The influence of ‘silofication’ in family proceedings

The lengthy backdrop to Gudmundsson v Lin [2024] EWHC 1576 (Fam); [2025] 1 FLR 328 (21 June 2024) throws up a variety of issues on the folly of silofication – not a very attractive word – of parallel strands of civil proceedings rules. When the Civil Procedure Rules 1998 (CPR 1998) were made they included the slightly startling requirement (CPR 1998 r 2.1(2)) that the rules applied only to the High Court, county court and Court of Appeal (or as specifically applied by subsidiary rules) but not to, for example, insolvency proceedings, Court of Protection or family and adoption proceedings (now amalgamated as family proceedings).

The case of Reid-Roberts v Mei-Lin (Re Gudmundsson (a Bankrupt)) [2024] EWHC 759 (Ch), 10 April 2024, Deputy Insolvency and Companies Court Judge Frith features also – perhaps predominantly? – as a family case namely Gudmundsson v Lin [2024] EWHC 1576 (Fam) (21 June 2024). And its essential feature – ignored by the four judges who dealt with it – was a chancery point (see Hudson v Hathway (later)), namely: had the husband (G) and wife (L) reached agreement in Law of Property Act 1925, s 53(1)(c) terms? (LPA s 53(1) is set out later). If so, had the couple’s transfer of G’s title to their former matrimonial home (FMH) to L kept that home from the reach of G’s trustee in bankruptcy?

In the concluding Family Division case in the series in 2004, Peel J seems to have given no thought to the critical fact that the insolvency judge, Judge Frith, had held that a matrimonial agreement was, said Judge Frith, unenforceable and that he should uphold the bankruptcy order made in respect of G. Yet Peel J would have known that agreements between married couples (Matrimonial Causes Act 1973 (MCA 1973) s 34(2); and if proved) are perfectly well able to be upheld subject to the s 53 point.

By now L and her children may be out of their house where, as I read Peel J’s decision in Gudmundsson v Lin (above), the decision in the Family Division could have gone the other way than it did. A court should, surely, have considered the position of L and whether any terms between her and G complied with the terms of LPA 1925 s 53(1)(c).

Was a spousal agreement enforceable?

The underlying question for this post is whether or not a married couple may have reached an enforceable agreement; and where neither of two High Court judges (Judge Frith in the Insolvency Court and Peel J in the Family Division) have decided the point so critical for this couple and their two children. And this failure to decide is overlaid, as I see it, by misunderstanding as to precedent rules and what is law and what obiter (said in passing) to a Court of Appeal decision.

Even more serious: Judge Frith conflates the existence of an agreement with its enforceability. That is, he says it is only an agreement if you can enforce it. And that view is based on what he says is “binding authority”. Whether or not a comment of Thorpe LJ in the Court of Appeal is binding on Judge Frith is the starting point for what follows. The insolvency judge takes no account of MCA 1973 s 34 on “validity of maintenance agreements” (defined later).

The decision of Peel J must be read alongside Judge Frith’s a much longer judgment (40 pages) in the Insolvency Court (ie in High Court, Chancery Division). Peel J makes no reference to Judge Frith’s decision. Peel J finds that G had abandoned his appeal; but then allows it (at [35]) “to rectify the erroneous property adjustment order” of HHJ Meston KC (see later). Procedurally, that is an odd state of affairs if the issue before him is no longer live; add to which there are profound insolvency/property law issues still for investigation by the courts.

Lord Meston KC in the Family Court

In the parties’ MCA 1973 financial proceedings before HHJ Meston KC (not reported or, as far as I know, given a neutral citation number), the judge made amongst other orders, a property adjustment order (PAO; “the Meston order”) for transfer of the parties’ FMH (H’s share was worth about £750,000).

The critical feature in this story is that six days before the Meston order was finally made (4 March 2020) H had been made, unknown to the judge, subject to a bankruptcy order (BO).

The parties have two dependent children aged 10 and 14 who were living in the FMH with L.

On H’s appeal Peel J said he must set aside the PAO (which was made in respect of property where H’s share was, said Peel J, vested in his trustees). HHJ Meston KC was not told by Mr G of his pending bankruptcy order. Judge Frith delayed sale of the FMH till the youngest child is 18. The trustee says he plans to appeal against the delay order.

Peel J failed to inquire, as far as can be deduced from his judgment, whether Judge Frith’s findings were correct in law and made no comment on the welfare of the children (MCA 1973 s 25(1)).

When does property pass? Is an inter-spousal agreement enforceable?

The judgements raise a number of questions, not least of all, whether or not property in law or equity had passed to L before the Meston order; or did it vest in G’s trustee in bankruptcy – the effect of the outcome of the case following the bankruptcy courts and Peel J’s orders – before the Meston order? Judge Frith failed to consider fairly the essential question of whether or not an agreement of two spouses is enforceable save – as he saw it – under a MCA 1973 or CPA 2004 court order? Was Judge Frith right to hold that he was bound in law or at all by a Court of Appeal “binding authority”?

Peel J accepted Judge Frith’s decision without, as far as one can tell, any serious consideration of how it had been arrived at and in the light of MCA 1793 especially of MCA 1975 s 34 (below).

The judgments in the Lin cases leave at least the following questions:

  • Was there, in law, an enforceable agreement between the parties for transfer of the FMH to L.
  • If there was, what effect on L’s rights (if any) does that create upon G’s insolvency?
  • Could Peel J, on allowing G’s appeal, have back-dated the Meston order to a date earlier than G’s bankruptcy and thus have enabled the Hudson v Hathway (cited below) issue to be tested?

These questions are not addressed by Peel J. (1) was considered but rejected by Judge Frith. (2) and (3) get no mention in either judgment. Central to Judge Frith’s decision was the question of whether or not there was in law – ie in terms a family lawyer would recognise – an agreement in LPA 1925 s 53(1)(c) terms between the parties for transfer of the FMH to L; and if so, as against the bankruptcy trustee, what were the consequences?

An agreement and its enforceability: separate facts

Judge Frith considered whether or not there was an agreement as ‘the Hudson v Hathway issue’ ([2022] EWCA Civ 1648, [2023] KB 345, [2023] 1 FLR 1252 (14 December 2022)). He reached no conclusion because he let himself be sidetracked by Xydhias and the question of enforceability. He deals with this in a short passage [2024] EWHC 759 (Ch) at [67] to [72] under a heading ‘The decision of the Court of Appeal in Xydhias v Xydhias‘ ([1999] 2 All ER 386; [1999] 1 FLR 683, CA). In particular he says (italicised numbers are added by me):

“[70] It follows that in this case, the parties were engaged in divorce proceedings. It may be the case that the parties did come to terms in this case. Had they not been involved in divorce proceedings, this may well have been sufficient to constitute a disposition under the rule in Hudson v Hathway. However, [counsel for the trustee: C] indicated that they were akin to “subject to contract” discussions and (1) only achieved legal status when the Court made an order…. (2) I am not sure that this is determinative, particularly given that the decision requires the determination of a question of law arising from written communications.”

This passage which, if the judge had dealt with the parties agreement and its compliance with Law of Property Act 1925 (LPA 1925) s 53(1)(c), probably would have determined the whole issue between L and the trustee, and might have decided the PAO litigation entirely in L’s favour.

Law of Property Act 1925 s 53(1)

As LeWison LJ pointed out in Hudson v Hathway, at [45]:

“Section 53(1) of the Law of Property Act 1925 relevantly provides:

“(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law; … (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.”

Judge Frith’s para [70] (above) seems to say in respect of the italicised numbering in the citation:

  • If he held the discussions were “subject to contract” then did there come a point where there was a s 53(1)(c) agreement? Was there a contract (enforceable or not) and if so did title pass – a basic conveyancing point – when contracts were “exchanged”? The judge reaches no conclusion on the point.
  • What doe this mean? We know that judges are not supposed to say they are ‘not sure’ (eg Lady Hale at [31] in Re B (Children) (Care Proceedings: Standard of Proof) (CAFCASS intervening) [2008] UKHL 35 [2009] 1 AC 11, [2008] 2 FLR 141).

Hudson v Hathway is apt. There the couple were not married. The Court of Appeal concluded that a course of emails between joint owners of their freehold property satisfied the test under LPA 1925 s 50(1)(c) and enable Ms Hudson to enforce an agreement between the parties. At [50] Lewison LJ said, at [50]:

“In my judgment Mr Hudson’s emails of 31 July and 9 September 2013 are sufficient in point of form to amount to a release of his equitable interest in the house. They evince a clear intention to divest himself of that interest immediately, rather than a promise to do so in the future. His email of 30 July 2013 said in relation to the house, ‘Take it’; and in his follow up on 9 September he disavowed any interest in it.”

Were similar emails between G and L of equivalent LPA 1925 s 53(1) sufficiency. We do not know. Judge Frith does not decide the point because he was sidetracked by a comment of Thorpe LJ in Xydhias, such that the judge concluded, at [71], that:

“… Xydhias provides binding authority to the effect that whilst the parties to the divorce proceedings can engage in negotiations to resolve issues in relation to a property adjustment order, any agreement they reach will have to be approved by the judge having the conduct of the matter. It will then be recorded in the appropriate Court order.”

Did Xydhias bind Judge Frith?

Xydhias is part of a continuum of family law financial relief cases, none of which Judge Frith considered. First the “binding authority” point. The issue in Xydhias was whether the husband should be bound by his agreement in correspondence between solicitors. The Court of Appeal said: yes, he should be held to his agreement. His appeal was rejected. Whether or not that husband should be held to his terms was the main issue before the court. And the “reasoning that led to the decision” to disallow the appeal on that issue was decided against the appellant husband. Enforceability was irrelevant to that main issue; though of course it was critical for Mrs X if the Court of Appeal was with her on Mr X’s appeal (as they were).

The comment Judge Frith cites from Thorpe LJ, even if correct, has nothing to do with the reasons (ratio decidendi) for the court’s rejection of Mr X’s appeal. Judge Frith does not analyse why he says he was bound by Thorpe LJ’s comment. Worse, Judge Frith ignores the continuum of jurisprudence of which Xydhias is part. The continuum of cases on this point, none of which seem to have been drawn to the attention of the judge, are set out below. These cases would be familiar to Peel J (though he mentions none of them), and unquestionably they would have been familiar to HHJ Meston KC had he realised that bankruptcy was in prospect.

The jurisprudence in summary level includes:

  • de Lasala v de Lasala [1980] AC 546, (1979) FLR Rep 223, PC (4 April 1979).
  • Edgar v Edgar [1980] 1 WLR 1410, (1981) FLR 19 (23 July 1980), CA.
  • Mountney v Treharne [2002] EWCA Civ 1174, [2002] 2 FLR 930 (mentioned by the judge because, said the judge, it was referred to as part of an advocate’s argument. The case was not analysed by him.)

  • Granatino v Radmacher (formerly Granatino) [2010] UKSC 42, [2011] AC 534, [2010] 2 FLR 1900

Beyond the pale of the law’s relief; ‘validity of maintenance agreements’

The case which is often cited on enforceability of spousal agreement is de Lasala. Lord Diplock said, 1980] AC 546 at 560:

“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; and the method of enforcing such of their provisions as continue to be executory… “

All that means is that if you have an agreement, and that agreement is defined ultimately by court order, then – but only then – enforcement shifts from the agreement itself (a matter of contract law) to the court order which summarises it (ie in the family courts). Lady Hale explains this in Granatino. The point is clear. Why otherwise would solicitors draft separation deeds, if they were going to be unenforceable?

More to the point – and determinative, surely? – is MCA 1973 s 34(2). Under the heading “Validity of maintenance agreements”, s 34(2) makes the same provision for married couples as for civil partnership couples in Civil Partnership Act 2004 Sch 5, Part 13 paras 67 and 68 (where the language is more modern than in MCA 1973; and replacing ‘civil partnership’ with ‘the parties to a marriage’).

Paras 67 and 68 are to the same effect s 34(2). They emphasise the validity point. Para 67 defines a ‘maintenance agreement’ as ‘made during the continuance or after the dissolution’ etc of a civil partnership and contains ‘“financial arrangements… governing the rights and liabilities towards one another when living separately of the civil partners’ including ‘the making or securing of payments [including for a child], or the disposition or use of any property’. Except in the case of restriction to use of the courts and ‘maintenance’ agreement are enforceable by statutory provision says para 68.

Judge Frith does not refer to s 34(2). At least since January 1971 (and from long before) Parliament has assumed that agreements between spouses are enforceable; and – as I read him – so did Lord Diplock. So everyone who commissions a lawyer to reduce their separation terms to writing can do so on the basis that if payments are not made or assets transferred they can appeal to one of HM courts to enforce their agreement. They do not have to wait till they are divorced and any court order is made. Whether there was a prior agreement was not decided by Judge Frith, still less even considered Peel J. Had it been L’s and her children’s occupation of their home, if it had gone L’s way, would have been decisive against G’s trustee in bankruptcy.

Silofication and Lin v Gudmundsson

Back then to silofication:

  • First in time was HHJ Meston KC. He was proceeding under MCA 1973 Part 2 in broadly conventional property adjustment order terms with underlying evasiveness of G.
  • I doubt the Hathway v Hudson points were pleaded before Judge Meston; but had they been he would have transferred that “chancery point” (LPA 1925 s 53(1); see eg TL v ML and others (Ancillary Relief: Claim against Assets of Extended Family) [2005] EWHC 2860 (Fam), [2006] 1 FLR 1263 Nicholas Mostyn QC sitting as a High Court judge) to be dealt with as a preliminary issue (probably before himself given his extensive experience as a circuit judge).
  • If the insolvency issue needed to be tried separately (ie because it was not avoided by an enforceable, as against the trustee in bankruptcy POA) and had the Xydhias point been spotted, an insolvency judge with family proceedings experience could have been allocated; and eg Judge Meston would have been well able to deal with the Xydhias
  • The Family Division appeal, which ended up before Peel J (and if there still remained an issue over the FMH), should have been capable of being dealt with by a judge with experience of the above subjects; and who would – it is to be hoped – have spotted the error of Judge Frith as to enforceability of matrimonial agreements and his uncertain approach to precedent rules.

The fact remains that the sets of civil proceedings rules in play are

  • FPR 2010 for the property adjustment order proceedings;
  • Insolvency Rules 1986 and 2006 Amendment Rules; and
  • If the chancery point was put over to a chancery judge, Civil Procedure Rules 1998 would apply (eg as to disclosure rules in relation to the parties communications which might evidence any agreement between them).

How many judges in the 2020s have the spectrum of experience which issues like the above demand?

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