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COSTS/ANCILLARY RELIEF: Baker v Rowe [2009] EWCA Civ 1162

Date:11 NOV 2009

(Court of Appeal; Ward, Wilson and Leveson LJJ; 6 November 2009)

The husband and wife purchased their council home with assistance from the wife's daughter and son-in-law, who not only guaranteed the mortgage, but also paid the mortgage instalments.

Initially these payments came from a joint account, but after the daughter and son in law separated the payments were made by the daughter alone and the daughter eventually redeemed the mortgage on the property. When the husband and wife divorced, the wife applied for orders to determine the future ownership and occupation of the property. The husband and wife had executed a declaration of trust to the effect that they held the property beneficially for the daughter. Both the daughter and the son-in-law (now themselves divorced) intervened in the ancillary relief proceedings, each asserting a beneficial interest in the property under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA).

The judge ruled that the daughter was the sole beneficial owner of the property because, while the son-in-law had indirectly contributed to the mortgage payments for some years, at the time of his divorce from the daughter he had specifically agreed that he would make no claim with respect to the property. The judge made a costs order against the son in law, in the daughter's favour, on the basis that the general rule in ancillary relief proceedings, set out in Family Proceedings Rules 1991, r 2.71(4)(a), did not apply. The son-in-law's appeal was dismissed; the circuit judge, who was under the impression that the son-in-law required permission to appeal to him, both refused permission and dismissed the appeal. Under Family Proceedings Rules 1991, r 8.1(1) any party could, without permission, appeal from an order or decision made in family proceedings in a county court to a circuit judge on notice.

No permission had in fact been required in this case because these proceedings were family proceedings, albeit that the claims by the interveners had used the vehicle of TOLATA, s 14. Therefore, although it was not possible to appeal against a refusal of permission to appeal, the Court of Appeal had jurisdiction to consider the son-in-law's appeal in this case, as a second appeal, and would treat the purported refusal of permission by the circuit judge as a nullity.

The general rule as to costs in ancillary relief proceedings, set out in FPR r 2.71(4)(a), did not apply to the issue of costs between the interveners; it made no sense to apply the new general rule in ancillary relief proceedings to cases like Judge v Judge [2008] EWCA Civ 1458 [2009] 1 FLR 1287, and to this case; the clear purpose behind r 2.71(4)(a) required its unfocussed reference to 'ancillary relief' proceedings to be construed narrowly. The proceedings brought by the interveners in this case were related to, but not for, ancillary relief. However, the proceedings were family proceedings, so the rule that costs were to follow the event did not apply either; no general rule applied.

Even in cases in which the general rule that costs were to follow the event was not applied, the fact that one party had been unsuccessful, and must therefore usually be regarded as responsible for the generation of costs, would often be the decisive factor in the exercise of the judge's discretion as to costs.