COLLEGE CHAMBERS ANCILLARY RELIEF LECTURE JANUARY 2010 THIRD PARTY INTERVENTION AND TRUSTS OF LAND CLAIMS IN ANCILLARY RELIEF CASES

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1 COLLEGE CHAMBERS ANCILLARY RELIEF LECTURE JANUARY 2010 THIRD PARTY INTERVENTION AND TRUSTS OF LAND CLAIMS 1.1 Interveners 1.2 Beneficial interest in FMH 1.3 Loaned monies 1.4 Gift 1.5 Evidence 1.6 Interveners Intervening 1.7 Costs IN ANCILLARY RELIEF CASES 2.1 Trusts of land issues within ancillary relief proceedings impact upon the ancillary relief proceedings 2.2 Impact on A.R proceedings Is there a place in matrimonial finance proceedings for TLATA claims? 2.3 Trusts of Land proceedings under TLATA 2.4 Cost implications of TLATA claims 3.1 Preliminary Hearings 3.2 When to have preliminary hearings 3.3 Format, attendance and representation 3.4 Evidence required 3.5 Preliminary hearings and cost issues 4.1 Conflict of Interest 4.2 Playing Safe 4.3 Getting Out & Delaying Joinder APPENDIX: 1. SOLICITORS CODE OF CONDUCT (as amended 31 March 2009) Rules GUIDANCE 3. COUNSEL: (Bar Code of Conduct) 4. Baker v Rowe (2009) [2009] EWCA Smith v Smith [2009] EWCA Civ 1297

2 1.1 INTERVENERS: Third Party interests frequently arise in Ancillary Relief proceedings, with not only Family members, but frequently also business associates, Trustees and even new partners of the Husband or Wife. Whether these people join the proceedings in their own right, attend as a witness for the Husband or Wife or even play no part at all, is a decision that needs to be made at an early stage and continually reviewed as the case progresses. The most common asset in issue is Property, and usually the FMH. Given the ever increasing difficulty for newly married couples purchasing their own property, family members often contribute and assist. Assistance from parents is the most common form of claim, although such appear in various forms. The first consideration of a potential claim, by or on behalf of a 3 rd Party, is what is the legal basis of the claim? As to forms of parental assistance, the furthest extreme is where a parent sells their own property and releases equity so as to assist in the purchase of the FMH, such parent will invariably live with the couple, whether in the FMH or at the bottom of the garden in an Annex/Shed. This invariably leads to divorce. But, because the general public believe the worst will never happen, it is common that at the point of the contribution being made, there is not always the formal drafting of declaration of trust which will preserve the parent s share we then have to try and un-pick that then from the matrimonial pot. Another option is of course an amount of money is provided to the couple by the Parents. Again consideration will need to be given as to on what basis monies were provided as rarely formalised agreements are drafted. Was the money ever intended to be repaid? Was the money to provide an interest in the Property (perhaps as security until repayment)? Or was the payment a gift or provision of early inheritance? All very different provisions by parents of the married couple, all with their own problems in proving and in achieving recovery of such monies for the 3 rd Parties.

3 1.2 BENEFICIAL INTERESTS IN THE FMH: For a claim to succeed it is necessary to first show that it was the intention of the Parties to have an interest in the property; this may be implied or imputed from conduct, but is crucial as without this the case is doomed to fail. Upon showing the intention, the amount of the share needs then to be quantified, the holistic approach may apply if there are no documentation or reference on the Title documents or more a simple approach and less arguable answer where such documents do exist. 1.3 LOANED MONIES: Parents providing monies to their children when they get married may be deemed to be a loan. It is rare for such loans to be formalised into written agreements, but where they are, there is unlikely to be much to dispute between the parties. What then is the status of a loan in such circumstances where there are no written agreements? Such soft loans are unlikely to attract interest and unlikely to have a repayment date. Often, if they are true loans, it will be likely that in the early days repayments are made towards the loan but then they may reduce and cease to be made over time if it can be shown that payments were made initially then this will be good evidence of a loan. The motivation of an assertion of a loan is often to provide one party with a larger share of the capital, provision assumingly being made for the ring fencing of capital assets. Loaned monies in their truest sense may also prove to be a more secure return than investing in property as such will not be affected by the down turn of the property market, avoiding the % assessment. 1.4 GIFT: The Defence of a gift is often difficult for the third party to overcome, as a parent providing money to their children raises the presumption of advancement. This is easily raised but without good evidence to the contrary, can be a knock-out blow to a parent s claim for recovery of their financial assistance. ANTONI & PEACHES LTD v ANTONI, MALONE & ANTONI (2007) LTL 1/3/ emphasizes the need to start with consideration of this equitable principle and consider the evidence and facts of the case to determine whether such is displaced.

4 1.5 EVIDENCE: 1. Early Evidence. 2. Full evidence. Usual scenario is either a dispute that there ever was an agreement or one party saying I know nothing of any agreement in any event the importance of the evidence cannot be forgotten. Problems arise where the evidence is built up over time, such that it may not be credible and attacked as being manufactured, particularly in the cases wholly dependant on recollections of events and conversations from many years previous. Documents are great but rarely available in the disputed cases. Thus, it is important to get the Client s full recollection of events and ensure that such ties in with the case of the Intervener or supporting Party prior to making the claim known to all A Husband asserting a loan from his parents but with the parents asserting a beneficial interest is a case doomed from the outset! - Terminology is important and reference from the early stages of Form E and pre-issue negotiations to different claims may prove fatal. 1.6 INTERVENERS INTERVENING Interested Third Parties may intervene in the course of ancillary relief proceedings to assert their interest, they may issue a separate application that will invariably be joined with the ancillary relief, they may simply take a witness role on behalf of one of the Parties, or they may not take part in the proceedings at all. Ever since the decision of Tebbutt v. Haynes [1981] 2 All ER 238, it has been recognised as convenient that a third person who asserts a beneficial interest in property which is the subject of an application for ancillary relief following divorce should either be permitted as an intervener, or ordered as a further respondent, to make his assertion within, and thus as a party to, the application, rather than that the existence or otherwise of his alleged interest be determined in separate proceedings in a separate court at a separate time, with the consequential risk of inconsistent decisions. But the Tebbutt approach does not formalise a TOLATA claim and therefore does not necessarily give the Court the powers of s.14 of TOLATA or the costs protection of the Civil Procedure Rules.

5 T v T and others (Joinder of Third Parties) [1996] 2 FLR 357 is an example of the reluctant Third Party (a Trustee) who under RSC Order 15 r.6 (2) (b) was joined by the court as a party to the proceedings on the basis such was necessary and it was just and convenient to determine at the same time as the substantive issue other issues between the existing parties and the party to be joined. Thus, even the reluctant Third Party may be compelled to partake in proceedings. 1.7 COSTS & INTERVENERS CLAIMS The general rule, under the Family Proceedings Rules, that there be no order for costs in AR, does not apply to the issue of costs involving parties who intervened in order to establish a beneficial interest in the marital home, as such are only in connection with AR and not for the purposes of AR. (Judge v Judge (2008)). Further, where intervention is under the general auspices of the Matrimonial Causes Act, the Civil Procedure Rules do not apply by virtue of the fact that the CPR does not apply to family proceedings. Thus, the general rule that the unsuccessful party will be ordered to pay the costs of the successful party, will not apply. The recent case of Baker v Rowe (2009) considered this area further and concluded that the judge making the costs order has a wide clean sheet discretion, but also stated that the Court could not properly ignore the fact that one side had won and the other had lost and will often properly count as the decisive factor in the exercise of the judge s discretion. So how does this help the practitioner in advising as to litigation risk? Well the answer seems to be overtly hidden within the Baker case. To ensure an Intervener has the highest chance of being awarded costs upon success, then they should issue a separate TOLATA application which will be heard with the AR case, thus CPR will then apply. Simply join interested parties in AR then face the risk of the absolute discretion of the Judge!

6 2.1 TRUSTS OF LAND ISSUES WITHIN ANCILLARY RELIEF PROCEEDINGS IMPACT UPON THE ANCILLARY RELIEF PROCEEDINGS: 2.2 IMPACT UPON THE ANCILLARY RELIEF PROCEEDINGS: Midland Bank v Cooke [1995] 2 FLR 915 at 927 per Waite LJ said: The mass diffusion of home ownership has been one of the most striking social changes of our own time When people, especially young people, agree to share their lives in joint homes they do so on a basis of mutual trust and in the expectation that their relationship will endure For a couple embarking on a serious relationship, discussion of the terms to apply at parting is almost a contradiction of the shared hopes that have brought them together. There will inevitably be numerous couples, married or unmarried, who have no discussion about ownership and who, perhaps advisedly, make no agreement about it. It would be anomalous, against that background, to create a range of home-buyers who were beyond the pale of equity s assistance in formulating a fair presumed basis for the sharing of beneficial title, simply because they had been honest enough to admit that they never gave ownership a thought or reached any agreement about it. Cohabitants who are involved in disputes as to the ownership of their owner-occupied home still face strict property rights and the existence of express and implied trusts. This will be the case unless Parliament brings about statutory in line or similar to the statutory provisions available to married couples or civil partners. Cohabitants will have to rely on the Trusts of Land and Appointment of Trustees Act 1996 section 14 (TOLATA 1996) to pursue a claim for a declaration of his or her beneficial interest in the cohabitants home or the net proceeds of sale. The 1996 Act brings with provisions for statutory accounting in terms of occupation of the property and compensation for a co-owner s exclusion from the property.

7 Engaged couples can look to the statutory provisions under s 17 of the Married Women s Property Act 1882 (MWPA 1882) and Matrimonial Proceedings and Property Act 1970 s 37 (MPPA 1970) by virtue of section 1 of the Law Reform (Miscellaneous Provisions) Act 1970 s 2(1). Section 17 of the MWPA 1882: Questions between husband and wife as to property to be decided in a summary way In any question between husband and wife as to the title to or possession of property, either party... may apply by summons or otherwise in a summary way [to the High Court or such county court as may be prescribed and the court may, on such an application (which may be heard in private), make such order with respect to the property as it thinks fit. Section 37 of the MPPA 1970: Contributions by spouse in money or money's worth to the improvement of property It is hereby declared that where a husband or wife contributes in money or money's worth to the improvement of real or personal property in which or in the proceeds of sale of which either or both of them has or have a beneficial interest, the husband or wife so contributing shall, if the contribution is of a substantial nature and subject to any agreement between them to the contrary express or implied, be treated as having then acquired by virtue of his or her contribution a share or an enlarged share, as the case may be, in that beneficial interest of such an extent as may have been then agreed or, in default of such agreement, as may seem in all the circumstances just to any court before which the question of the existence or extent of the beneficial interest of the husband or wife arises (whether in proceedings between them or in any other proceedings). As for married couples, generally, there is little point in spouses litigating as between themselves over strict property rights. In a happy marriage it does not matter who owns what, except to creditors, executors and the Inland Revenue. If a marriage breaks down and proceedings for divorce or judicial separation follow, all property considerations will be subsumed within the flexible jurisdiction of the courts under the Matrimonial Causes

8 Act 1973 (MCA 1973). To that extent, proceedings under the MWPA 1882 or MPPA 1970 are otiose. The Matrimonial Causes Act 1973 is the main statutory act to deal with financial provision upon the breakdown of a marriage. Thus the Matrimonial Causes Act 1973 is the main statutory act to deal with financial provision upon the breakdown of a marriage. The 1882 and 1970 statutes are occasionally used to sort out contents (very rare) to achieve an interim sale of the matrimonial home or to plug a gap left by the accidental remarriage of a party before instituting a claim for ancillary relief IS THERE A PLACE IN MATRIMONIAL FINANCIAL PROCEEDINGS FOR A CLAIM UNDER TOLATA 1996? The key provisions of the MCA 1973 in relation to real property such as the family home are: Section 24 Property adjustment orders in connection with divorce proceedings, etc (1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may make any one or more of the following orders, that is to say a. an order that a party to the marriage shall transfer to the other party, to any child of the family or to such person as may be specified in the order for the benefit of such a child such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion; b. an order that a settlement of such property as may be so specified, being property to which a party to the marriage is so entitled, be made to the satisfaction of the court for the benefit of the other party to the marriage and of the children of the family or either or any of them; c. an order varying for the benefit of the parties to the marriage and of the children of the family or either or any of them any ante-nuptial or

9 post-nuptial settlement (including such a settlement made by will or codicil) made on the parties to the marriage, other than one in the form of a pension arrangement (within the meaning of section 25D below); d. an order extinguishing or reducing the interest of either of the parties to the marriage under any such settlement, other than one in the form of a pension arrangement (within the meaning of section 25D below); subject, however, in the case of an order under paragraph (a) above, to the restrictions imposed by section 29(1) and (3) below on the making of orders for a transfer of property in favour of children who have attained the age of eighteen. (2) The court may make an order under subsection (1)(c) above notwithstanding that there are no children of the family; (3) Without prejudice to the power to give a direction under section 30 below for the settlement of an instrument by conveyancing counsel, where an order is made under this section on or after granting a decree of divorce or nullity of marriage, neither the order nor any settlement made in pursuance of the order shall take effect unless the decree has been made absolute. Section 2 Matters to which court is to have regard in deciding how to exercise its powers under sections 23, 24 and 24A (1) It shall be the duty of the court in deciding whether to exercise its powers under section 23, 24, 24A or 24B above and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen; (2) As regards the exercise of the powers of the court under section 23(1)(a), (b) or (c), 24, 24A or 24B above in relation to a party to the marriage, the court shall in particular have regard to the following matters a. the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire; b. the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

10 c. the standard of living enjoyed by the family before the breakdown of the marriage; d. the age of each party to the marriage and the duration of the marriage; e. any physical or mental disability of either of the parties to the marriage; f. the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family; g. the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it; h. in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring. The matrimonial court has a wide discretion as to how to deal with the assets within the marriage including real property such as the parties home. The Court is not bound by the strict property rights and the declared interests. Once there has been a divorce, everything can be sorted out and property rights adjusted, as necessary, under MCA In essence, it is usually a waste of time issuing a TOLATA 1996 claim (or such claims under MWPA 1882 or MPPA 1970). The case of Tee v Tee and Hillman [1999] 2 FLR 613 saw the Court of Appeal giving a firm view as to the use of TOLATA claims in matrimonial cases. The Court said that there was only one material capital asset, the matrimonial home, which was obviously joint property. Because the owners were husband and wife, and there were no third party interests, the only pertinent statutory provisions were contained in the MCA 1973, section The recent case of Smith v Smith [2009] EWCA Civ 1297 (judgment handed down on ) answers the question as to whether or not there is a place for a TOLATA claim in matrimonial proceedings as follows: in principle is it more desirable that an issue between divorcing spouses about the sale of a home should be resolved within an application for ancillary relief rather than one under TOLATA 1996.

11 2.3 TRUSTS OF LAND PROCEEDINGS UNDER TOLATA 1996: Normally, TOLATA claims in ancillary relief cases under the MCA 1973 are not required. The Court of Appeal decisions both past (Tee v Tee & Hillman) and present (Smith v Smith) confirm that in principle is it more desirable that an issue between divorcing spouses about the sale of a home should be resolved within an application for ancillary relief rather than one under TOLATA However, Mr Smith got away using the TOLATA to achieve an earlier for sale of the former matrimonial home and on the facts of that case, it could be said that the Court of Appeal was not overall critical of the use of TOLATA. Thus there may be a place for a TOLATA claim in certain matrimonial cases: As in Smith v Smith, a large property lived in by the Wife with the Husband paying for it and the proceedings being dragged out with no or limited prospects of the Wife ultimately retaining the property as a home for herself (and her dependants); Those cases in which the parties own various properties which may need to be sold sooner rather than later before the overall settlement or conclusion of the ancillary relief matter.

12 2.4 COSTS IMPLICATIONS OF TOLATA CLAIMS: Considering a TOLATA claim instead of a MCA application for ancillary relief in normal cases is unimaginable. In most cases, TOLATA does not need to be considered alongside a MCA application. If the facts of the case do give rise to the ringing bells of TOLATA, consider the need very carefully. Make sure that the facts really merit such a claim. In particular, consider what is sought to be achieved by such a claim that cannot be achieved by a MCA claim or indeed other statutory provisions such as the Family Law 1996 (such as occupation order/ orders directing parties to pay mortgage and outgoings). Also consider the costs implications of pursuing a TOLATA claim as well as a MCA application (or being faced with an application for ancillary relief from the other side): consider: o the additional costs of pursuing the TOLATA claim further court fee/ statements of case/ hearings etc; o The fact that TOLATA claims are civil proceedings to which the Civil Procedure Rules apply in terms of procedure; o The CPR also have the rules as to offers (CPR 36 with specific provisions as to costs/ interest implications); o The CPR sets out clear rules as to costs generally (CPR 44). The usual costs follow the event remains as the general approach in civil cases compared to the now well versed no order as to costs approach in matrimonial courts.

13 3.1.1 PRELIMINARY HEARINGS: The Family Proceedings Rules 1991, rule 2.51D set out the overriding objective in family proceedings as follows: (1) The ancillary relief rules are a procedural code with the overriding objective of enabling the court to deal with cases justly. (2) Dealing with a case justly includes, so far as is practicable (a) ensuring that the parties are on an equal footing; (b) saving expense; (c) dealing with the case in ways which are proportionate (i) to the amount of money involved; (ii) to the importance of the case; (iii) to the complexity of the issues; and (iv) to the financial position of each party; (d) ensuring that it is dealt with expeditiously and fairly; and allotting to it an appropriate share of the court s resources, while taking into account (e) the need to allot resources to other cases. (3) The court must seek to give effect to the overriding objective when it (a) exercises any power given to it by the ancillary relief rules; or (b) interprets any rule. (4) The parties are required to help the court to further the overriding objective. (5) The court must further the overriding objective by actively managing cases. (6) Active case management includes encouraging the parties to co-operate with each other in the conduct of the (a) proceedings; (b) encouraging the parties to settle their disputes through mediation, where appropriate; (c) identifying the issues at an early date; (d) (e) regulating the extent of disclosure of documents and expert evidence so that they are proportionate to the issues in question; helping the parties to settle the whole or part of the case;

14 (f) fixing timetables or otherwise controlling the progress of the case; (g) making use of technology; and (h) giving directions to ensure that the trial of a case proceeds quickly and efficiently. In Crossley v Crossley [2008] 1 FLR 1467, the Court of Appeal stated that the FPR were not intended as a straitjacket precluding sensible case management: Applying the overriding objective in r 2.51D, it was very important that judicial case management should seek to save expense, should deal with the case in ways proportionate to the financial position of the parties, should allot to each case an appropriate share of the court s resources, and should identify the issues at an early date, in particular regulating the extent of the disclosure of the documents and expert. The need for preliminary hearing in ancillary relief cases are generally few and far between. The need for a preliminary hearing may arise when: A party alleges a serious conduct issue, such as dissipation of assets, such that it would be inequitable for the Court to disregard such conduct; There exist a pre-nuptial agreement or a post-nuptial agreement and one party seeks to rely on the terms; a third party might raise seek to argue that he or she has a beneficial interest in a matrimonial property such as the former matrimonial home; a third party being owed a significant amount of monies by the Husband and/ or the Wife; Significant disputes regarding valuation of matrimonial assets/ shares/ businesses - unusual but possible and would probably involve significant assets and disputed expert evidence; whether or not a party s reversionary interest in a trust fund was a financial resource within s 25(2)(a) of the Matrimonial Causes Act 1973 C V C (Ancillary Relief: Trust Fund) [2009 EWHC 1491 was a case determined in June 2009 by Munby J.

15 As to those cases in which a party alleges that a previously concluded agreement had been reached between the parties as to the matrimonial finances, where there is an issue seen as a factor of magnetic importance, the court still retained its duty to consider the s 25 factors. The correct approach was not to list as a preliminary issue but to list the matter for final hearing, with further disclosure limited to the identified issue of the agreement: see Crossley v Crossley [2008] 1 FLR 1467 and S v S (Ancillary Relief) [2008] EWHC 2038 (Fam). 3.2 WHEN TO HAVE PRELIMINARY HEARINGS: By the time the parties attend the First Directions Appointment, any preliminary issue should have been identified clearly along with the parties positions as to the particular issue. The extent of the issue in terms of the amount involved, the evidence required and the potential impact of the issue s determination is important to consider at an early stage in order to decide: a) Whether the preliminary issue should be heard in advance of the Financial Dispute Resolution hearing/ final hearing; or b) Whether the issue can be deal with at the start of the final hearing (e.g. during the first day of a 2 day plus hearing); or c) Whether the issue can be considered by the court along with the other usual factual disputes as part of the final hearing itself. Factors which would militate towards an advance preliminary issue hearing are: Determination of the issue could finalise the proceedings sooner rather than later and avoid a FDR hearing let alone a final hearing: for example, in cases involving an issue that there has been a concluded agreement which is fair for both parties and the other party should show cause as to why the agreement

16 should not approved by the Court might be brought to a swift end if the Court finds in favour of the concluded agreement and that it should be approved by the Court. The parties agree in principle how the matrimonial assets should be shared along with the other peripheral orders but there is an issue as to what assets are to be shared or the value of those assets. Once the factual issues can be decided upon, the resolution of the case can be achieved through settlement; The preliminary issue involves a third party/ intervener as to his or her interest and once determined, the rest of the case based on the section 25 factors is likely to be resolved at a financial dispute resolution hearing; The preliminary issue which may involve a dispute requiring disputed expert evidence to be called and again, upon determination of the expert evidence, the case can lead to a potential resolution via settlement/ FDR. The issue involves a significant asset or assets making it worthwhile potentially having an additional preliminary hearing over and above the usual 3 hearings in the event of the parties being unable to reach settlement; 3.3 FORMAT AND ATTENDANCE/ REPRESENTATION: Directions for a preliminary hearing should be made at the First Directions Hearing. It is helpful for the Court to record in the preamble of the directions order the purpose of the preliminary issue and the determination sought from the Court. Care should be made to ensure that the directions are full and complete as to gathering the appropriate evidence/ statements and that the directions are timely without causing too much delay. Consider which party shall deal with the preparation of the trial bundle and the drafting of preliminary documents. Consider and agree directions for agreed preliminary documents and timescales of doing so. Give directions for skeleton arguments if they are required.

17 The parties need to be clear as to any third parties who are potential interveners and the directions that may be required at the earliest opportunity: Have they expressed a wish to be joined if not already done so? Do they need to be joined? Can they simply be witnesses for the parties? Will they be willing witnesses or will there be a need to apply to the Court for a witness summons? Should relevant third parties be invited to join? Consider timescales to enable the third parties to make their application and further directions to deal with such an application and/ or consequential directions; Will the interveners be provided with disclosure of the case papers or a selection of them? To what extents the spouses disclosure needs to be provided to interveners? Will the interveners be legally represented and if not, ensure which of the parties solicitors will serve orders upon them and trial bundles etc. When should a preliminary hearing be held? Where should a preliminary hearing be held? Should there be any site visits or any other unusual facilities? Which party should open the hearing? Consider a timetable of witnesses if there are interveners, witnesses other than the spouses/ expert witnesses with estimated timings of the evidence and submissions. 3.4 EVIDENCE REQUIRED: Early identification of the issue that requires a preliminary hearing should enable the parties to identify the evidence that is required, such as: Parties evidence; Other witness evidence; Expert evidence followed by questions (CPR Part 35);

18 Documentary evidence and disclosure; Disclosure from third parties. Consider very carefully the purpose of the evidence intended to put forward and rely upon, its relevance and who it will assist the Court to determine the preliminary issue. Do not forget the most obvious documents: Trust deed/ Declaration of Trust; Written agreement; Signed consent order; Relevant correspondence set out in chronological order. Does the case need a Scott Schedule? This can be a useful tool in cases where the preliminary issue involves expenditure over a period of time by a third party or the parties with reference to the disclosed bank statements/ receipts. It enables the items highlighted and the supporting evidence to be listed in one document rather than scattered all over the place in a trial bundle (or more). Such a Schedule should be set up if at all possible at the time the piles of paperwork handed over the by client are being digested for relevance. Ensure that columns are included for the other parties comments/ position and a column for the Judge s decision if he needs to consider the entries and make findings upon them. Send the document via to the other parties along with the hard copy. Avoid overloading the evidence on the basis with issues which will in reality be considered as part of the section 25 factors at a FDR hearing or final hearing. Keep the client on the relevant evidence tracks!

19 3.5 COSTS ISSUES: Rule 2.71 of the Family Proceedings Rules 1991 provides as follows: 2.71 Costs orders (1) CPR rule 44.3(1) to (5) shall not apply to ancillary relief proceedings. (2) CPR rule 44.3(6) to (9) apply to an order made under this rule as they apply to an order made under CPR rule (3) In this rule costs has the same meaning as in CPR rule 43.2(1) (a) and includes the costs payable by a client to his solicitor. (4) (a) The general rule in ancillary relief proceedings is that the court will not make an order requiring one party to pay the costs of another party; but the court may make such an order at any stage of the proceedings where it considers (b) it appropriate to do so because of the conduct of a party in relation to the proceedings (whether before or during them). (5) In deciding what order (if any) to make under paragraph (4)(b), the court must have regard to any failure by a party to comply with these Rules, any order of the court or any (a) practice direction which the court considers relevant; (b) any open offer to settle made by a party; (c) (d) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; the manner in which a party has pursued or responded to the application or a particular allegation or issue; any other aspect of a party s conduct in relation to the proceedings which the court (e) considers relevant; and (f) the financial effect on the parties of any costs order. (6) No offer to settle which is not an open offer to settle shall be admissible at any stage of the proceedings, except as provided by rule 2.61E.

20 The general rule in ancillary relief proceedings under FPR r 2.71(4) is now that the court will not make a costs order but the court retains discretion to do so because of the conduct of a party in relation to the proceedings. FPR r 2.71(5) sets out factors to which the court must have regard, which include: (c) whether it was reasonable for a party to raise or pursue a particular issue; and (d) the manner in which a party had pursued an application. These two considerations are identical to those found in the CPR r 44.3(5) (b) and (c). CPR r 44.3(6) and (7) regarding the costs orders the court may make apply to ancillary relief proceedings. It follows that authorities on costs orders under the CPR will be relevant in the ancillary relief context. The costs of a preliminary issue will be considered based on the statutory provisions set out above and clearly the Court can exercise its discretion. A client pursuing a preliminary issue unreasonably causing significant costs could face a persuasive application for costs by the other side. Conversely, a party defending an issue unreasonably such that a preliminary hearing was necessary may face a costs order. Thus consider very carefully the need for a preliminary hearing: whether or not to pursue the issue or defend the issue; and whether or not the issue can be or should be determined at a final hearing with the consideration of the section 25 factors without the additional expense of a preliminary hearing.

21 4.1 CONFLICT OF INTERESTS ISSUES: An important initial consideration that should be continually reappraised throughout the case is that of Conflict. Conflict arising at the 11 th hour or even in the middle of a hearing gives exposure to costs and delays. 4.2 PLAYING SAFE : Consideration to the issue of conflict raises the issue of separate representation. A lead party may represent an intervener s interests concurrently without difficulty, although in difficult cases thought may be given to separate representation for many reasons, not just the risk of conflict but as to the perception of independent representation at trial. 4.3 GETTING OUT / DELAYING JOINDER: 2 aspects of Interveners that needs to be continually assessed is whether to intervene/join 3 rd parties or whether involved parties should exit even after joined the principle factor will be costs! The safest course is to alert the 3 rd Party at an early stage Service of Forms A and E in accordance with the concluding words of FPR r.2.59 (3). STUART McGHEE & CAROL DAVIES College Chambers, Southampton. JANUARY 2010

22 APPENDIX: 1. SOLICITORS CODE OF CONDUCT (as amended 31 March 2009) Rule 3.01 Duty not to act (1) You must not act if there is a conflict of interests (except in the limited circumstances dealt with in 3.02). (2) There is a conflict of interests if: (a) you owe, or your firm owes, separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict; or (b) your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter. (3) For the purpose of 3.01(2), a related matter will always include any other matter which involves the same asset or liability Exceptions to duty not to act (1) You or your firm may act for two or more clients in relation to a matter in situations of conflict or possible conflict if: (a) the different clients have a substantially common interest in relation to that matter or a particular aspect of it; and (b) all the clients have given in writing their informed consent to you or your firm acting. (2) Your firm may act for two or more clients in relation to a matter in situations of conflict or possible conflict if: (a)the clients are competing for the same asset which, if attained by one client, will make that asset unattainable to the other client(s); (b)there is no other conflict, or significant risk of conflict, between the interests of any of the clients in relation to that matter; (c)the clients have confirmed in writing that they want your firm to act in the knowledge that your firm acts, or may act, for one or more other clients who are competing for the same asset; and (D) Unless the clients specifically agree, no individual acts for, or is responsible for the supervision of, more than one of those clients. (3) When acting in accordance with 3.02(1) or (2) it must be reasonable in all the circumstances for you or your firm to act for all those clients. (4) If you are relying on the exceptions in 3.02(1) or (2), you must:

23 (a)draw all the relevant issues to the attention of the clients before agreeing to act or, where already acting, when the conflict arises or as soon as is reasonably practicable, and in such a way that the clients concerned can understand the issues and the risks involved; (b)have a reasonable belief that the clients understand the relevant issues; and (c) Be reasonably satisfied that those clients are of full capacity Conflict when already acting If you act, or your firm acts, for more than one client in a matter and, during the course of the conduct of that matter, a conflict arises between the interests of two or more of those clients, you, or your firm, may only continue to act for one of the clients (or a group of clients between whom there is no conflict) provided that the duty of confidentiality to the other client(s) is not put at risk.

24 2. GUIDANCE: Conflict is defined 3.01 Conflict is defined as a conflict between the duties to act in the best interests of two or more different clients, or between your interests and those of a client. The definition appears in 3.01(2). This will encompass all situations where doing the best for one client in a matter will result in prejudice to another client in that matter or a related matter. The definition of conflict in 3.01(2) requires you to assess when two matters are "related". 3.01(3) makes it clear that if the two matters concern the same asset or liability, then they are "related". Accordingly, if you act for one client who is negotiating with publishers for the publication of a novel, an instruction from another client alleging that the novel is plagiarised and breaches copyright would be a related matter. However, there would need to be some reasonable degree of relationship for a conflict to arise. If you act for a company on a dispute with a garage about the cost of repairs to a company car, your firm would not be prevented from acting for a potential bidder for the company, even though the car is a minor asset of the company and would be included in the purchase. If you act for a client selling a business, you might conclude that your firm could also act for a prospective purchaser on the creation of an employee share scheme which would cover all the entities in the purchaser's group, this work perhaps requiring the future inclusion of the target within the scheme and consideration as to whether this raised any particular issues. In each case, you will need to make a judgement on the facts. In making this judgement, you might want to consider the view of your existing client where you are professionally able to raise the issue with him or her. You should also take care to consider whether your firm holds any confidential information from your existing client who would be relevant to the new instructions and if so, to ensure that you comply with rule 4 (Confidentiality and disclosure). You are or your firm is permitted to act with clients' consent in defined circumstances of conflict subject to suitable safeguards This reflects the fact that there may be circumstances in which, despite peripheral or potential conflict, the clients' best interests are served by you, or your firm, being able to act for two or more clients who are able to give informed consent. The circumstances in which you could act despite a conflict are set out in Two different situations are defined. These are in 3.02(1) and (2): (a) (i) 3.02(1) deals with the situation where the clients have a "common interest", they all want to continue to instruct you and it would be disproportionate, for example, in terms of cost and general disruption to their matter, to require them to instruct separate solicitors.

25 (ii) For there to be a "common interest" there must be a clear common purpose and a strong consensus on how it is to be achieved. However, it will be for you to decide objectively on the facts in each case whether there is a "common interest" and it is appropriate to act. In making this decision, you should always consider whether the clients will be represented even-handedly with equal weight being given to the instructions from each. (iii) The "common interest" might arise, for example, where you are acting for several members of a family in relation to their affairs or acting for various individuals in the setting up of a company. Any areas of conflict must be substantially less important to all the clients than their common purpose and may, for example, relate to slightly different views on how the common purpose is to be achieved. It will be your duty to keep the differences under review with the clients and to decide if the point has been reached when it would be untenable to continue to represent all of them in a fair and open manner or without any of them being prejudiced. (iv) There exist some multi-party complex commercial transactions, where sophisticated users of legal services, who have a common purpose, may expect a firm to act for two or more parties, because this will facilitate efficient handling of the matter (taking into account amongst other things the desire to complete the transaction quickly, the availability of necessary experience/expertise and the overall costs). Indeed in many cases it may already be accepted business practice for firms to act in this manner. An example is acting for different tiers of lenders (for example senior lenders and mezzanine lenders) and/or different parties (for example arrangers/underwriters and bond/security trustees) in entering into a financing transaction where there is already an agreed or commonly understood structure with regard to the ranking of their respective claims, the content of their respective obligations and associated commercial issues. (v) While accepted business practice can be considered as a factor in determining whether an appropriate common purpose exists, you and your firm should always exercise caution when proposing to act in accordance with 3.02 and should be mindful of the residual test of reasonableness referred to in 3.02(3). (vi)in some situations it might be possible for you to consider whether the retainer could be limited to those areas where there is no conflict with the clients seeking separate advice on any areas of conflict. This could only be done where the conflict did not undermine the overriding common purpose (see below for further guidance on limiting retainers). (vii)in some circumstances it might be possible that, while a conflict would prevent you from acting for another party on all aspects of a matter, a mandate limited to a specific issue where there is common purpose might be accepted. For example, you may be retained by the owner of a company to advise on its disposal. In that case you would not generally be able to advise another party on the purchase of the company. However, in the hope and anticipation of a successful sale a seller client which is a sophisticated user

26 of legal services might agree that you should also accept a limited retainer to provide competition law advice to the prospective purchaser regarding the filings for competition law purposes that would be required in the event that the two businesses were combined. (viii)when acting under this exception, especially in family situations, you need to consider the developing legal position. Courts are likely to make a presumption of undue influence where one of the parties who is considered vulnerable through age or other circumstances places trust and confidence in the other party. In any situation of doubt it may well be in the best interests of the clients that they are separately represented. (b) (i) 3.02(2) is intended to apply to specialised areas of legal services where the clients are sophisticated users of those services and conclude that rather than seek out new advisers they would rather use their usual advisers in the knowledge that those advisers might also act for competing interests. An "asset" is not necessarily physical, and can include a contract or a business opportunity. Examples where this exception might apply include: (A) acting on insolvencies so that a firm can act for more than one creditor; (B) acting for competing bidders, and/or for those involved with the funding of bidders, for a business being sold by auction; and (C) acting for competing tenderers submitting tenders to perform a contract. (ii) The wording of 3.02(2) is sufficiently wide to permit other transactional work in the commercial field where clients can give consent. Solicitors and their firms should exercise considerable caution when proposing to act in accordance with 3.02(2) in categories of work where to do so is not already accepted business practice. (iii) 3.02(2) should not be applied to disputes over assets other than in the context of corporate restructurings and insolvencies. Reasonableness is an important rider to There may be situations where, despite compliance with 3.02, it would still not be reasonable to act. The apparent unequal bargaining position of the parties, concerns about the mental stability of one of the parties, a family arrangement where an elderly parent is providing security for their son's or daughter's business loan, and the importance of one of the clients to the firm may all be situations where instructions to act for both or all parties should be declined. Having accepted instructions you must be satisfied that you can act even-handedly for both or all clients and that, taking into account any limitations in a specific retainer, you do not favour one at the expense of the other(s). The criterion against which reasonableness will be judged is whether one client is at risk of prejudice because of the lack of separate representation. In relation to all situations where you are proposing to act for two or more clients under the provisions of 3.02, the onus will be on you to demonstrate why it was reasonable to act for all the clients at the time the instructions were accepted. Above all, you must be satisfied that unfettered advice can be given, without fear or favour, to the clients. You must also keep under review whether it

27 remains reasonable to continue to act for them. You should also have regard to 1.04 (Best interests of clients) which requires you to act in the best interests of each of your clients. (a) 3.02(4) places obligations on you to discuss with the clients the implications of you, or your firm, continuing to act for all of them. You must be satisfied that the clients understand the issues and that their consent is independently and freely given. You should consider setting out in your initial terms of business letter the issues discussed in relation to the conflict of interests and how that might affect your ability to represent both or all of the clients as the matter progresses. Extreme caution will be required where one of the clients is particularly vulnerable due to mental health, language or other problems affecting their understanding of the issues, although where a litigation friend acts for a person who lacks capacity they will be able to consent on that person's behalf. Similarly, you must always be alert to situations where a client might be consenting under duress or undue influence and in those circumstances must insist on separate representation. For the avoidance of doubt, and for evidential purposes, you should always keep a written record of all discussions with the clients about the implications of your acting for them. You must always obtain all the clients' written consent on each occasion when acting under either of the exceptions. (b) Where seeking informed consent under 3.02(1) (b) you should identify by name the other clients you or your firm propose(s) to act for, or be able to do so when their identities are known. Provided that you do this and comply with the requirements of 3.02(4), the obligation to obtain "informed" consent in 3.02(1) (b) will have been satisfied. Where consent is sought under 3.02(2), you need to comply with the requirements of 3.02(4) but you need not identify by name the other clients you or your firm propose(s) to act for. When acting for two or more clients on a matter, or a related matter, there may be circumstances where you will have to cease acting for one or both clients. This may be in circumstances where no conflict was apparent when accepting instructions but a conflict subsequently arose or when acting under one of the exceptions and it becomes impossible to fulfil the conditions set out in In these circumstances it is important to try and limit the disruption that will inevitably be caused for the clients. One way of doing this is to discuss and agree with the clients at the outset what will happen if a conflict arises and agree which client the firm would continue to represent where this is possible. The rule does not specifically deal with potential or future conflict, although it does make clear that a significant risk of conflict should prevent a solicitor from acting. You should always be cautious, therefore, about accepting instructions where the possibility of future conflict is evident. The risks should be explained to the clients about the problems and expense which the requirement for future separate representation could bring