Nicholas v Nicholas

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE CUMMING-BRUCE,LORD JUSTICE DILLON
Judgment Date08 September 1983
Judgment citation (vLex)[1983] EWCA Civ J0908-2
Docket Number83/0366
Date08 September 1983

[1983] EWCA Civ J0908-2

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM ORDER OF HIS HONOUR JUDGE BARKER

Royal Courts of Justice

Before:

Lord Justice Cumming-Bruce and

Lord Justice Dillon

83/0366

Mary Andony Nicholas
and
Brian Nicholas

MISS MARY MacMURRAY Q.C. and MRS E.A. WALKER, instructed by Messrs Collyer Bristow, Agents for Messrs Ashtons (Sheffield), appeared for the Appellant (Respondent).

MR I.A.B. McLAREN, instructed by Messrs Wedlake Bell, Agents for Messrs Harold Jackson & Co. (Sheffield), appeared for the Respondent (Petitioner).

LORD JUSTICE CUMMING-BRUCE
1

This is an appeal against an order made by His Honour Judge Barker in financial proceedings between a former husband and a former wife upon an appeal to the judge against the order made by the learned deputy registrar. The proceedings before the judge followed a course that led the legal advisers for the wife to take the view that if the judge thought that it was right that the house in which the applicant wife was living should be transferred to her by the company which owned it, there would be no difficulty in procuring a situation in which Mr Nicholas exercised his voting powers in the company of E.C. Sayers & Company Limited in such a way as to cause the sale of the property known as Elmwood to the wife for a consideration paid by her to the company of £105,000. That figure of £105,000 was based on a valuation which the judge accepted as reasonable.

2

Against that background the form of the order made by the judge was as follows: "IT IS ORDERED THAT the respondent do undertake to use his controlling vote in the company known as E.C. Sayers & Company Limited to cause the sale of the property known as Elmwood and situate at Sheffield Road, Mosborough, Sheffield to the petitioner. Such property is delineated on the plan submitted at the hearing. AND IT IS ORDERED that the respondent do pay or cause to be paid to the petitioner such lump sum estimated to be £105,000 to enable her to purchase the property known as Elmwood. AND IT IS ORDERED that the order be in full and final settlement of all the petitioner's claims against the respondent for ancillary relief and/or a property settlement order."

3

The first difficulty about the form of order, which Mr McLaren accepts is a real difficulty, is that in fact the respondent was not prepared to give an undertaking to use his controlling vote as a voluntary undertaking, and I know of no authority which would enable the court to order the respondent to give an undertaking. If the matter rested there, it would not be a matter of serious import, because the order as made by the judge could be settled by deleting the words "do undertake", and it could be ordered that the respondent use his controlling vote in the company without any undertaking.

4

But that brings me to the second problem, which to my mind raises a formidable difficult, about the transaction contemplated by the judge pursuant to the exercise of the court's powers under section 23 of the Matrimonial Causes Act. By section 23(1) of that Act it is provided that on granting a decree of divorce the court may make one of the following orders, that is to say: "(c) an order that either party to the marriage shall pay to the other such lump sum or sums as may be so specified". Then one turns to section 24, which gives the court power to make property adjustment orders. There it is provided by subsection (1) that on granting a decree of divorce the court may make one of the following orders, that is to say: "(a) an order that a party to the marriage shall transfer to the other party….such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion".

5

On the facts of the instant case, the property known as Elmwood, together with its furniture and fittings, less some exceptions with which the court is not immediately concerned, is vested in the company which owns it, and a question arises whether, having regard to the shareholdings in the two relevant companies with which the court is concerned, it is proper for the court to pierce the corporate veil with the effect that though the company is the legal owner of the realty the court would disregarded the corporate ownership and make an order which in effect is an order against the husband, an individual shareholder. Of course it is quite clear, and there is abundant authority, that where the shareholding is such that the minority interests can for practical purposes be disregarded the court does and will pierce the corporate veil and make an order which has the same effect as an order that would be made if the property was vested in the majority shareholder. But in the instant case it is not possible to take the view that the minority interests in either company can be thus disregarded. The shareholdings are set out in the evidence and it is quite clear that they are of such a character that the minority interests are real interests and it would not be an appropriate case in which the court should exercise its power to pierce the corporate veil. That being so, as the property known as Elmwood is vested in the company and the company's ownership has to be respected, is it an appropriate use of the power to order a lump sum under section 23 to add to the order for a lump sum an obligation imposed upon the husband to procure the transfer by the company of the company's property to the wife by way of sale, the purchase money being the sum ordered by way of lump sum?

6

I am satisfied that although I perfectly understand the reasons that led the learned judge to take the view that such an order, made as he thought by way of undertaking, should be made, having regard to the terms of section 24 when read with the terms of section 23(1)(c), it is not open to the court to supplement the express powers specified in section 23(1)(c) and section 24(1) in such a way as to exercise an inherent power, the effect of which will be to force a third party, to-wit the company, to sell property vested in the company by way of sale to the petitioner. The difficulty I feel is that Parliament has in section 24(1)(a) specifically limited the property that shall be the subject of a property adjustment order and has limited it to property which is property to which the first-mentioned party is entitled in possession or reversion. Clearly no order could be made in respect of Elmwood, the company's property, pursuant to section 24. Section 23 is in terms drafted in such a way as to limit it simply to the obligation to pay a lump sum. I am unable to hold that I can collect from section 23 when read with section 24 any power to order as ancillary to an order for a lump sum an order imposing an obligation upon a respondent to procure that a third party in whom the property is beneficially vested to divest itself of that property by way of sale to a petitioning wife, whether the machinery be by exercise of the majority shareholder's voting powers or otherwise.

7

For those reasons, though with reluctance, I take the view that there was no power to make the order that the judge made in respect of the transfer of Elmwood, whether by way of undertaking, which as I have already explained was not an appropriate form of order, or by way of a direct order ordering the respondent to use his controlling vote in the company known as E.C. Sayers & Company to cause the sale of the company's property to the petitioner. For those reasons I would hold that that very important feature of the judge's order must be varied.

8

When one comes to the judge's order for a lump sum, it is quite plain that the order that he made, which was stated to be a lump sum estimated to be £105,000, is a figure arrived at simply as representing the evidence that was given before the judge as the reasonable consideration for the sale of Elmwood, having...

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