Fisher Meredith LLP v JH, PH

JurisdictionEngland & Wales
CourtFamily Division
JudgeMr Justice Mostyn
Judgment Date02 Mar 2012
Neutral Citation[2012] EWHC 408 (Fam)
Docket NumberCase No: FD09D05007

[2012] EWHC 408 (Fam)

IN THE HIGH COURT OF JUSTICE

FAMILY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Mostyn

Case No: FD09D05007

Between:
Fisher Meredith LLP
Appellant
and
J H
1st Respondent
and
P H
2nd Respondent

Mr Matthew Brett (instructed by Fisher Meredith LLP) for the Appellant

Mr Geraint Jones QC & Mr Philip Perrins (instructed by Rainer Hughes) for the Respondents

Hearing dates: 16 February 2012

Mr Justice Mostyn

This is the approved anoymised version of this judgment. The anonymisation has been agreed between by the parties and approved by me.

1

This is an appeal against a wasted costs order made by District Judge Bassett-Cross on 20 July 2011 against the solicitors for the claimant wife in financial remedy proceedings.

2

The final hearing of the wife's claim was listed before District Judge Bassett-Cross on 23 May 2011 with a time estimate of 5 days. It was adjourned. The District Judge found that the wife's solicitors were responsible for the adjournment and that their fault was of such a nature and degree that it amounted to "improper, unreasonable or negligent conduct" within the meaning of s51(6) Senior Courts Act 1981 justifying an order that they should pay the costs thrown away by virtue of the adjournment of both the respondent husband and of the wife of his uncle, the second respondent. Those costs, together with the costs of the hearing about the wasted costs, have been estimated at over £100,000, although the bills have not yet been assessed by a costs judge. The wife was also ordered on a joint and several basis to pay the costs thrown away by the adjournment, but as a legally aided litigant, those costs were not to be enforced save by a further order of the court.

3

I shall refer to the solicitors as "FM", to the claimant wife as "W", to the respondent husband as "H", and to the second respondent aunt as "R2".

4

Permission to appeal was granted by Parker J on 12 October 2011.

5

W's financial remedy claims were compromised by consent orders made on 13 December 2011; a term of the settlement was that it expunged her liability for costs.

Narrative of the background facts

6

I shall set out as shortly as I can only those background facts which are needed to be stated for the purposes of the disposal of this appeal.

7

In May 1998, three years before the marriage between H and W, a property company ("the Company") was incorporated. H, then a 21 year old university student, was allocated one-third of the issued shares. There is no suggestion that he paid for them. Two of his first cousins were each allocated similar shareholdings.

8

The reasons given by H in his s25 affidavit made on 27 April 2011 for the shares being put in the names of him and his cousins were as follows:

"I am informed by my uncle that various properties previously owned by my family were acquired on or around May 1998 as part of an agreed property sale agreement effected between the administrators of HMRC and court appointed receivers (consent of the High Court obtained) with the benefit of loans from my uncles in Canada. My uncle was also finishing his custodial sentence and was not released from prison until 16 August 1999. I believe that I was made a shareholder and. a director of [the Company] due to the convictions of my uncle. At this time it was my uncle S H who was principally running the company and the shares were put into my name purely as a nominee."

The uncle referred to is AH.

9

It is accepted that at no time prior to the separation of H and W on 20 June 2009 did H ever assert his nomineeship to anyone, whether in writing or otherwise. To the outside world he was both the legal and beneficial owner of the shares.

10

Shortly before the separation in June 2009 (according to W; as will be seen, both H and R2 say 2 June 2008) H transferred his shareholding to R2. She is the wife of AH.

11

On 21 October 2009 W filed her divorce petition; Form A; and an application under s37 Matrimonial Causes Act 1973 seeking a reversal of the share transfer to R2 and her joinder. On that day on an ex parte hearing District Judge Malik joined R2, and restrained her from dealing with the shares. He also ordered that both H and R2 make affidavits which inter alia had to specify why and when the shares were transferred by him to her.

12

Those affidavits were made on 27 October 2009. They are very short and obviously have the same authorship. H stated that "I have never regarded myself as the beneficial owner of the shares. I believe that the shares were transferred to more accurately reflect the beneficial ownership. The shares were transferred on 2 June 2008". In the affidavit H identified the beneficial owners as his uncle AH "and/or" his uncle's brothers. The use of "and/or" is a masterpiece of ambiguity. In her affidavit R2 stated "I do not know why the shares were transferred to me. I believe the shares were transferred to me on 2 June 2008". She did not assert that she had any beneficial ownership of the shares.

13

On 22 June 2009 HHJ Hughes QC considered an application made by W that day. She refused to order joinder of the Company. She granted an order that H be orally examined as to his contention that he has no beneficial interest in the Company. This was, presumably, an order for an OS v DS type of hearing.

14

On 8 April 2010 District Judge Bassett-Cross ordered that the oral examination be listed for directions at the FDR on 12 May 2010 with the intention that there would be a preliminary issue as to the beneficial ownership of the Company heard at the final hearing of W's claims. No party, nor the Court, raised the question of the joinder of any third parties.

15

The FDR was then twice adjourned on account of deficiencies in H's replies to W's questionnaire.

16

On 12 November 2010 the FDR and directions hearing took place before District Judge Gordon-Saker. She ordered that by 25 March 2011 the parties were to serve a list of witnesses who would give evidence; that s25 affidavits and statements from the witnesses were to be filed by 8 April 2011; and that the final hearing do take place over five days commencing on 23 May 2011 with the first two days being designated for disposal of the preliminary issue. Again, no party, nor the Court, raised the question of the joinder of any third parties.

17

On 25 March 2011 H's solicitors signified that the only witness for H would be H himself. Remarkably, he did not intend to call any family members as witnesses in relation to the preliminary issue.

18

On 27 April 2011 H filed his s25 affidavit which contained a narration about the acquisition by him of the shareholding in the Company, from which I have quoted above at para 8.

19

On 28 April 2011 W's solicitors FM wrote to A H as follows:

"As you may be aware the final hearing in our client's application for financial relief is listed at the above court on the above date.

It is part of our client's case that the shareholding currently held by your wife, P H is to be rightly attributed to your nephew, the 1st Respondent J H. We note that you are not being called as a witness by the 1st Respondent despite the nature of his evidence on the issue. If you wish to consider intervening in the proceedings and seeking permission from the court to file your own evidence in these proceedings relating to that issue that must be a matter for you to consider but we should be grateful to receive notice of any intention to do so.

You may wish to consult your own independent legal advisors elsewhere before responding."

20

On 17 May 2011 A H replied to this letter, and declined the invitation to intervene. It did not explain why he had not applied to intervene earlier.

21

On 18 May 2011, that is just two clear business days before the hearing, R2's solicitors wrote to W's solicitors stating "in line with our client's ongoing duty of disclosure we enclose herewith further documents that our client will be relying on at the hearing on 23 May 2011 … Please note that elements of the disclosed documentation have been redacted and only items that are seen as relevant are being disclosed". There were 123 pages of documents enclosed which related to events in 1998 when the company was formed. They had indeed been very heavily redacted. One document was an affidavit from K H, H's father then imprisoned in HMP Brixton, made in what appear to be confiscation proceedings under the Criminal Justice Act 1988. About 95% of the text had been obliterated. No-one could have derived any meaningful knowledge from what was left.

22

On Saturday 21 May 2011 the skeleton argument of Mr Geraint Jones QC for R2 was prepared and emailed. Given that this was not a business day it is to be treated as being served on Monday 23 May 2011, the first day of the hearing. That document did not state that R2 asserted a beneficial interest in the shares of the Company. To my clear recollection of the submissions made to me on the hearing of the appeal such an assertion was not made until much later, in or about October 2011, pursuant to a further order of District Judge Bassett-Cross 1. The language of the skeleton was uncompromising. It described the steps taken by W's solicitors as "astonishingly inept and inappropriate". It asserted that it was "incumbent on W to join the beneficiaries", relying on a number of authorities including a decision of my own: TL v ML [2006] 1 FLR 1263. It asserted that "W cannot ask this court to make any findings/rulings concerning the beneficial interest(s) in the 334 shares. This is because her solicitors have failed to join the appropriate beneficiaries into the action". Interestingly, in relation to the s37 application against R2 (which was of course the only relevant application with which she was concerned) it was stated "whether the Court does or does not [set the transfer aside] is...

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