Stodgell v Stodgell

Where criminal confiscation proceedings and ancillary relief compete for the same assets, neither statutory regime automatically has priority. The court must exercise the discretions under the Criminal Justice Act 1988 and the Matrimonial Causes Act 1973 together, weighing all the circumstances. The legislative steer towards making realisable property available for confiscation remains elastic, but may prevail on the facts. In a substantial Revenue fraud, where the state is the victim, the offending has pervaded the family economy, the assets cannot realistically be separated into tainted and untainted portions, and the confiscation order exceeds the available assets, ancillary relief may properly be postponed until the order is paid in full. Case management principles may require the financial claim to be adjourned, rather than dismissed, where no realistic award can presently be made.

The wife sought ancillary relief following the breakdown of a marriage during which the husband had fraudulently evaded income tax. He was imprisoned and became subject to a confiscation order of £900,453 under Part VI of the Criminal Justice Act 1988. The wife was wholly innocent of the offending and sought provision for herself and their minor child from assets subject to restraint and receivership.

The known net assets were unlikely to satisfy the confiscation order. The court therefore had to decide whether the wife's claims should proceed to a full hearing and whether provision should be made before, and in priority to, satisfaction of the order.

1. Statutory priority. The court held that the relevant provisions of the Criminal Justice Act 1988 and the Matrimonial Causes Act 1973 do not require either statute to take automatic priority. Both confer discretions, which must be exercised together and according to the facts. The authorities provide guidance on the factual exercise of those discretions rather than a fixed rule.
2. Application to the assets. Despite the wife's innocence and her strong need for a home, satisfaction of the confiscation order had to prevail. The offending was extensive and prolonged; the order represented tax, interest and penalties due to the state; and the state was an identifiable victim. The husband's assets were so closely connected with a family economy sustained by evaded tax that it was impossible to identify a particular asset or percentage as untainted.
3. The court distinguished the exceptional circumstances in A, where the wife had an existing interest in and occupation of the matrimonial home and the outstanding confiscation order was modest. The present case was materially closer in principle to Richards, although the wife here was innocent. The legislative steer in section 82 remained elastic, but prevailed on these facts. The welfare of the child was given first consideration, including on the assumption that he would live primarily with his mother, but it did not justify an award in priority to confiscation.
4. The possibility of hidden assets did not justify a lump-sum order. There was insufficient evidence of assets capable both of bridging the shortfall and funding an award. Under the overriding objective, continuing the ancillary-relief proceedings would waste public money and court resources. The claims were therefore adjourned, not dismissed, and could be restored if a surplus emerged after payment of the confiscation order and receivership costs.
5. No application on behalf of the child under Schedule 1 to the Children Act 1989 was before the court. The judge expressed the provisional view that provision was unlikely to be made under that Schedule before the confiscation order was satisfied, without binding any future court. Existing interim payments were substantially brought to an end, subject to limited transitional payments, and the children's proceedings and adjourned financial claims were transferred to the appropriate county court.