What is difficult, however, is to apply it to the facts and circumstances of any given case. Where the family home is taken in the joint name, then, unless the facts are very unusual, I think that both the man and the woman are entitled to a share in the beneficial interest. Where the house is bought outright and not on mortgage, then the extent of their respective shares will depend upon a more-or-less precise arithmetical calculation of the extent of their contributions to the purchase price. Where, on the other hand and as is more usual nowadays, the house is bought with the aid of a mortgage, then the court has to assess each of the parties’ respective contributions in a broad sense; nevertheless, the court is only entitled to look at the financial contributions or their real or substantial equivalent to the acquisition of the house: that the husband may spend his week-ends redecorating or laying a patio is neither here nor there, nor is the fact that the woman has spent so much of her time looking after the house, doing the cooking and bringing up the family.

The inquiry becomes even more difficult when the home is taken in only one of the two names. For present purposes I will assume that it is the man, although the same approach will be followed if it is taken in the name of the woman. Where a matrimonial or family home is bought in the man’s name alone on mortgage by the mechanism of deposit and instalments, then if the woman pays or contributes to the initial deposit and instalments, common intention that she should have some beneficial interest in the house. If thereafter she makes direct contributions to the instalments, then the case is a fortiori and her rightful share is likely to be greater. If the woman, having contributed to the deposit but although not making direct contributions to the instalments, nevertheless uses her own money for other joint household expenses so as to enable the man the more easily to pay the mortgage instalments out of his money, then her position is the same. Where a woman has made no contribution to the initial deposit, but makes regular and substantial contributions to the mortgage instalments, it may still be reasonable to infer a common intention that she should share the beneficial interest from the outset or a fresh agreement after the original conveyance that she should acquire such a share. It is only when there is no evidence upon which a court can reasonably draw an inference about the extent of the share of the contributing woman, that it should fall back on the maxim ‘equality is equity’. Finally, when the house is taken in the man’s name alone, if the woman makes no ‘real’ or ‘substantial’ financial contributions towards either the purchase price, deposit or mortgage instalments by the means of which the family home was acquired, then she is not entitled to any share in the beneficial interest in that home even though over a very substantial number of years she may have worked just as hard as the man in maintaining the family in the sense of keeping the house, giving birth to and looking after and helping to bring up the children of the union.

49. Mr Wilson has pointed to the fact that May LJ addresses indirect contributions to the mortgage only in the context of the claimant having made an initial direct contribution to the deposit. He says that in the next scenario, where that party has made no such contribution, the reference is only to direct contributions to the mortgage. I agree that May LJ does not directly address the position that we have here; namely where there was no initial cash contribution but only an indirect contribution to the mortgage. But I believe that a fair reading of his judgment is that such a state of affairs should suffice to enable the necessary inference to be drawn. Otherwise these cases would be decided by reference to mere accidents of fortune, being the arbitrary allocation of financial responsibility as between the parties.

50. I therefore conclude that by virtue of her indirect contributions to the mortgage I am entitled to infer that the parties commonly intended that W should have a beneficial interest in the former matrimonial home.

51. I agree that absent that state of affairs I could not draw the necessary inference from the sole fact of W’s role in enhancing the quantum of the cash money supplied by Sir Arnold Silverstone. But when coupled with W’s indirect contributions to the mortgage I am reinforced in my view that the parties plainly held the unexpressed common intention that W should have a beneficial interest in the former matrimonial home.

52. Having decided the question as a matter of principle I now turn to the issue of quantification of the beneficial interest. In this regard the leading case is Midland Bank v. Cooke [1995] 2 FLR 915. In that case the Court of Appeal had to decide between two different approaches namely the straightjacket of the mathematical resulting trust approach and the more holistic approach of looking at the parties’ global dealings over the span of their ownership of the property. Waite LJ preferred the latter approach. He said (at p926)

The general principle to be derived from Gissing v. Gissing and Grant v. Edwards can in my judgment be summarised in this way. When the court is proceeding, in cases like the present where the partner without legal title has successfully asserted an equitable interest through direct contribution, to determine (in the absence of express evidence of intention) what proportions the parties must be assumed to have intended for their beneficial ownership, the duty of the judge is to undertake a survey of the whole course of dealing between the parties relevant to their ownership and occupation of the property and their sharing of its burdens and advantages. That scrutiny will not confine itself to the limited range of acts of direct contribution of the sort that are needed to found a beneficial interest in the first place. It will take into consideration all conduct which throws light on the question what shares were intended. Only if that search proves inconclusive does the court fall back on the maxim that ‘equality is equity’.

53. When I survey the whole course of dealings between H and W between 1971 and 1999, having regard, in particular, to the capital contributions made by W since 1995, I have been left with no doubt at all that they commonly intended that she should have a 50% share in the property. This view is conclusively confirmed by H’s statement in his affidavit of 25 May 2001 at Paragraph 54 where he stated (when seeking to justify his conduct in secretly mortgaging the property for £750,000 in 1999)

In any event, I believed that at law no less than one of the flats was mine and I viewed the mortgage that I took out as touching no part of Margaret’s entitlements

Was W in actual occupation at the time of the creation of the charge? If so, does she have an interest that overrides the interest of the Woolwich? If so, to what extent?

54. Unquestionably W was in actual occupation on 16 August 1999. Accordingly by virtue of s 70(1)(g) Land Registration Act 1925 and the decision in Williams and Glynn’s Bank v. Boland [1981] AC 487 she has, in principle, an interest that overrides that of Woolwich.

55. The mortgage money of £750,000 from the Woolwich was used in the first instance to repay the existing Halifax charge of £203,272. That charge plainly had priority over W’s beneficial interest, as she consented to it. So Mr. Wilson argues that W cannot be put into a better position by virtue of H’s fraud than would have been the case had he not done what he did. Mr. Wilson argues that since December 1999 no payments have been made on the Woolwich mortgage. Arrears of interest have accrued. He says that of the arrears approximately £25,000 is referable to what I will refer to as the Halifax element. He says, therefore, that a figure of about £228,000 of the Woolwich mortgage takes priority over W’s interest.

56. In fact, he goes further than this. He says that by virtue of the parties’ joint application in 1998 for a mortgage of £250,000 from the Woolwich W should be fixed with the intention that the interest would be subjected to priority in favour of the Woolwich in that sum. I reject that argument. As I will explain below, when I come to consider the question of constructive knowledge under s37 Matrimonial Causes Act 1973, that application was no more than the most preliminary inquiry to which no significance should attach, either against the Woolwich, or in its favour.

57. I agree with Mr Wilson’s first argument. It would be bizarre if W’s position could be improved as against the Woolwich by virtue of H’s fraud. Fortunately, the matter is covered by authority. In Equity & Law Homes Ltd v. Prestidge [1992] 1 FLR 485 a similar situation arose. The female partner of the mortgagor consented to an original mortgage of £30,000. The mortgagor then secretly remortgaged for the higher figure of £43,000 and used the surplus for his own purposes. The Court of Appeal held that the charge of the mortgagee ranked ahead of the beneficial interest of the female partner up to £30,000. Mustill LJ stated (at p491)

So it seems to me that one must ask this question:

‘What intention must one impute to the parties as regards the position which would exist if the mortgage, which had been obtained in order to enable the purchase of the house, and which the parties intended to have priority over Mrs Brown’s beneficial interest, should be replaced by another mortgage on no less favourable terms?’

In my judgment, this question need only to be posed for it to be answered in favour of the new mortgagees. Any other answer would be absurd, for it would mean that if Mr Prestidge had in good faith and without the knowledge of the appellant transferred the mortgage to another society, in order (say) to obtain a more favourable rate of interest, Mrs Brown would suddenly receive a windfall in the shape of the removal of the encumbrance which she had intended should be created in consequence of a transaction which could not do her any harm and of which she was entirely ignorant.

58. This is precisely the case here.

59. In his written closing submissions argument Mr Wilson suggests that the priority of interests is

59.1. £228,000 of the Woolwich mortgage

59.2. W’s beneficial interest

59.3. Remainder of mortgage

59.4. W’s additional entitlement upon ancillary relief

59.5. Husband

I agree. In numeric terms the position can be expressed as follows

60. Subject to the application under s37 Matrimonial Causes Act 1973, and any adjustment in favour of H in the ancillary relief proceedings, the position is therefore that the Woolwich will be entitled to recover on the sale of Ashley Gardens the sum of £834,500, leaving £56,421 to be recovered from H’s interest in 31 Craven Street.

Does the charge amount to an avoidable disposition within s37 Matrimonial Causes Act 1973? If so, should the court exercise its discretion to set it aside?

61. s37 Matrimonial Causes Act 1973 provides so far as is material to this case:

37. Avoidance of transactions intended to prevent or reduce financial relief

(1) For the purposes of this section ‘financial relief’ means relief under any of the provisions of sections 22, 23, 24, 27, 31 (except subsection (6)) and 35 above, and any reference in this section to defeating a person’s claim for financial relief is a reference to preventing financial relief from being granted to that person, or to that person for the benefit of a child of the family, or reducing the amount of any financial relief which might be so granted, or frustrating or impeding the enforcement of any order which might be or has been made at his instance under any of those provisions to, the 1996 Act.

(2) Where proceedings for financial relief are brought by one person against another, the court may, on the application of the first-mentioned person-

(a) ...

(b) if it is satisfied that the other party has, with that intention, made a reviewable disposition and that if the disposition were set aside financial relief or different financial relief would be granted to the applicant, make an order setting aside the disposition;

(c) ...

and an application for the purposes of paragraph (b) above shall be made in the proceedings for the financial relief in question.

(3) Where the court makes an order under subsection (2)(b) ... above setting aside a disposition it shall give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payments or the disposal of any property).

(4) Any disposition made by the other party to the proceedings for financial relief in question (whether before or after the commencement of those proceedings) is a reviewable disposition for the purposes of subsection (2)(b) ... above unless it was made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any intention on the part of the other party to defeat the applicant’s claim for financial relief.

(5) Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or with respect to a disposition or other dealing with property which is about to take place and the court is satisfied-

(a) in a case falling within subsection (2)(b) above, that the disposition or other dealing would (apart from this section) have the consequence, or

(b) ...

of defeating the applicant’s claim for financial relief, it shall be presumed, unless the contrary is shown, that the person who disposed of or is about to dispose of or deal with the property did so or, as the case may be, is about to do so, with the intention of defeating the applicant’s claim for financial relief.

(6) In this section ‘disposition’ does not include any provision contained in a will or codicil but, with that exception, includes any conveyance, assurance or gift of property of any description, whether made by an instrument or otherwise.

62. In this case for W’s application to succeed the following has to be demonstrated

62.1. That the execution of the mortgage was done by H with the intention of defeating her claim for ancillary relief. This is presumed against H, and he has to show that he did not bear that intention

62.2. That the execution had the consequence of defeating her claim

62.3. That the disposition in favour of the Woolwich was not made for valuable consideration to it who, at the time of the disposition, acted in relation to it in good faith and without notice of any intention on the part of H to defeat W’s claim for financial relief

62.4. That the court should exercise its discretion to set aside the charge

63. I do not propose to consider the second and fourth of these requirements at this stage of my judgment. This I would ordinarily do when I considered the wider question of ancillary relief. But as I will find against W and in favour of Woolwich in respect of the third question, the questions will not arise.

64. As to the first, I have no doubt that H has failed to rebut the presumption. Indeed I am sure that he did what he did with an intention of defeating W’s claims for ancillary relief. The decision of Kemmis v. Kemmis [1988] 2 FLR 223 establishes that where there is more than one intention for a disposition the intention to defeat does not have to be the predominant motive. Nourse LJ stated (at pp 245 - 246)

I agree with my Lords that what the judge had to find was a subjective intention on the part of the husband. Moreover, I think it clear that it did not have to be his sole or even his dominant intention. It was enough if it played a substantial part in his intentions as a whole. If it were otherwise, s. 37(2) would fail to catch the case where a husband makes a disposition with the dominant intention of gratifying his mistress and only the subsidiary intention of defeating his wife’s claim for financial relief. I feel sure that that was not the intention of Parliament.

65. H has sought to argue in his recent affidavit that he had no such motive; that his intentions were honourable; and that what he was trying to do was to increase, rather than decrease the size of the family pot. I regard this as pure humbug. His intention was to strip out as much equity as he possibly could to enable him to buy a new home to occupy with his new partner. He perceived that if he went down the conventional route he would not be awarded by a court in ancillary relief proceedings as much as £750,000. He recognised that W may have had a claim which would have resulted in a smaller sum being received by him. He therefore embarked on self-help and in the process rode roughshod over W’s putative claims. I find that the requisite intention has been established.

66. The third question, insofar as it addresses the question of notice on the part of Woolwich, has caused me some difficulty and I confess that in this regard my mind has fluctuated in the course of the hearing. W says that by virtue of two matters Woolwich should be fixed with constructive knowledge of H’s intention to defeat her claims. These are

66.1. Following the 1998 application the Woolwich should have known that she was in residence, and had not been separated from H for 20 years, as he had falsely stated; and

66.2. The valuer appointed by the Woolwich, Mr Hopkins of Ekins Surveyors, should have noticed her actual presence when he inspected the property in June 1999.

67. There is no doubt that notice under s37(6) Matrimonial Causes Act 1973 includes constructive notice: see Kemmis (ibid) and Sherry [1991] 1 FLR 307. In Kemmis Purchas LJ stated

Constructive notice

Turning to the authorities relating to the analogous question of constructive notice of interests in land, the locus classicus is Hunt v. Luck [1902] 1 Ch 428. The principle is stated by Vaughan Williams LJ at p. 433:

... if a purchaser or a mortgagee has notice that the vendor or mortgagor is not in possession of the property he must make inquiries of the person in possession - of the tenant who is in possession - and find out from him what his rights are, and, if he does not choose to do that, then whatever title he acquires as purchaser or mortgagee will be subject to the title or right of the tenant in possession.

At first instance in Hunt v. Luck [1901] 1 Ch 45, Farwell J (whose judgment was expressly approved by the Court of Appeal in that case) said at p. 52:

Constructive notice is the knowledge which the courts impute to a person upon presumption so strong of the existence of the knowledge that it cannot be allowed to be rebutted, either from his knowing something which ought to have put him to further inquiry or from his wilfully abstaining from inquiry, to avoid notice.

The basic concepts are ‘knowing something’ which ought to have stimulated enquiry or ‘wilfully abstaining from inquiry to avoid notice’. Both import that the enquiry, if made, would necessarily have revealed the knowledge, constructive notice of which is to be imported. As will be seen subsequently in this judgment it is important to distinguish this position from the position where the evidence establishes a state of affairs from which the court could infer actual knowledge, which would not necessarily be acquired by the further inquiries indicated.

68. In this case W has strenuously argued that Woolwich were hopelessly negligent in the inquiries that they carried out and that the two matters to which I have referred should have sent out such strong warning signals that they could or should not have failed to have discovered her existence and presence in the former matrimonial home. Initially I was exercised by this argument. My initial impression was that the application in 1998 would, in all probability, have created a database entry on Woolwich’s computers which would or should have revealed at the touch of a few buttons her existence and presence when the application was made by H in 1999. Similarly, I could not understand how Mr. Hopkins had failed to notice evidence of W’s presence on his visit. In that regard W’s evidence was that she was having a rest on her bed, with her dog, behind a screen when Mr. Hopkins came to make his inspection. She did not introduce herself, because as she said, she was “deshabillée” and un-made-up. I was unimpressed by the suggestion that she was somehow at fault in not presenting herself in such a condition to Mr Hopkins. Similarly I was unimpressed by the argument that Mr Hopkins could have discounted the obvious evidence of female occupation (such as clothes, cosmetics and the like) on the ground that because H was an actor they could very well have belonged to him.

69. Unfortunately Mr Hopkins was unable to give evidence, as he is on holiday in France, and not contactable. But I was able to hear from Mr Goodenough, a Senior Mortgage Underwriter of the Buy to let Unit of Woolwich plc. He explained to me the following

69.1. The 1999 mortgage was made to the Buy to let Unit. As its name suggests this is a special unit which lends money to people who want to move out of their homes for the purposes of letting them out. This mortgage is a popular produce which enables people to down-size their accommodation while retaining their original homes, and hopefully to make some money on the turn between rents chargeable and mortgage interest payable.

69.2. The Buy to Let Unit is separate from the normal residential unit and its computers are not linked.

69.3. Even if the computers were linked the initial mortgage inquiry made in 1998 would not have been retained on the system. Potential borrowers make a huge volume of inquiries of potential lenders in order to test the market. The inquiry will lead to a quotation and the despatch of an application form. It is only when the application form is returned that a mortgage number is allocated and the case enters the system properly

69.4. The reference number given by the quotation department is ephemeral and will “drop out” after some time. Indeed, I asked Woolwich’s solicitor to telephone the quotation department to see if the temporary reference number allocated to H and W in 1998 would yield a successful search on the system, and it did not.

69.5. Although the valuer is instructed to be Woolwich’s “eyes and ears” his brief is only to assess whether the property in question is (a) of an appropriate value to secure the proposed advance and (b) suitable for letting. In the latter regard the valuer has to be alive as to whether the proposed tenants fall within the class of those deemed unacceptable to Woolwich, such as benefit claimants or asylum seekers, or whether there are multiple occupants inconsistent with a single short-hold tenancy. He is not briefed to be on the look-out for undeclared spouses or partners, and will not have seen the mortgage application form which gives details of the applicant’s marital status. Moreover, the existence of a spouse will not be regarded by a valuer as abnormal: quite the reverse, very many of these buy to let mortgages, are sought by couples seeking to achieve the financial advantage to which I have referred.

70. I have therefore concluded that Woolwich should not be fixed with constructive notice of W’s presence. Even if I had, it is a quantum leap to conclude from that that they should be fixed with constructive notice of H’s intention to defeat W’s claim, which is what s37(4) requires. In Kemmis (ibid) the case was much stronger than this. I quote from the headnote

The marriage of the parties effectively broke down in about 1973 though it was not dissolved until 1984. In 1973 the husband bought a property which the wife and the three children of the marriage lived in. Later the property was transferred into the name of a company in which the husband had a controlling interest. In April 1978 the company sold the property and bought another with the proceeds of sale together with £8,000 from the wife’s mother. She went to live there with her daughter and grandchildren. In November 1980 a mortgage deed between the company and the bank charged that property in favour of the bank to secure loans made to the company. In November 1983 the wife started divorce proceedings and made her application for financial relief.

Wood J’s findings as to the Bank’s knowledge were as follows

What then was within the knowledge of Lazards by November 1980? As I have already indicated Mr B and Mr G were officers of Lazards who worked closely with the other directors. This was a small executive operation. It was these two who were the effective members of the bank’s executive who were in charge of the transactions with this husband and with Norah Holdings. It was through Mr B that the husband had his first contact with Lazards and was advised about his scheme for moving to Jersey. Mr G only came on the scene somewhat later but, in his own evidence, he made it clear that he knew that Norah Holdings was a nominee company; that he had made no request to see any company accounts; that he knew that the company had no source of income other than from the husband and it is also clear that when a valuation was made for the purposes of the mortgage of 1980 it was clear that No. 1 was furnished. Mr Kemmis thought that these valuations were for insurance purposes.

It is quite clear that Lazards, through Mr B and Mr G, knew almost as much about the family’s circumstances and financial circumstances as Mr Kemmis says he did himself. At risk of repeating certain factors, the bank knew the following:

(a) That this husband was separated from his wife and had been so separated from some time and that he was living openly with Miss P in Jersey.

(b) That No. 1 was the matrimonial home and was being used by the wife and had been used by the children, if not still being so used.

(c) It knew that Norah Holdings was the alter ego of the husband.

(d) It knew all about Norah Holdings, as I have already described it.

(e) It knew that this husband was spending or salting away very substantial sums. There is a reference in a handwritten note by Mr B to an ‘‘offshore fund’’.

(f) There is no evidence that any specific purpose was given by this husband for a fresh mortgage so soon after the last mortgage had been paid and after the Burwood money had been paid.

What would a reasonably careful banker do in these circumstances? In my judgment, knowing that the wife was in occupation, he would have made some enquiry. What enquiry would be reasonable? It could have been of the simplest. All that was needed was to write a letter to the wife who occupied No. 1 to notify her that it was intended by her husband to raise a further mortgage and to advise her to obtain advice from her solicitors and to ask her solicitors to get in touch with the bank. I use the word‘‘ her husband’’ but, of course, they realized that Norah Holdings was in fact the alter ego of her husband.

71. Purchas LJ held that these strong findings, nonetheless did not entitle a finding of constructive notice to defeat that wife’s claims. He said (at pp 238 -239)

After not a little hesitation and with some regret, it is at this point of his judgment that I find myself in disagreement with the judge. I understand, only too well, the sense of frustration which he must have felt as a result of the way in which the case had been conducted and the absence of Mr B from the witness-box. The failure to call Mr B as a witness, if this was a deliberate tactic, was explicable because he might have made damaging admissions which established the husband’s intentions; or because those admissions might have established actual knowledge of those intentions by the bank. An inference of this kind might have supported a finding of actual knowledge against the bank; but the judge did not make this finding; nor, in my judgment, was there any evidence upon which he could properly have done so.

Even bearing in mind the development of the doctrine of constructive notice when applied in this field to be detected from the speech of Lord Wilberforce in Boland’s case, already cited in this judgment, it is still necessary to establish two elements:

(1) that the facts actually known by the disponee should have put him on enquiry, e.g. when the disponor is not in occupation to enquire whether his wife had any claim against the asset to be charged:

(2) that the results of those enquiries would, within the criteria in Hunt v. Luck (above), give the disponee knowledge of the disponor’s intention to frustrate the wife’s claims for financial relief, at the time of the disposition.

At the date of the mortgage the wife was not contemplating divorce. She was content to remain in occupation of No. 1 receiving support from her husband. If at that time the bank had asked her if she had an interest in the property or objected to her husband charging it by way of mortgage it must be pure speculation what her reaction would have been. For my part, I do not consider that her reaction upon the occasion when she was asked to sign the licence 3 years later and at the same time was told that the husband would not continue to support her, could be taken as a reliable indication as to what she would have done if the bank had approached her in 1980. In these circumstances I find it impossible to say that there was any evidence upon which the judge could infer that the wife was contemplating divorce proceedings and therefore, whatever indirect motives the husband may well have had at that time, of which the bank would have had notice, one of them could not have been an intention to defeat the wife’s claims for financial relief.

72. If the egregious facts of Kemmis do not give rise to the relevant constructive notice then they cannot here. At the time of H’s application in 1999 his intentions were entirely secret, and no amount of reasonable inquiry by Woolwich would have revealed them.

73. The application under s37 Matrimonial Causes Act 1973 is therefore refused.

74. Before parting with this aspect of the case I cannot forbear from commenting that had Woolwich in fact discovered W’s presence I have no doubt that this enormously wasteful and complicated case would never have ensued. The total costs incurred in this case are about £145,000 - an alarming figure, although I do not doubt, given the extent of the legal work that this case has entailed, that they were reasonably incurred. The decision of Williams and Glynn’s Bank v. Boland is now 20 years old. Money-lenders should be more astute, in my opinion, to be alive to the potential claims of actual occupants of properties. Given the regrettable tendency of people to make fraudulent claims in mortgage applications I consider it very unwise merely to rely on representations in the mortgage application and pre-contract enquiries. At the very least I would have thought that valuers should be instructed to make a more careful inspection, and inquiries about the occupants, of properties being offered as security.

If all or part of the charge survives W’s claim to an overriding interest or her claim under s37, should there be an order for possession, or alternatively an order under s14 TLATA 1996?

75. I have found that the Halifax element of the Woolwich mortgage has priority over W’s beneficial interest. That element is in substantial arrear. Therefore, in principle, Woolwich is entitled to an order for possession against her. Even if this were not the case Woolwich would be entitled to an order for sale under s14 TLATA 1996: see Barclays Bank v. Hendricks [1996] 1 FLR 259 and TSB v. Marshall [1998] 2 FLR 796.

76. It is pointless for either order in fact to be made for I am going to order a sale of Ashley Gardens in the ancillary relief proceedings under s24A Matrimonial Causes Act 1973. Accordingly, I shall grant a formal order for possession but shall stay its execution until my orders for sale under s24A have been implemented. The remedy under s14 TLATA is discretionary and I shall refuse it, as it would be otiose.

Ancillary Relief

77. I find that H’s actions in mortgaging the former matrimonial home in August 1999 amounts to conduct which it would be inequitable to disregard under s25(2)(g) Matrimonial Causes Act 1973. In order to take that conduct into account I find that it is necessary to consider what the ancillary relief result would have been had he not done so.

78. Before doing so I can deal briefly with the assets of H and W other than their interests in the two properties.

78.1. W has free assets in bank and building society accounts as follows

Coutts current	(3,179)
Abbey National current	156
Abbey National savings	3,024
Halifax	368
Corus Group	210
Allied Domecq	0
Halifax 150 @ 8.02	1,203
Total	1,782

78.2. W also has the benefit of the debt owed to her by the Player’s Theatre. The principal is £33,000. It was lent in mid 1995. W claims simple interest of 1½% per month (£495) over 6 years (72 months). This would give rise to interest of £35,640. This would be taxable. After tax it would net down to about £28,000, or a total, with the principal of £61,000. If a more normal interest rate of say 7% was applied the net figure would be £44,000. I propose to take a figure of £50,000 as the figure, with net interest, that W will, on the balance of probabilities recover from the Theatre in the reasonably near future.

78.3. H has no free assets: only an overdraft of £8,000

78.4. As to chattels, H had asserted, as is so often the case, that they were of enormous value. I therefore ordered that his valuer should take a valuation. Predictably they were worth only a small fraction of what he asserted. I divided the chattels summarily between the parties during the hearing and will say no more about them.

79. Their income positions are as follows:

79.1. W has a state pension of £48 per week or about £2,500 pa.

79.2. H has a state pension of £72 per week or £3770 per annum. He has an annuity of £1200 pa say £1600 gross. He has earnings from performances and productions of about £10,000 per annum. He thinks he can sustain this for about 5 years.

79.3. I ignore their respective bed and breakfast incomes as they will not be able to do this once they move into new homes.

80. Their budgets are as follows:

80.1. W’s is for just under £15,000 ignoring mortgage repayments and service charges

80.2. H’s is for just under £13,000.

81. Had H not executed the charge in 1999 the court would have been looking at a position along the following lines

* As before, I do not enlarge this figure by £25,000 unpaid arrears on the Halifax element as I believe that the payments would have been kept up had H behaved properly

82. In view of H’s higher income I would have concluded that it would be unfair to take anything away from W in his favour. Therefore I would have ordered a sale of Ashley Gardens with equal division of the proceeds. This would have left the parties as follows:

83. I would have concluded that these sums would have met each party’s reasonable needs. The Duxbury calculation on W’s budget is about £120,000; and on H’s budget (having regard to his earnings) about £56,000. These calculations are only loose guidelines to be circumspectly applied where the parties are of mature years: see A v. A [1999] 2 FLR 269.

84. There would have been an ample residue on each side of the ledger to meet the reasonable rehousing costs of each party, which I would have assessed at about £400,000 - £450,000, having regard to the particulars with which I was furnished.

85. Finally I would have applied the yard-stick of equality mentioned in White v. White [2000] 3 WLR 1571 to ensure that I was not discriminating against W, and would have concluded that the fractional result of 52:48 was entirely fair.

86. But this is all hypothetical. As a result of H’s actions there is nearly £300,000 less in the pot. The true table is as follows

87. If the consequences of H’s conduct fall solely on him then a solution as follows has to be adopted

88. The question I have to ask myself is whether it is fair (for fairness is the ultimate objective) for such a solution to be adopted. I conclude that it would not be fair to require H to pay to W a further £12,500 to achieve the hypothetical result referred to above. So to that small extent H is relieved from the consequence of his misconduct. Otherwise I regard the result as perfectly fair, having regard to H’s conduct, although I recognise that the consequence will be that he will have to live in inferior accommodation in a less salubrious part of London. That said the average house price for all houses in the UK in 2000 (according to table 16 of At A Glance) is only £84,350. Even allowing for the vastly higher cost of housing in London I am sure that H will be able satisfactorily to put a roof over his head and put some amount aside for his old age.

89. I have not taken into account either party’s costs in accordance with the decision in Leadbetter [1985] FLR 789.

90. Nor have I taken into account any assets of, or asserted responsibility by H to, his new partner. He accepted in evidence that I should assess his position on the basis of being a single man.

91. Mr. Becker sought to argue that W had been guilty of litigation misconduct by turning down reasonable offers made by H in the course of the litigation, during which time costs and arrears of interest were exponentially mounting. He sought to introduce into evidence Calderbank written on behalf of his client to demonstrate this, saying, blithely, that his client waived the privilege. My intuitive reaction was that the privilege was joint, and researches by counsel proved me right. The position is conclusively determined by the decision of the Court of Appeal in Walker v. Wilsher (1889) 23 QBD 335. In that case, in the costs phase of a trial, letters written purely without prejudice were sought to be introduced, and were admitted. Of course, Calderbank letters, which ex hypothesi, are admissible at that stage of the proceedings, had not by then been invented. The Court of Appeal held that the letters were inadmissible. Lord Esher MR stated

It is, I think, a good rule to say that nothing which is written or said without prejudice should be looked at without the consent of both parties, otherwise the whole object of the limitation would be destroyed

The opinion stated in Burrows: Evidence in Family Proceedings (Jordans 1999), at Paragraph 7.31, namely that the writer of a Calderbank letter can unilaterally waive the privilege, is in my judgment incorrect and should not be relied on in any future case.

92. Mr Becker relied on his client’s open position as stated in the Statement of Issues of May 2000 to the same effect. That proposal was that W should retain the former matrimonial home subject to the Woolwich charge in its entirety; that H should retain Craven Street subject to its mortgage; and that there should be a clean break. It is true that this is not dissimilar to what I will order, although I have imposed on H as much as £56,421 of the Woolwich debt. Nobody has calculated what the figure would have been had the matter settled in May 2000. Moreover the proposal contains no provision as to costs. I do not regard it as sufficiently formulated to take it into account. I will of course take into account any demonstrated unreasonableness of W in the costs phase of these proceedings, when I can legitimately read the Calderbank correspondence.

93. W’s claim before me was that I should transfer to her the entirety of Ashley Gardens, subject only to the Halifax element of the Woolwich mortgage, so that she can carry on her bed and breakfast business from there. She is distraught at the prospect that her home of 30 years should be sold. These are very human feelings, but are neither reasonable nor fair. It would give her a disproportionate share of the assets, and even if I did it, it would be to no avail, for presumably Woolwich would bankrupt H for the balance of the debt, and my transfer would, I imagine, be set aside in the bankruptcy. Moreover, the bed and breakfast business is uneconomic. W told me that she could make £25,000 from it, gross, by working 18 hours a day. But her budget at Ashley Gardens, inclusive of interest on the Halifax element and service charges is over £37,000. The figures speak for themselves

94. My order in the ancillary relief proceedings will effect the following result:

94.1. 37/38 Ashley Gardens shall be sold, for the best price reasonably obtainable, as soon as is reasonably practicable. Woolwich will have the formal conduct of the sale.

94.2. From the gross proceeds of sale there shall be deducted the following:

94.2.1. The costs of sale and any costs of partitioning the properties

94.2.2. £228,000 being the Halifax element

94.3. The residual proceeds shall be divided between H and W equally

94.4. From H’s share of the residue Woolwich shall be entitled to be paid the balance of their debt

94.5. 31 Craven Street shall be sold, for the best price reasonably obtainable, as soon as is reasonably practicable. H’s solicitors shall have the conduct of the sale

94.6. From gross proceeds of sale there shall be deducted the following:

94.6.1. The costs of sale

94.6.2. The mortgage to RFC

94.6.3. Any residual debt owed by H to Woolwich

94.7. The chattels shall be divided in accordance with my earlier ruling

94.8. Otherwise each party shall keep their respective assets and liabilities

94.9. There shall be a clean break in life and death. As these are Judicial Separation proceedings I cannot make a dismissal order under s25A Matrimonial Causes Act 1973, and so the order must recite that it is the Court’s intention that this order seeks to achieve such a clean break and that such intention should be reflected in any ancillary relief proceedings mounted in any future divorce proceedings

94.10. There shall be liberty to apply to me, if available, on short notice as to implementation.

95. I will discuss with Counsel the form of the order to ensure that it is compliant with the terms of s24A Matrimonial Causes Act 1973, and with the decision of the Court of Appeal in Mullard v. Mullard (1982) 3 FLR 330.

96. I direct that this judgment may be treated as authentic and that no transcript of it need be taken.