CHAPTER ONE – THE JURISDICTION OF THE FAMILY COURT AND THIRD PARTY INTERESTS
It is an established fact that any dispute between a spouse and a third party regarding the beneficial ownership of property can be adjudicated in financial remedy proceedings. As stated by Lord Denning MR in Tebbutt v Haynes [1981] 2 All ER 328:
[242] It seems to me that, under s.24 of the 1973 Act, if an intervenor comes in making a claim for the property, then it is within the jurisdiction of the judge to decide on the validity of the intervenor’s claim. The judge ought to decide what are the rights and interests of all the parties, not only of the intervenor, but of the husband and wife respectively in the property. He can only make an order for the transfer, to the wife, of property which is the husband’s property. He cannot make an order for the transfer to the wife of someone else’s interest. So, in order to make an order under s24, it must be within the jurisdiction of the judge to determine what are the various rights and interests in the property not only of husband and wife but also of any other persons who claim an interest.
Another intervenor case is P v Q, R and S (Claim against Assets of Extended Family) [2024] EWFC 164. In those proceedings, the court was concerned with a claim by the wife against the husband’s parents who were joined as intervenors to the proceedings. The judge noted that it was not particularly clear what the wife’s case was and stated that “it was not particularly clear during the hearing what the applicant’s case is”. This highlights the importance of complying with the guidance provided in paragraph 36 of TL v ML. Ultimately, the wife claimed to have a beneficial interest in some properties. The husband and intervenors argued that the facts do not support the case which the wife was advancing, and neither the wife nor the husband have any beneficial interest in either property.
The Family Court does not have the jurisdiction under the Trusts of Land and Appointment of Trustees Act 1996 (‘TLATA’). It follows that TLATA claims must be issued in either a county court or the High Court, and not the family court. If a TLATA claim is to be heard together with an application under the Matrimonial Causes Act 1973 (‘MCA 1973’) or Schedule 1 of the Children Act 1989 (‘Sch 1 CA 1989’), both claims will need to be heard at a combined county court and Family Court Centre or in the High Court. Notwithstanding this, it does not follow that the determination of what is or what is not ‘property/financial resources’ in financial remedy proceedings under the MCA 1973 is outside the jurisdiction of the Family Court. Indeed, it can be firmly stated that it is within the Family Court’s dispositive powers under the MCA 1973 to make such determinations given the express reference to ‘property/financial resources’ under the section 25 statutory checklist.
In determining what property and/or financial resources are available for distribution, the Family Court applies trust law principles or proprietary estoppel principles which are universally applicable when determining property rights. According to section 31E(1) of the Matrimonial and Family Proceedings Act 1984 (‘MFPA 1984’) “in any proceedings in the family court, the court may make any order (a) which could be made by the High Court if the proceedings were in the High Court, or (b) which could be made by the county court if the proceedings were in the county court”. Such orders include the power to make a declaration. On this basis, the family court has the power to make a declaration as to the beneficial interests without the jurisdictional issues that can arise as the family court is not exercising TLATA jurisdiction. In financial remedy proceedings between spouses, the court is required to perform an essentially inquisitorial role and then discretionary exercise pursuant to sections 23-26 of MCA 1973. In contrast, when determining the issue between a spouse and a third party as to who owns what, “the court is not performing a discretionary exercise but is determining issues of property law and associated fact”.[1]
Having determined the beneficial ownership of a property, the declaratory relief will be binding against the whole world, and not just the parties and the intervenors to the claim. Support for this proposition is drawn the case of Tebutt v Haynes & Anor [1981] 2 All ER 238 which concerned a claim for a transfer of property between husband and wife under section 24 of MCA 1973. Mrs Tebutt claimed that she had a considerable interest in the house, and she was rightly brought in as an intervenor. Per Lord Denning MR:
[242] It seems to that, under s24 of the 1973 Act, if an intervenor comes in making a claim for property, then it is within the jurisdiction of the judge to decide on the validity of the intervenor’s claim. The judge ought to decide what are the rights and interests of all the parties, not only of the intervenor, but of the husband and wife respectively in the property. He can only make an order for the transfer, to the wife, of property which is the husband’s property. He cannot make an order for the transfer to the wife of someone else’s interest. So, in order to make an order under s24, it must be within the jurisdiction of the judge to determine what are the various rights and interests in the property not only of husband and wife but also of any other persons who claim an interest.
Although Bingham LJ refers to the Family Division, in light of section 31E MPFA 1984 it is clear that the same logic equally applies to the Family Court which also undertakes the same exercise in section 24 and may make similar orders as the High Court. In these types of cases, the task of the judge in determining ownership between a spouse and a third party is different from the discretionary exercise undertaken by the judge when determining issues between spouses. In TL v ML & Ors (Ancillary Relief: Claim Against Assets of Extended Family) [2005] EWHC 2860 (Fam), [2006] 1 FLR 1263, Mostyn QC (sitting as a Deputy High Court judge) stated that “a dispute with a third party must be approached on exactly the same legal basis as if it were being determined in the Chancery division”.
In Goldstone v Goldstone & Ors [2011] EWCA Civ 39, the principal point in dispute was whether an issue between one of the parties to matrimonial finance proceedings and a third party as to the beneficial ownership of an asset subject to claim for a property adjustment order within the matrimonial proceedings should be determined as a preliminary issue within those proceedings or in a separate civil claim. In that case, Thorpe LJ emphasised that whilst the Family Court are exercising a fact-finding/declaratory jurisdiction in intervenor cases, and the substantive law may be property law, the procedural rules to be used are the Family Procedure Rules and not the Civil Procedure Rules. He stated that:
[39] Of course, the ultimate trial required the family division judge to apply the law of property and the law of sham just as his brother judge would do in the Chancery Division. Careful preparation for that trial was necessary. However, these impeccable directions do not require or permit the import of the CPR. In its essence the claim remains a claim by the wife against the husband. Ultimately it is a claim for discretionary relief. In this, as in my cases, there must be a preliminary issue trial to establish the extent of the assets over which the discretion is ultimately exercised. Here, as in many cases, the preliminary issue trial determines the claims and the rights of third parties. The preliminary issue trial is pendent on the originating application. It has no independent existence.
The position is more procedurally complex if the third party commences their intervention by way of a free-standing TLATA claim in a county court by issuing either a Part 7 or Part 8 claim. Given that such is a civil claim, it would not be possible for the application or claim to be transferred to a family court such as the Central Family Court or the Financial Remedies Court (‘FRC’) so that the claim can be heard alongside proceedings under the MCA 1973. This is simply due to the lack of jurisdiction. If this occurs, an application should be made to the county court to stay those proceedings pending the determination of the beneficial interests in the family court or FRC. The TLATA proceedings in the county court can then either be dismissed on the grounds of res judicata or issue estoppel or restored for the purpose of enforcement by way of an order for sale. Directions can be made in the family court for the pleadings and any evidence in the county court claim to stand in the family proceedings. If the parties refuse to stay the civil proceedings, then a Hemain injunction restraining the relevant party from continuing with their actions should be sought and could be granted.
Given that financial remedy proceedings can involve and effect third parties, it is helpful to understand who are third parties? A third party is essentially an individual, body or entity that is not a main party to the proceedings. Within family law, there can be third parties in public and private child law proceedings as well as financial remedy proceedings. This book shall focus solely on financial remedy proceedings. In financial remedy matters, third parties can include trustees, beneficiaries, individuals such as family members, companies or commercial partners. This book will focus on the first two in separate chapters, with discussions as to the relevant law to be applied, practical and procedural guidance on joinder including service. Although companies are not considered in this book, the procedural rules and test for joinder are equally applicable and therefore users of this book can apply them accordingly.
Given the potential for third party interests to arise, the Family Procedure Rules 2010 (‘FPR 2010’) now contain a provision for third parties to be joined, known as ‘joinder’, into the proceedings. A financial remedy order will only bind those parties to the proceedings. It is therefore necessary to consider at an early stage whether to join a third party to the proceedings to ensure the determination made by the court is binding on them. However, with the involvement of a third party comes complexity, delay and the potential for massively increased costs, to the extent that, without careful case management, the expense of disposing of a preliminary intervenor claim can exceed the costs of the main financial remedy claim.
[1] Goldstone v Goldstone & Ors [2011] EWCA Civ 39, [2011]