Smith v Smith

When separated spouses jointly own their home, the court may order its sale under the Trusts of Land and Appointment of Trustees Act 1996 before divorce. It should first ask whether the issue can reasonably await ancillary relief within a tolerable time-frame. A sale will ordinarily be inappropriate if there is a measurable chance that the occupying spouse could preserve occupation through a transfer or variation of the trust.

If that threshold is crossed, the court must exercise the statutory discretion by considering the trust’s purposes and the beneficiaries’ circumstances, including their housing needs. Sections 13 and 14 permit an effective order for vacant possession. The applicant need not separately establish the conditions for an occupation order under the Family Law Act 1996.

The wife appealed against an order made by Mr Recorder Sapsford QC in the Principal Registry of the Family Division. Before determination of the husband’s defended divorce petition, the recorder ordered the immediate marketing and eventual sale with vacant possession of their jointly owned matrimonial home. The net proceeds were initially to be divided equally, held on deposit and frozen pending agreement or further order.

The application was made under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. The wife contended that the application was premature because the sale should be considered holistically in later ancillary-relief proceedings. She also argued that vacant possession could not be ordered unless the requirements for an occupation order under section 33 of the Family Law Act 1996 were satisfied.

The central issues were when a court may order sale of a matrimonial home under the 1996 trust legislation before decree and whether a separate occupation-order test governs vacant possession.

1. Appeal dismissed unanimously. The recorder was entitled to order sale with vacant possession under the Trusts of Land and Appointment of Trustees Act 1996. Lord Justice Rimer and Sir Mark Potter agreed with Lord Justice Wilson’s judgment.

2. On a TOLATA application between separated spouses, the court should first ask whether the issue can reasonably be left for determination in ancillary-relief proceedings following divorce. That course is generally preferable because the matrimonial court can examine the parties’ finances, needs and contributions holistically, and can devise an integrated solution. A TOLATA order determines only one part of that wider financial arrangement.

3. The threshold enquiry requires particular attention to the time within which ancillary relief is likely to become available. If there is any measurable chance that, within a tolerable time-frame, the respondent could preserve occupation by obtaining a transfer of the home or a variation of the trust, an immediate sale will ordinarily be an improper exercise of discretion.

4. The application crossed that threshold. The parties had long been separated, capital ancillary relief remained a substantial time away, and continued retention exposed the husband to heavy outgoings and currency-related mortgage risk. There was no measurable chance that the wife could secure sole ownership of, or a life interest in, the highly valuable and heavily mortgaged home.

5. Sections 13 and 14 authorised an order which effectively required a beneficiary to give vacant possession for a sale. In exercising the section 14 discretion, section 15 required consideration of the trust’s purposes and the beneficiaries’ circumstances and wishes. The recorder could find that the home’s purpose as a shared matrimonial home could never again be fulfilled. The beneficiaries’ circumstances included their respective housing needs.

6. The court was not legally required also to find that an occupation order should be made under section 33 of the Family Law Act 1996. Wicks v Wicks concerned the absence of a collateral possession power under different legislation and did not impose that requirement upon TOLATA.

7. The husband accepted on appeal that the wife could elect to receive the half of the net proceeds representing her existing beneficial interest, subject to any later application to freeze property or investments acquired with it. The stay on marketing therefore fell away, and the earliest completion date required revision.

1. Court of Appeal (Civil Division): The wife’s appeal was dismissed unanimously: [2009] EWCA Civ 1297. The stay on marketing fell away, and the earliest permissible completion date required revision.

2. Principal Registry of the Family Division: Mr Recorder Sapsford QC ordered the matrimonial home to be marketed and sold with vacant possession. He directed that the net proceeds be divided equally, deposited and withheld from distribution without consent or further order.