Joy v Joy -Morancho

For the purposes of Matrimonial Causes Act 1973, section 37, a disposition may be set aside where a subsidiary intention to frustrate or impede enforcement forms part of the disposer’s motives. The statutory presumption of that intention may be displaced by evidence. A solicitor’s good-faith exception requires absence of both actual and constructive notice, and the evidential burden may in practical terms shift to the solicitor. Constructive notice is assessed by the solicitor’s state of knowledge at the time of the disposition, not by subsequent conduct viewed retrospectively. Although transactions securing legal fees will not ordinarily be set aside, the discretion may be exercised where the arrangement creates a gross inequality between the parties’ ability to fund litigation.

The wife applied to set aside the husband’s disposition of a Bentley motorcar by way of charge in favour of his solicitors, DWFM Beckman, securing existing and future legal costs. She relied on section 37 of the Matrimonial Causes Act 1973, contending that the disposition impeded enforcement of maintenance pending suit arrears.

The husband applied to vary the maintenance pending suit and legal services orders and to remit or discharge accrued arrears. The court also considered whether an order for sale under section 24A of the Act might provide an alternative route in relation to the Bentley.

1. Disposition and statutory presumption. The relevant disposition occurred orally during a telephone consultation on 27 November 2013, when the husband agreed that the Bentley should secure his solicitors’ existing and future fees. It materially impeded enforcement of the maintenance order. Since it occurred within three years of the wife’s application, section 37(5) raised a presumption that it was made with the intention of defeating her claim.
2. The husband did not displace that presumption. A subsidiary intention, forming one element of mixed motives, is sufficient. The court applied the formulation in Kremen v Agrest [2010] EWHC 2571 (Fam), supported by Kemmis v Kemmis [1988] 2 FLR 223.
3. Good-faith exception. The solicitors had given valuable consideration and acted in good faith. The relevant question was whether they had actual or constructive notice of the husband’s intention. The court accepted that constructive notice was not established. The solicitor’s knowledge had to be assessed at the critical time, and later delay in disclosing the charge did not retrospectively establish notice. The court applied the principles discussed in Sherry v Sherry [1991] 1 FLR 307 and Le Foe v Le Foe; Woolwich plc v Le Foe and Le Foe [2001] 2 FLR 970, deriving the constructive-notice test from Hunt v Luck [1901] 1 Ch 45.
4. The application to set aside the charge was therefore refused. Had the good-faith exception failed, the court would have exercised its discretion to set aside the transaction because permitting the husband to fund his lawyers to the full value of the Bentley, while the wife lacked comparable security, would have produced an unconscionable inequality of arms. This was an observation about the hypothetical exercise of discretion.
5. The husband’s variation application was adjourned. The court indicated that it would otherwise have suspended the maintenance and legal services obligations prospectively under section 31, without remitting arrears at that stage. It also accepted, without argument, that section 22ZA(8) might permit discharge, suspension, revival or remission of a legal services order.
6. The court left open a possible application under section 24A for sale of the Bentley. Any such application would require proper notice and an opportunity for interested third parties, including the solicitors and RFG, to make representations.

The judgment records that the husband had sought permission to appeal an earlier order concerning delivery up of the Bentley. Patten LJ’s judgment is identified as [2014] EWCA Civ 520. That appeal-related matter was not determined in this judgment.