Gowers v Gowers

A matrimonial court may order a spouse to pay a lump sum, but it cannot make a direct order against a company’s assets where the company is not a party to the marriage and the spouse has no beneficial interest in those assets. Payment of company money into court as security does not, without clear words, create a trust, guarantee or obligation to pay the spouse’s liability. The corporate veil may be pierced only within the established limits of control and impropriety, subject to the interests of minority shareholders, creditors, directors and others. A Thomas v Thomas order operates against the spouse and may encourage third-party assistance; it cannot invade a third party’s rights or discretion.

Financial proceedings between the husband and wife concerned a proposed lump sum of £900,000. City Docs Limited, a trading company closely connected with the husband but not owned by him, had paid £500,000 into court following a short freezing order concerning proceeds from the sale of shares in a subsidiary.

The district judge subsequently ordered that the £500,000 be paid to the wife. City Docs applied to set that part of the order aside and sought repayment of the money. The preliminary issues were jurisdiction, the effect of the husband’s subsequent bankruptcy, and whether the order should be set aside. The present court exercised original jurisdiction to vary or discharge the order because City Docs had not been on notice that the order would be sought.

1. Jurisdiction. Section 23(1)(c) of the Matrimonial Causes Act 1973 permits an order requiring either party to the marriage to pay a lump sum to the other. City Docs was not a party to the marriage. Section 24A could not assist because the husband had no beneficial interest in City Docs, Trilantic International Limited or the proceeds of sale of shares owned by City Docs. The district judge’s finding that the husband could control the company and borrow substantial sums from it did not establish ownership or a beneficial interest.
2. Payment into court. The company’s payment was made to secure the money and release the balance of the proceeds from the freezing order. The documents required retention and later distribution pursuant to an order; they did not contain clear words creating a trust, guarantee or indemnity in favour of the wife. Practicality was not a basis of jurisdiction.
3. Corporate veil. The authorities, including Ben Hashem v Al Shayif [2008] EWHC 2380 (Fam), required at least consideration of control and impropriety linked to the company’s structure. No impropriety or dishonesty had been found. The company was an active trading business with minority shareholders, employees, creditors and directors whose interests could be prejudiced. The case was far removed from the exceptional circumstances in which the veil might be pierced.
4. Thomas v Thomas. That authority supported, at most, an order against the spouse designed to encourage third-party assistance. It did not authorise a direct order against a company or trustee, or an invasion of a third party’s rights or discretion.
5. The husband’s subsequent bankruptcy did not affect the conclusion on jurisdiction. Paragraph 2 of the order dated 11 March 2011 was made without power, was set aside, and the £500,000 and accrued interest were ordered to be paid forthwith to City Docs, subject to its undertakings concerning dealings with the money.

• District Judge Gibson: made an initial judgment on 16 September 2010 and a supplemental judgment on 8 March 2011, followed by an order requiring £500,000 paid into court to be paid to the wife.
• High Court (Family Division): on City Docs Limited’s application, exercised original jurisdiction to vary or discharge the order, answered the preliminary issues, set paragraph 2 aside and directed payment to City Docs.