Property – Matrimonial and Family Proceedings Act 1984 — Beneficial ownership – Former spouse challenging share transfer on basis that transaction intended to defeat application for financial relief – Whether court properly exercising discretion to set aside transfer — Appeal dismissed
The first respondent owned the one bearer share in the appellant company, through which he and acquired a property, the company’s only asset. He transferred the share to a nominee who in turn transferred it to a third party under a share sale agreement. The contract was the subject of a clear, albeit unwritten, collateral agreement that the third party could withdraw from the deal if he could not obtain mortgage finance on the property for part of the consideration. An order was subsequently made preserving the property as the appellant’s sole asset.
In matrimonial proceedings between the first and second respondents, the court found, taking into account that the equity in the property would make a significantly affect the second respondent’s financial claims, that the transfer to the nominee was a sham and therefore ineffective. Thus, the nominee held the share as nominee or a bare trustee for the first respondent, who retained the beneficial ownership of the appellant. The judge also concluded that the first respondent had wrongfully used the appellant to conceal his interest in the property from the second respondent; the transfer of the beneficial ownership in the appellant to the third party was to be set aside in the exercise of the court’s discretion under section 23 of the Matrimonial and Family Proceedings Act 1984.
The appellant appealed, contending that the third party had entered into a valid contract for its acquisition on the date of the share sale agreement and that the title to the property effectively passed with the contract.
The questions for the court were: (i) whether the third party was the beneficial owner of the property prior to the order restraining dealings with the property so that he could be a purchaser in good faith and without notice of the respondent’s intention to defeat the second defendant’s claim or whether the property vested in the first respondent until after that order had been made, so that the judge could set aside the transfer to the third party under section 23; and (ii) if the transfer of the appellant to the third party could be set aside, whether the judge should use his discretion to do so.
Held: The appeal was dismissed.
If contract was intended to pass title to property, that intention should be clear from its terms. In the instant case, the evidence showed that the contract was conditional and that the obtaining of mortgage finance was the condition precedent for its performance of the contract. Therefore, the property remained vested in the first respondent until after the order preserving the property and the judge had been entitled to set aside the subsequent transfer under section 23. It followed that the judge had reached the correct conclusion.
Although it would have been preferable for the judge to have been more expansive in describing how he had exercised his discretion, once the discretion had been found to exist it could have been exercised only in one way. The judge had been right to set aside the transfer to the third party of the beneficial ownership of the appellant.
Per curiam: In future cases, judges should explain in greater detail than was provided in the instant case why judicial discretion was exercised as it was. The first respondent had manifestly attempted to defeat the second respondent’s claims. The addition £600,000-800,000 to the matrimonial pot, as represented by the value of the property, was a material factor when considering the support of the second respondent and her children.
Frank Feehan QC (instructed by Horne Engall & Freeman, of Egham) appeared for the appellant; The first respondent did not appear and was not represented; Christopher Stirling (instructed by Richardson Smith & Co Solicitors, of Chesham) appeared for the second respondent.
Eileen O’Grady, barrister
