Lord Justice Ward:
Introduction
- The issue in this appeal is whether the personal
representative of the estate of the deceased former husband of the claimant is
liable to pay her the sum of £100,000 which the deceased had promised he would
ensure she would receive on his death if she did not enforce an order for
periodical payments in her favour or seek any other order for ancillary relief
against him.
- On 27th June 2006 His Honour Judge Cowell, sitting
in the Central London County Court, held that the estate was liable to pay and
he entered judgment for the claimant for £116,750 including interest. The
personal representative now appeals.
The facts
- The claimant, Mrs Elizabeth Soulsbury, was married
to Mr Owen Soulsbury ("the deceased") in 1966. They had three children, all of
them now adults. The marriage broke down in 1986, divorce proceedings were
commenced by the wife and a decree absolute of divorce was granted on 17th
December 1986. By order of the Southampton County Court dated 18th September
1987, the deceased was ordered by consent to pay periodical payments to his
former wife at the rate of £12,000 per annum less tax. He was also ordered to
pay periodical payments to the two children of the family then still under the
age of 17 years at the rate of £2,400 per annum less tax. No orders for
payment of a lump sum or property adjustment orders were ever made.
- Notwithstanding the divorce, the claimant and the
deceased remained on very friendly terms and were regularly in communication
with each other. When in about 1988 the deceased sold his shareholding in a
public company which he had helped to found for a large sum of money, he made
generous gifts to the claimant and the children. He bought and refurbished a
property in Italy and the claimant and the children frequently took holidays
there.
- On the occasion of his fiftieth birthday in 1989,
the deceased made the suggestion that, instead of paying maintenance to the
claimant, he should leave her £100,000 in his will. From time to time he
repeated this suggestion. In April 1991 he went so far as to execute a will
bequeathing that sum to her, the residue to his children. He continued to
press the claimant to forego the periodical payments and her right to seek any
ancillary relief from him in return for his ensuring she would receive
£100,000 on his death.
- In about September 1993 agreement to that effect was
reached between the claimant and the deceased during conversations on the
telephone. This is the agreement upon which the claim is based. At or about
that time he ceased making periodical payments to her. No attempt has ever
been made to recover the arrears which had accrued under the order.
- By about 1992 the deceased began to cohabit with the
defendant. Sadly he became ill with leukaemia in 2000. On the morning of 10th
October 2002, close to death, he married her in the Charing Cross Hospital and
he died that evening. By virtue of s.18 of the Wills Act 1837 the effect of
that marriage was to revoke the 1991 will, though whether the deceased knew
that is moot and in any event immaterial.
- The appellant is the personal representative of the
deceased acting under a grant of letters of administration issued out of the
Principal Registry of the Family Division in March 2003. She refused to pay
the legacy or any part of it to the claimant. In October 2003 the claimant
brought this claim for payment of £100,000 alternatively damages together with
interest.
The judgment under appeal
- The judge wisely approached the claimant's evidence
with "a certain degree of caution". He concluded, however:
"23. … Bearing that in mind I am nevertheless certain I can
accept the evidence of the claimant that the agreement was made as she
said."
- Accordingly he held:
"35. So it seems to me that on the facts effectively what the
parties agreed – and here I am putting it in the words of a lawyer – was
that if she, the claimant, should not have enforced or attempted to enforce
the court order, as it then was, and should not seek anything from him by
court process during the remainder of their joint lives then on his
predeceasing her, he would ensure that she would receive on his death
£100,000.
36. She did none of those things. That event happened, and
indeed but for the remarriage and its unintended consequence, she would have
received that sum under the will of 1991 and the consequence in law, in my
judgment, is that the deceased's estate is in breach of the agreement and
must make it good.
37. It is in my judgment as simple a case as that. Put another
way, … the deceased would not make further maintenance payments to the
claimant in consideration of a promise that the deceased would leave the
claimant £100,000 by will on his death.
38. … whether or not she knew she could return to the
Southampton County Court, had she done so, as she might have, that would not
have been a breach of the agreement; it would have meant that the event or
the condition for the arising of the obligation to be left the £100,000
would not have happened or been fulfilled "
- The judge recognised that applications could have
been made for a lump sum or for a variation of the periodical payments order.
The claimant could have enforced the arrears and she could have applied under
the Inheritance (Provision for Family and Dependants) Act 1975. The truth was,
he said in paragraph 42, "either could have gone to court" but, (paragraph
43), "The point remains that neither party attempted to do any such thing." He
added in paragraph 49, "It also seems to me that if the claimant had applied
it would simply have meant that the event or condition for payment would not
have been fulfilled." His conclusion was:
"45. … that neither party had ever sought to oust the
jurisdiction of the court."
- The gist of the argument of Mr Dubbery, counsel
for the defendant below, was that the contract was not governed by ordinary
contractual principles and was unenforceable. He based his case on this dictum
of Thorpe L.J. in Xydhias v Xydhias [1999] 1 FLR 683, 691:
"My cardinal conclusion is that ordinary contractual principles
do not determine the issues in this appeal. This is because of the
fundamental distinction that an agreement for the compromise of an ancillary
relief application does not give rise to a contract enforceable in law. The
parties seeking to uphold a concluded agreement for the compromise of such
an application cannot sue for specific performance. The only way of
rendering the bargain enforceable whether to ensure that the applicant
obtains the agreed transfers and payments or whether to protect the
respondent from future claims, is to convert the concluded agreement into an
order of the court."
It was a matter of public policy, argued counsel as recorded by the judge:
"that when there is an ancillary relief application that is
pending it is important that the court should have some say about whether an
agreement ought to be implemented …
46. So in essence Mr Dubbery's argument is that this agreement
cannot be made and cannot be enforced except upon its being embodied in a
court order."
- The judge dismissed that argument because:
"49. It seems to me that because there was no application which
had been made by either party in 1993 the principle in Xydhias v Xydhias
could not have applied to make it of no contractual force until made
into a court order. …
50. … There was no application[for a lump sum etc] that was ever
made, the claimant could not have been prevented from making an application
but she did not make one, and the event which triggered the obligation to
pay the £100,000 occurred, or if you like, the non-events occurred entitling
her to the £100,000.
56. So, for those reasons, the claimant succeeds and I think the
appropriate award is damages measured by that amount"
Discussion
The starting point – contracts relating to wills
- The general principles are well settled and I can
simply cite Williams on Wills 8th edition:
"[3.1] General Statement
Although a will is by its nature always revocable, yet a
testator may bind himself personally as to the contents of his will and may
bind his assets so that his personal representative, whether he dies testate
or intestate, must give effect to such agreement at the expense of the
beneficiaries under the will or intestacy. There must, however, in any such
case, be a binding agreement by the testator to dispose of his property in a
certain way, and this involves two certainties. It must be shown that there
was an agreement in law and not a mere statement of intention or mere
representations. It must also be shown with certainty what the subject
matter of the gift by will was to be."
- The judge's findings establish that there was a
binding agreement between the claimant and the deceased entered into for good
consideration. There was certainty about the subject matter of the gift,
namely, to arrange his affairs in such a way that on his death £100,000 would
be paid to her. There is no appeal against that finding. Thus there appears no
reason why the personal representatives should not give effect to his promise.
Ordinarily where the promisee has honoured her bargain, the deceased would
remain bound to honour his. If he failed to provide payment for her on his
death, her right to that payment became enforceable by a direct right of
action for breach of contract against his estate.
- Those being the general principles for contracts
to provide payment on death, what difference, if any, does it make that this
was a bargain between a former husband and wife where she was forbearing to
enforce an order of the court for periodical payments and forbearing to make
any further claim for ancillary relief? Unless the contract is unenforceable
for some reason or other, the claim ought to succeed.
The crucial issue: is the contract unenforceable?
The first consideration: ousting the court's jurisdiction
- Once again the law is well established. An
agreement to oust the jurisdiction of the court is void. This was settled by
Hyman v Hyman [1929] A.C. 601, where the issue before the court
was whether the wife was precluded from petitioning the court for permanent
maintenance by reason of her having covenanted in a deed of separation not to
take proceedings against her husband for alimony or maintenance beyond the
provision made for by the deed. Lord Hailsham L.C. said at p.614:
"... it is sufficient for the decision of the present case to
hold, as I do, that the power of the Court to make provision for a wife on
the dissolution of her marriage is a necessary incident of the power to
decree such a dissolution, conferred not merely in the interests of the
wife, but of the public, and the wife cannot by her own covenant preclude
herself from invoking the jurisdiction of the court or preclude the court
from the exercise of that jurisdiction."
Lord Atkin explained at p. 629:
"In my view no agreement between the spouses can prevent the
Court from considering the question whether in the circumstances of the
particular case it shall think fit to order the husband to make some
reasonable payment to the wife, 'having regard to her fortune, if any, to
the ability of her husband and to the conduct of the parties.' The wife's
right to future maintenance is a matter of public concern, which she cannot
barter away."
- I add, for the sake of completeness, that s.34 of
the Matrimonial Causes Act 1973 provides that if a maintenance agreement
includes a provision purporting to restrict any right to apply to the court
for an order containing financial arrangements, then that provision shall be
void. A maintenance agreement is defined in subsection 2 to mean any agreement
in writing and so this oral agreement between the claimant and the deceased
does not fall within the ambit of s.34 or s.35 and no question can, therefore,
arise of this agreement being varied by the court even if a change of
circumstances could have been established.
- The principle established by Hyman v. Hyman
is that the wife cannot contract herself out of her statutory right to
maintenance and no agreement can prevent the court from considering her claim.
Its application has been considered in a number of cases of which I need
mention only three. In Bennett v. Bennett [1952] 1 K.B. 249 the wife
sued for arrears of maintenance payments payable under a deed in consideration
for which the wife covenanted not to proceed with the prayers in the petition
for maintenance, to consent to their being dismissed, and not to present any
further petition for maintenance. The question which arose was whether the
whole or main consideration moving from the plaintiff wife was a promise or
promises purporting to oust the jurisdiction of the court. It was held per
Somervell L.J. at p.258:
"The point here is that the consideration moving from her was a
promise not to exercise her right to apply to the court."
That being the sole or main consideration the covenant sought to be
enforced by the wife was void and unenforceable.
- By way of contrast, in Goodinson v.
Goodinson [1954] 2 Q.B. 118 the wife covenanted, so long as the weekly
payments of maintenance for herself and the child were punctually made, not to
commence or prosecute any matrimonial proceedings against the husband. When
the husband fell in arrears she brought a claim in the county court for the
arrears. In this case it was held that there was ample consideration to
support the agreement apart from the covenant not to sue so as to enable the
wife to enforce it against the husband.
- In Sutton v Sutton [1984] 1 Ch. 184 a
husband and wife agreed that she would consent to a divorce, would take over
responsibility for the mortgage on the matrimonial home and would not ask for
maintenance whilst the husband agreed to allow her to keep savings in a Post
Office account in her name, to keep the motorcar and to convey the bungalow to
her absolutely. Although there was no memorandum in writing there was
sufficient part performance by her. She paid off the mortgage but the husband
did not transfer the property to her and she sued for specific performance.
The deputy judge, Mr John Mowbray Q.C., held that if the agreement was
enforceable as a contract, it would leave nothing for the court to do under
ss. 23 and 24 of the Matrimonial Causes Act 1973 which empower the court to
order maintenance and make property adjustments because the agreement
pre-judged and foreclosed all financial questions. He held that the agreement
offended the rule in Hyman v. Hyman. Two rules of public policy were
engaged: the first that the public at large has an interest seeing that a
husband makes proper provision for his wife on divorce and the second, relying
upon in Edgar v. Edgar [1980] 1 WLR 1410, 1418, that there is a
public interest in the court overseeing arrangements made in the throes of
marital breakdown when emotional pressures on the parties are high and their
judgment clouded. He was satisfied that the agreement impliedly excluded the
court's jurisdiction and that made the whole financial settlement
unenforceable as a contract.
- Mr Charles Howard Q.C., for the appellant, submits
that because the parties intended not to rely on the matrimonial jurisdiction,
this was indeed a contract to oust the jurisdiction of the family court. In my
judgment, it depends upon the proper construction to be placed upon the
particular contract. The agreement found by the judge, against which finding
there is no appeal, is that if the claimant should not have enforced or
attempted to enforce the court order or if she should have not have made any
application for ancillary relief during their joint lives then he would ensure
she would receive £100,000 on his death. Properly construed, this was an
agreement to pay £100,000 subject to conditions subsequent, namely, (1) the
death of the deceased and (2) the claimants not having enforced any arrears
nor applied for further matrimonial relief. Those events have been fulfilled.
Thus the obligation crystallised on the death of the deceased. Nothing in the
agreement, express or implied, prevented her from applying to the court
for relief. She could have gone back to court at any time without being
in breach of any promise that she would not do so. There was no promise not to
apply to the court. She could not, therefore, be in breach of the agreement
had she done so and the effect of her going back to court would simply be to
render the fulfilment of the condition subsequent impossible. She would have
forfeited her right to the payment of £100,000 by seeking to enforce the
arrears or seeking some alternative form of relief. I am thus satisfied that
the claimant had not bartered away her right to future maintenance nor
prevented any consideration by the court of her claims. In those circumstances
the jurisdiction of the court has not been ousted and the agreement does not
fall foul of the principles established in Hyman v. Hyman.
The next consideration: the Xydhias argument
- The appellant relies heavily upon the statement of
principle by Thorpe L.J. in Xydhias at p.691 quoted in paragraph 12
above, namely that ordinary contractual principles do not determine whether
the parties were in accord because of the fundamental distinction that an
agreement for the compromise of an ancillary relief application does not give
rise to a contract enforceable in law and so the parties seeking to uphold a
concluded agreement for the compromise of such an application cannot sue for
specific performance. Mr Howard submits that this principle applies to any
agreement which amounts to the settlement of a matrimonial claim which is
within the potential scrutiny of the Family Division. Before embarking on
analysis of this case, it is important to see whether, before Xydhias,
the court had enforced agreements between husband and wife and former husband
and wife.
- As we have seen, Goodinson is an example of
a case where the Court of Appeal permitted the wife to elect to sue the
husband on his covenant rather than to apply to the courts for maintenance.
The issue was sufficiency of consideration: once it was accepted that there
was consideration for the promise there was no question about the
enforceability of the agreement.
- Gould v Gould [1970] 1 Q.B. 275 is another
example where the husband told the wife he would pay her £15 a week as long as
he had it. She issued a writ claiming payment of arrears of maintenance due.
Lord Denning M.R. said at p. 280D:
"I hold, therefore, that an oral separation agreement by which
the husband agrees to pay the wife so much a week is legally enforceable.
There is ample consideration for such agreement."
Edmund Davies L.J. considered that the agreement in that case was too vague
to be enforced but he said this at p. 281E
"There can be no doubt that husband and wife can enter into a
contract which binds them in law. Peters (Executors) v. Inland
Revenue Commissioners [1941] 2 All E.R. 620 and the recent decision of
Stamp J. in Merritt v. Merritt, "The Times," May 15th,
1969, afford examples of this. But it is upon the spouse asserting that such
a contract has been entered into to prove the assertion: see the
observations of Atkin L.J. in Balfour v. Balfour [1919] 2 K.B. 571,
580 … In the general run of cases the inclination would be against inferring
that spouses intended to create a legal relationship: see Lord Hodson in
Pettitt v. Pettitt [1969] 2 W.L.R. 966, 983. The evidence
establishing such an intention needs, in my judgment, to be clear and
convincing."
Megaw L.J. agreed with that judgment.
- In Merritt v Merritt [1970] 2 All ER 760 the husband confirmed the arrangements made with his wife by
giving her a note in which he wrote:
"In consideration of the fact that you pay all charges in
connection with the house … until such time as the mortgage repayment has
been completed, when the mortgage has been completed I will agree to
transfer the property into your sole ownership."
She paid off the mortgage but he refused to transfer the home to her. She
brought an action in Chancery Division for a declaration that the house
belonged to her and for an order that he should make the conveyance. Stamp J.
made the order but the husband then appealed. The appeal was dismissed. The
challenge seems to have been addressed to whether or not the arrangement had
been made by the husband with the intention of creating legal relations. That
intention was established. No suggestion appears to have been made that the
agreement was not enforceable. Specific performance was ordered accordingly.
- The next case is Smallman v Smallman [1972]
Fam. 25. That arose out of a dispute under s. 17 of the Married Women's
Property Act 1882 for determination of the parties' shares in their
matrimonial home. An overall agreement was negotiated in correspondence
between their respective solicitors that the wife should have a half share in
the proceeds of sale of the property and that he would pay the children's
school fees and maintenance but this was conditional upon the wife providing
evidence on which the husband could found a petition for divorce and on "the
approval of the court." The wife gave the necessary confession statement but
the husband then sought to resile from the agreement claiming that it was not
binding until it had been approved by the court. The wife went ahead with her
proceedings under s.17 and the Registrar held there was a binding agreement
but that before the proceeds could be distributed the court must approve it.
On appeal Lord Denning M.R. acknowledged that the case raised "some difficult
and important points in divorce law." He held at p.31G:
"In my opinion, if the parties have reached an agreement on all
essential matters, then the clause "subject to the approval of the court"
does not mean there is no agreement at all. There is an agreement, but the
operation of it is suspended until the court approves it. It is the duty of
one party or the other to bring the agreement before the court for approval.
If the court approves, it is binding on the parties. If the court does not
approve, it is not binding. But, pending the application to the court, it
remains a binding agreement which neither party can disavow. Orr L.J. has
drawn my attention to a useful analogy. Many contracts for the sale of goods
are made subject to an export or import licence being obtained. Such a
condition does not mean that there is no contract at all. It is the duty of
the seller, or the buyer, as the case may be, to take reasonable steps to
obtain a licence. If he applies for a licence and gets it, the contract
operates. If he takes all reasonable steps to obtain it, and it is refused,
he is released from his obligations. If he fails to apply for it or to do
what is reasonable to obtain it, he is in breach and liable to
damages."
- Amey v Amey [1992] 2 FLR 89 was an unusual
case. Husband and wife together ran a public house which was bought in the
husband's name. She left to establish her relationship with another man. A
clean break settlement was agreed under which the husband was to pay the wife
the sum of £120,000 in full and final settlement of all her claims and a draft
note of order was to be placed before the court for the necessary order to be
made. Before that could happen the wife died and the husband sought rescission
of the agreement claiming repayment of the lump sum. Scott Baker J. held at p.
92F:
"Matrimonial law has moved on somewhat since Smallman was
decided. There is no longer a requirement to obtain the court's approval.
What the parties intended to do, in the present case, was to obtain the
imprimatur of the court on a clean break agreement, so as to avoid the
possibility of return at some later date, such as happened in, for example,
Edgar v. Edgar (1981) FLR 19. It cannot therefore be said that the
agreement is not effective because it was not considered by the court. Mr
Coleridge for the husband accepts this. He also concedes that there is an
agreement. His case is that it was vitiated by a change in a fundamental
assumption underlying it. His argument is based on the observations of Lord
Brandon in Barder v Caluori [1988] AC 20 … "
Scott Baker J. held, however, that the agreement "stands or falls at law".
He considered the issue to be whether the agreement could be set aside by
reason of mutual mistake or frustration and concluded that the wife's death
soon after the agreement was not an event which entitled the court to
intervene. The agreement stood accordingly and was enforced.
- None of these cases were mentioned in Peacock v
Peacock [1991] 1 F.L.R. 324, a judgment of Thorpe J., as he then was, to
which reference was made in Xydhias. Following the divorce of the
parties, a consent order was made in 1982 providing for the sale of the
matrimonial home ten years later in 1992 or earlier order and for the equal
division of the proceeds of sale. A periodical payments order was also made in
favour of the wife and the two children who remained in the home. In 1984 the
parties were agreed upon the husband transferring his interest in the house to
her, but they were not ad idem because he believed that she was
releasing him from all future payments not only to her but also to the
children, whereas the wife understood that she would lose only her own
periodical payments. When that dispute arose, the husband applied for a
variation of the order for periodical payments and the wife issued a writ in
the Chancery Division seeking specific performance of the promise to transfer
the house to her. This claim was later transferred to the Family Division to
be heard together with the ancillary relief proceedings. The parties'
solicitors entered into correspondence and in 1986 seemed to settle the
dispute on the basis the husband would transfer the house and the wife's claim
for periodical payments would be dismissed. The husband then changed
solicitors and resiled from the agreement. Thorpe J. held:
"… the first conclusion at which I have arrived is that the
Chancery proceedings were misconceived. All the issues between the parties
related to the 1982 consent order, its implementation, and its possible
variation. The fundamental, but not exclusive, consideration for any
transfer of the husband's interest in the home was the wife's abandonment of
her right to claim periodical payments. The implementation of that
fundamental consideration would have involved the dismissal of her claim to
periodical payments and her rights to claim under the Inheritance (Provision
for Family and Dependants) Act 1975.
It is beyond question that such orders are not made simply
upon evidence of the applicant's consent. The court has an overriding duty
to survey the sufficiency of the proposed consideration and the overall
fairness of the orders proposed. [Emphasis is added as this is the
passage referred to in the authorities discussed later]. Accordingly,
the wife should have brought the disputed compromise before the Edmonton
County Court. …
In my judgment the issue of proceedings in Chancery by the
wife's advisors in reaction served only to complicate an already complicated
issue, to delay an adjudication from which the parties might hope to look
with satisfaction for its fairness and finality, and to increase
substantially the costs for a family that is not in a position to afford any
waste. Nor could Chancery proceedings ever have achieved any practical
advantage for the wife. How could the court order specific performance of
one side of the bargain, when the plaintiff was not able to perform her side
of the bargain without the concurrence of another court having completed a
wide-ranging review?
In my judgment, this is, and always has been, an issue that
could only be litigated within the suit. Effective jurisdiction remained
exclusively in the Edmonton County Court until the suit was transferred to
the Family Division. Accordingly I do not intend to grant any relief to the
wife within the Chancery proceedings …"
- As Mr Richard Millett Q.C. submits on the
respondent's behalf, it is far from clear whether Thorpe J. was actually going
so far as to say that a contract for the mutual variation of an ancillary
relief order was invalid unless made into a court order. He did not appear to
refuse the wife's specific performance claim on the grounds that the contract
was invalid or unenforceable. His point was that the claim to enforce it had
been brought before the wrong court or at that both claims should be dealt
with together. As I understand it, the judgment up to that point was concerned
more with the allocation of jurisdiction and the question of where the
disputed issues in the different claims should most appropriately be
considered. The more effective jurisdiction of the Family Division justified
the disposal of the claim for specific performance and I do not see in the
judgment any clear finding that the agreement would not be enforced because it
was an invalid bargain.
- The court still had to deal with the application
for variation of the periodical payments order. That necessitated a
consideration of whether or not the parties were agreed upon its dismissal. As
to that, Thorpe J. held that "in respect of the 1984 agreement I am not
satisfied that the parties were ever ad idem." He added that in any
event the court might have to consider whether it was right to hold the
husband to any contract that had been made because in the light of Edgar v
Edgar, the court could have regard to the lack of legal advice and so
forth. As to whether or not a contract was concluded by their solicitors in
1986, Thorpe analysed this in wholly conventional contractual terms. He
treated the letter from the husband's solicitors of 18th July 1986 "properly
construed as a letter of offer". As such he found it was "sufficiently clear
in terms". He asked whether the letter of 28th July from the wife's solicitors
constituted "a sufficiently clear and unequivocal acceptance". After analysis
he decided that the parties had indeed "struck a concluded bargain".
Nonetheless he could not give effect to the husband's promise to transfer the
house because, as the law then stood, the court was precluded by the terms of
s. 31(5) of the Matrimonial Causes Act 1973 from ordering a transfer of
property with the result that he had to do justice between the parties solely
by reference to the variations to the ancillary relief order.
- The italicised passages cited in Thorpe J.'s
judgment were approved in Kelley v Corston [1998] 1 F.L.R. 996, a case
about barrister's negligence, the issue being whether the barrister's immunity
could cover advice given in connection with a court door settlement of an
ancillary relief claim. Pill L.J. at 1008 and Butler-Sloss L.J. at 1012-1013
referred to Peacock in connection with the court's duty to inquire into
proposed settlements before making the order. There is nothing surprising
about that. Thorpe J. was applying principles by then well established by
de Lasala v de Lasala [1980] AC 546, Thwaite v Thwaite [1982]
Fam. 1 and Jenkins v Livesey (formerly Jenkins) [1985] AC 424. The principle stated in de Lasala per Lord Diplock at p.
560 was that:
"… financial arrangements that are agreed upon between the
parties for the purpose of receiving the approval and being made the subject
of a consent order by the court, once they have been made the subject of the
court order no longer depend upon the agreement of the parties as the source
from which their legal effect is derived. Their legal effect is derived from
the court order; …"
Ormrod L.J. applied that in Thwaite saying at p. 8:
"We respectfully adopt it and believe that it removes much of
the confusion about consent orders which has prevailed in this jurisdiction.
It does, however, represent a significant departure from the general
principle frequently stated in cases arising in other divisions of the High
Court, that the force and effect of consent orders derives from the contract
between the parties leading to or evidenced by, or incorporated in, the
consent order: … A distinction, therefore, has to be made between consent
orders made in this and other types of litigation."
- Peacock was also mentioned with approval in
Arthur J.S. Hall & Co v Simons [1999] 1 FLR 536, another
professional negligence case, where Lord Bingham of Cornhill C.J. observed at
p. 550 that different judges have, unsurprisingly, described the function of
the court in somewhat different ways when making a consent order under s. 25
where the parties have agreed terms but:
"It none the less remains true that:
'The court has an overriding duty to survey the sufficiency of
the proposed consideration and the overall fairness of the orders
proposed.'
(Peacock v Peacock [1991] 1 FLR 324, 328 per Thorpe J.)
"
- In these cases the Court of Appeal was
acknowledging the conventional approach which was well known to such an
experienced a judge as Thorpe J. He was fully aware of the overriding duty of
the court to apply s. 25 when deciding what effect to give to an agreement
reached by the parties. For my part, I see nothing in the Court of Appeal's
approval of these passages which has any bearing on the quite different
questions, namely, (1) how the family court has to resolve the issue of
whether or not an agreement has been reached and (2) whether or not any
agreement which had been reached was valid and enforceable.
- There are, however, other passages which bear on
the latter question. Thus Butler-Sloss L.J. said in Kelley at p. 1011:
"Although it is possible for the parties, after the dissolution
of their marriage to agree a settlement without recourse to the
courts it is a widespread practice to embody the agreement in a court
order with the advantages of court enforcement of the provisions of the
order if not complied with …"
Mr Millett for the appellant relies on the italicised words and submits
that that is wholly in accordance with de Lasala where Lord Diplock
said this at p. 560:
"The [Hong Kong] Ordinance and corresponding English legislation
recognised two separate ways in which financial provision may lawfully be
made for parties to a marriage which has been dissolved. One is by a
maintenance agreement entered into between the parties without the
intervention of the court; the other is by one party obtaining a court
order against the other for periodical payments or for once-and-for-all
financial provision. In the event of default, a maintenance agreement is
enforceable by action. A court order is enforceable by judgment
summons." [The emphasis is added by Mr Millett.]
He submits that the passages he emphasises support the proposition that an
agreement without recourse to the court is enforceable. The only consolation
Mr Howard Q.C. can gain from those two dicta is that there is a "clear
implication … that an agreement without an order of the court lacks the
advantage of court enforcement." True it is that an agreement converted into a
court order has the advantage of the means of enforcement available to enforce
the court's order whereas a party has to sue on the agreement to obtain
eventual enforcement. Bit that does not meet Mr Millett's point: settlement
without recourse to the courts is nonetheless enforceable. So I prefer the
argument of Mr Millett. There is nothing in the decisions which I have recited
thus far which suggests that an agreement containing financial arrangements
made between spouses and former spouses with the intention of creating legal
relations between them and which is not contrary to public policy cannot be
enforced in the civil jurisdiction of the courts. Against that background I
turn to Xydhias.
- It is interesting to note what issue came before
the court and how it developed during the course of the argument. With the
hearing of the wife's claims for ancillary relief being imminent, there were
intense negotiations between counsel. Draft orders were circulated. By 28th
August 1996 counsel had agreed that there were two relatively minor questions
of form but not of substance outstanding, namely whether the husband should
provide additional properties to the schedule of securities and the duration
of his continuing obligations. Later that day counsel for the husband sent the
fourth version of the consent order which the wife agreed and on 29th August
the wife's solicitors informed the court that heads of terms of settlement had
been agreed. However, the husband's solicitors then attempted to vary the
timetable for payment of the lump sum. The wife's counsel complained to her
opponent of an unacceptable attempt to alter the agreement, though she did say
she would advise some flexibility to secure the agreement. That concluded
counsel's involvement. When the parties attended before the district judge to
approve the order, the husband's solicitor stated on instructions that the
husband had withdrawn all offers and that the case would have to be fully
fought. As a result, the wife issued a notice for the husband to show cause
why the order should not be made in terms of the agreement which had been
reached on 29th August and the district judge directed that to be tried as a
preliminary issue. The district judge found that the essential building blocks
for an agreement were in place subject to two minor points, namely the
schedule of properties to be charged to secure the payment of the lump sum and
the taxation of an earlier order for costs. He made an order in terms of the
fourth draft excising the two points not expressly agreed by the husband. On
appeal to the judge both parties relied on the case law relevant to the
formation of commercial contracts. The judge upheld the district judge.
- In the skeleton arguments of both appellant and
respondent there was common ground that ordinary contractual principles had to
be applied to establish whether or not there was agreement. There was also
common ground in the Court of Appeal that if an agreement for compromise was
found, there would be no Edgar–type grounds which would prevent its
transition into an order of the court. Thorpe L.J. noted at p. 690:
"Although [counsel for the husband] had referred to both
Peacock v Peacock and Kelley v Corston … in his skeleton, Mr
Eccles [Q.C.]did not accept that compromises in ancillary relief were on any
different footing to compromises of actions in other divisions."
Mr Horowitz Q.C., for the wife, had not referred to those cases and Thorpe
L.J. then noted that:
"… On the first day [he] accepted with little seeming enthusiasm
an alternative formulation of his case on the basis that the issue before
the district judge was not to be determined by applying the principles
regulating the formation of commercial contracts but by exercising a broader
discretion to judge if the parties were ad idem as to the extent of the
financial redistribution and as to whether the husband had so conducted
himself as to forfeit his right to a fully contested trial. On the second
day he adopted the alternative formulation more robustly but always
tenaciously contending that the appeal should be dismissed upon the
application of the Pagnan [SpA v Feed Products Ltd [1987] 2
Lloyds Rep. 601] principles."
Thus the case had shifted under pressure from the court.
- In a judgment with which Mummery and Stuart-Smith
L.JJ. agreed, Thorpe L.J. stated the applicable principles beginning with his
"cardinal" conclusion already recited in paragraph 12 above. He continued:
"An even more singular feature of the transition from compromise
to order in ancillary relief proceedings is that the court does not
automatically or invariably grant the application to give the bargain the
force of an order. The court conducts an independent assessment to enable it
to discharge its statutory function to make such orders as reflect the
criteria listed in s. 25 of the Matrimonial Causes Act as amended. The
decision of this court in Kelley v Corston has a decisive impact in
this appeal, as was pointed out by my Lord, Mummery L.J. (Although the
judgments in Kelley v Corston have since been criticised by this
Court in the case of Hall & Co v Simons …, the Peacock v
Peacock point, with which we are concerned, was again affirmed by the
judgment of the court.)"
He then recited the dicta of Pill and Butler-Sloss L.JJ. to which I have
referred and continued:
"In consequence, it is clear that an award to an applicant for
ancillary relief is always fixed by the court. The payers' liability cannot
be ultimately fixed by compromise as can be done in the settlement of claims
in other Divisions. Therefore the purpose of negotiation is not finally to
determine the liability (that can only be done by the court) but to reduce
the length and expense of the process by which the court carries out its
functions. If there is a dispute as to whether the negotiations led to an
accord, that process should be abbreviated, the court has a discretion in
determining whether an accord was reached. In exercising that discretion
the court should be astute to discern the antics of a litigant who, having
consistently pressed for abbreviation, is seeking to resile and to justify
his shift by reliance on some point of detail that was open for
determination by the court at its abbreviated hearing. If the court
concludes that the parties agreed to settle on terms then it may have to
consider whether the terms were vitiated by a factor such as material
non-disclosure or tainted by a factor within the parameters set out in
Edgar v Edgar. Finally in every case the court must exercise its
independent discretionary review applying the s. 25 criteria to the
circumstances of the case and to the terms of the accord. This approach
particularly applies to accords intended to obviate delivery of briefs for
trial. Different considerations may apply to agreements not negotiated in
the shadow of an impending fixture." [I have added the emphasis.]
- As to the outcome of the appeal, Thorpe L.J. held:
"The principal issue in this appeal is not difficult to decide
on the application of the first principle. It is relevant to regard not only
the offers and counter offers in their terminology but also the
communications with the court and the understanding of those involved.
Clearly both counsel understood that they had settled the case. Clearly the
solicitors understood that they had no need for advocates. Briefs were not
delivered and the court was informed that the case had settled and that the
fixture was vacated. Those convictions rested on firm foundation. In
ancillary relief litigation a clear distinction has always been drawn
between the determination of the liability and the determination of the
security for the performance of the obligation. In the years when secured
provision orders were common place counsel regularly settled cases on the
footing that if the quantum of the annual payment could be agreed the
mechanism that would be triggered to secure the recipient in the event of
the payer's default would be separately and subsequently put into place
either by further agreement or by the determination of the court. I have no
doubt that that long-established practice informs and explains the
communications between counsel as well as their readiness to regard the
detail of the properties to be included within the schedule as ancillary and
not precedent to a concluded agreement. Of course if the issue had to be
decided on the stricter basis of pure contractual principle then the saga of
the developing drafts and the complementary exchanges between solicitors
would have to be examined in much greater detail. The ambiguities and the
inconsistencies that such an analysis would reveal would all tell against a
finding of concluded contract on Pagnan principles. However on the
evidence before him I am in no doubt that the district judge rightly held
that the parties had concluded a compromise during the week before the
hearing. Throughout that week it was the husband who was pressing for a
settlement and plainly there came a point at which the wife agreed his
terms. All that remained unresolved was either mechanics or
trivial."
- One has to say that there are some who are
critical of the "cardinal conclusion" that "ordinary contractual principles"
do not apply to determine whether or not the parties had reached a concluded
agreement. It was the way both counsel had initially approached the case. Once
the agreement was established, then, but only then, had the court a discretion
to exercise, namely, whether or not to sanction the agreement and make the
order (see Jenkins v Livesey). The result of Xydhias is that the
court now also exercises its discretion in determining whether or not an
accord was reached (see the highlighted words set out in paragraph 38 above).
That the effect of a compromise should receive different treatment in
the Family Division from the other Divisions was established in Thwaite
but Xydhias has now given the Family Division a different and
unique test for establishing the very formation of the underlying agreement
itself. I mention these doubts, and I feel bound to say I share them, but the
correctness of that part of the decision is not a matter which arises in this
appeal and I need say no more.
- That is not to say that I do not have sympathy for
the eventual conclusion reached by the Court. This was a difficult,
prevaricating husband with little or no real merit on his side and perhaps the
policy reasons best explain what drove the Court to its conclusions. Thorpe
L.J. held:
"It is well-recognised by all experienced practitioners, whether
solicitors or counsel, that contested ancillary relief proceedings are
expensive and by far the most expensive stage of the process is the trial,
preceded by delivery of briefs. There have been innumerable examples over
more than the last decade of cases in which the legal costs incurred have
been quite disproportionate to the assets available for division. This
perception has engendered the Calderbank procedure and more recently
the interdisciplinary development of modern procedures designed to excise
much of the elaboration and waste that have become the hallmarks of the old
procedure. Litigants in ancillary relief proceedings are subjected to great
emotional and psychological stresses, particularly as the date of trial
approaches. In my opinion there are sound policy reasons supporting the
conclusion that the judge is entitled to exercise a broad discretion to
determine whether the parties have agreed to settle. The pilot scheme
depends on judicial control of the process from start to finish. The court
has a clear interest in curbing excessive adversariality and in excluding
from trial lists unnecessary litigation. A more legalistic approach, as
this case illustrates, only allows the inconsistent or manipulative litigant
to repudiate an agreement on the ground that some point of drafting, detail,
or implementation had not been clearly resolved. Ordinarily heads of
agreement signed by the parties or a clear exchange of solicitors' letters
will establish the consensus. Hopefully a case such as this requiring the
exercise of the judge's discretion will be a rarity." (I have added the
emphasis.)
- As I have said, it is not for us to pronounce upon
the correctness of the "cardinal conclusion" but the reason for arriving at
that conclusion is material to this appeal. To remind ourselves of it, the
reason was "because of the fundamental distinction that an agreement for the
compromise of an ancillary relief application does not give rise to a contract
enforceable in law". Mr Millett at first submitted that because the issue
before the court in Xydhias was whether or not there was a binding
agreement or, to put it another way, upon what principles the court decides
whether there was or was not a binding agreement, it must follow reference to
agreements for the compromise of ancillary relief applications being
unenforceable was obiter. I cannot accept that submission because that
was the key plank in the reasoning of the court. It was an essential part of
the ratio.
- In his written submissions to us after the court
had invited the parties to address Kelley v Corston, Mr Millett
submitted that the dictum about enforceability was not only obiter
but plainly wrong. He pointed out that Kelley v Corston was said by
Thorpe L.J. to have "a decisive impact" on the appeal in Xydhias. As I
have already analysed, Kelley v Corston and Peacock v Peacock
are really concerned with the court's overriding duty to scrutinise the
agreement for its fairness and its compliance with s. 25 of the Act. Mr
Millett argues that Thorpe L.J. ignored the dictum of Butler-Sloss L.J.
in Kelley v Corston and the opinion of Lord Diplock in de Lasala
which confirmed that an agreement can be enforced as I have already set out.
- I do not see how I can evade dealing with Mr
Millett's direct attack. It is reinforced by my own researches. Thorpe L.J.
was of the view that:
"The parties seeking to uphold a concluded agreement for the
compromise of such an application cannot sue for specific
performance,"
yet in Merritt the Court of Appeal allowed specific performance. Can
those decisions be reconciled? Merritt was decided before the divorce
law reforms had taken effect. I can see an argument that the reforms have
changed the approach but, if it has, it must be limited to cases where there
is the compromise of an ancillary relief application. I cannot see any
justification for denying relief if the spouse or former spouse concludes an
agreement which is not part of the settlement of any pending claim for
ancillary relief. As I have pointed out, Thorpe J. himself in Peacock
refused specific performance more because of a clash of jurisdiction
between the Chancery Division and the Family Division than on the basis that
the agreement itself was unenforceable. Furthermore, our case concerns the
enforcement of a promise to pay a sum of money, or, perhaps more accurately,
damages for breach of the promise to pay it. In the judgment of Thorpe L.J. in
Xydhias the only way of rendering a bargain to make payment of money
enforceable would be to convert the concluded agreement into an order of the
court. Stated in those terms, it cannot be correct. It is in conflict with
Goodinson and also Gould. It is contrary to what Lord Diplock
was saying in de Lasala and it was contrary to the clear understanding
of Butler-Sloss in Kelley v Corston.
- In my judgment the cardinal conclusions expressed
by Thorpe L.J. are stated in terms which are too wide. I accept that if there
are negotiations to compromise a claim for ancillary relief, then there is a
duty to seek the court's approval as is stated in Smallman. But as
Smallman states, and I do not see how that authority of this court can
be ignored by me, even an agreement subject to the approval of the court is
binding on the parties to the extent that neither can resile from it.
- In my judgment the appeal before us can be
disposed of upon this narrow basis: was this agreement between claimant and
deceased a compromise of an application for ancillary relief? The answer is,
"No". There was no pending application for any financial relief to compromise.
Despite Mr Howard's valiant attempt to expand that into any agreement the
effect of which is to effect a clean break between the parties and so
potentially be within the ambit of the court's duty to scrutinise it, I cannot
accept that proposition. They did not envisage going back to court to approve
it. There was no need to do so. Either of them could have done so but neither
chose to do so. The events upon which payment depended came to be fulfilled.
This was, as the judge found, a perfectly valid agreement. The deceased failed
to make the arrangements to provide the payment for the claimant he agreed to
make. His estate was in breach of an agreement binding upon it. The claimant
was entitled to her damages.
Conclusion
- For those reasons I would dismiss this appeal.
Lord Justice Longmore:
- I agree that the agreement found by the judge to
have been made in September 1993 was not an agreement to oust the jurisdiction
of the court within the principle established by Hyman v Hyman [1929] 1
AC 201. That was a case where the wife had agreed not to take proceedings for
alimony or maintenance otherwise than as contained in the deed of separation.
In the present case the wife made no such agreement. The agreement was merely,
that if she did not seek to enforce the order of the Southampton County Court,
which awarded her £12,000 less tax, she would get £100,000 on the death of her
former husband. As the judge said, any enforcement of the order of the court
would not have been a breach of contract. It would just mean that she would
not be entitled to the £100,000 which her husband had promised to leave her by
will.
- This is a classic unilateral contract of the
Carlill v Carbolic Smoke Ball [1893] 1 QB 256 or the 'walk to York' kind. Once the promisee acts on the promise
by inhaling the smoke ball, by starting the walk to York or (as here) by not
suing for the maintenance to which she was entitled, the promisor cannot
revoke or withdraw his offer. But there is no obligation on the promisee to
continue to inhale, to walk the whole way to York or to refrain from suing. It
is just that if she inhales no more, gives up the walk to York or does sue for
her maintenance, she is not entitled to claim the promised sum.
- The facts of this case are analogous to
Errington v Errington [1952] 1 KB 290 in which a father paid a lump sum
for a house for his son and daughter-in-law leaving a balance payable by
mortgage to a building society. He promised his son and daughter-in-law that
if they continued in occupation and paid the mortgage instalments, he would
transfer the property to them after the last instalment had been paid. When
the father died, his personal representatives sought to revoke this promise
and claimed possession. It was held that the couple were entitled to occupy
the house as long as they paid the mortgage instalments. Denning LJ said at
page 295:-
"The father's promise was a unilateral contract - a promise of
the house in return for their act of paying the instalments. It could not be
revoked by him once the couple entered on performance of the act, but it
would cease to bind him if they left it incomplete and unperformed, which
they have not done. If that was the position during the father's lifetime,
so it must be after his death"
The present case is stronger than Errington since on Mr Soulsbury's
death, Mrs Soulsbury had completed all possible performance of the act
required for enforcement of Mr Soulsbury's promise.
- This kind of unilateral contract is quite
different from "an agreement for the compromise of an ancillary relief
application" to which Thorpe LJ referred as being "unenforceable in law" in
Xydhias v Xydhias [1999] 1 FLR 683, 691. Mr Howard QC's reliance on this dictum is thus misplaced
and, for these reasons also, I agree with my Lord that the appeal should be
dismissed.
Lady Justice Smith:
- I agree with both judgments and have nothing to
add.
