Fisher Meredith LLP v JH & Anor: The obligation to join a third party

Mr Justice Mostyn
In Fisher Meredith LLP v JH & Anor [2012] EWHC 408 (Fam) Mr Justice Mostyn considered an appeal against a wasted costs order made against the wife's solicitors in financial remedy proceedings.

The case involved a company in which the husband had been allocated shares, which he claimed he had only ever held as a nominee for his uncle "and/or" his uncle's brothers. He transferred the shares to his uncle's wife shortly before the parties separated. The wife applied for ancillary relief and sought a reversal of that transfer, under s.37.

Just two clear business days before the (5 day) final hearing of the wife's applications the aunt's solicitors served the wife's solicitors with 123 pages of further documents, which had been very heavily redacted, which related to events in 1998 when the company had been formed. On the day of the hearing, the aunt's skeleton argument was served, asserting that it was "incumbent on W to join the beneficiaries", without whom she could not ask the court to make any findings as to the beneficial interests in the shares

Accordingly, at the hearing counsel for the wife sought an adjournment, as the point of the skeleton argument was that even if the court set aside the share transfer, that would not affect the beneficial ownership of that shareholding, because it was held for persons who were yet to be specified. Both the husband and the aunt agreed to the adjournment, provided the wife paid the costs thrown away, and that a wasted costs order was made against the wife's solicitors, on the basis that they had failed to join the beneficiaries.

A wasted costs order was duly made by District Judge Bassett-Cross, with the costs estimated at over £100,000. The wife's solicitors appealed.

Referring to his own judgment in TL v ML & Ors [2005] EWHC 2860 (Fam), Mr Justice Mostyn stated that it was essential in every instance where a dispute arises about the ownership of property in ancillary relief proceedings between a spouse and a third party, that the third party should be joined to the proceedings at the earliest opportunity. However, that judgment said nothing as to who should achieve the joinder. He found (at paragraph 42) that:
"...there is a clear distinction to be drawn between the state of affairs where a claimant is saying that a property held in the name of a third party is the property of the respondent; and the situation (as here) where the respondent says that property to which he has legal title is beneficially owned by a third party."
In the former case, there was a clear obligation on the claimant to apply to join the third party. In the latter situation, the duties were by no means so clear cut.

After examining the argument of counsel for the aunt and the judgment of District Judge Bassett-Cross, Mr Justice Mostyn concluded (at paragraph 58):
"In my judgment the findings and criticism made against [the wife's solicitors] are wholly untenable. All of W, H and [the aunt] had assented either expressly or tacitly to the preliminary issue being determined without joinder of other members of H's family. If this was the wrong decision then in my judgment the blame falls primarily and equally on (i) H for not inviting other members of his family to intervene, (ii) [the aunt] for not suggesting the same to her husband and other family members and (iii) the family members for not intervening to protect their (alleged) property."
In the circumstances, the judgment and award of the District Judge were set aside in their entirety.