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12 FEB 2009

ANCILLARY RELIEF/CRIMINAL LAW: Stodgell v Stodgell [2009] EWCA Civ 243

(Court of Appeal; Thorpe, Lloyd and Hughes LJJ; 12 February 2009)

The husband had been convicted of tax evasion and fraud over several years, and sentenced to 3 years' imprisonment. The wife had petitioned for divorce before the husband was charged, although after the investigation began; she was seeking ancillary relief from the husband. However, a criminal confiscation order had been made against the husband for £900,453, with 12 months to pay and a term of 3 years' imprisonment in default. It had become apparent that it was highly unlikely that realisation of all known and identified assets would satisfy the confiscation order. The wife argued that her claim to a lump sum should be decided before the husband's assets were applied to satisfy the confiscation order; the Revenue asked the court to adjourn the wife's claims until the confiscation order had been satisfied in full. The judge eventually held that the wife's ancillary relief claim could not proceed until the charging order had been discharged. The wife appealed, relying in the main upon her lack of any knowledge of the husband's fraudulent evasion of income tax.

Refusing the wife leave to appeal, the court noted that, although non-complicity in crime was a necessary condition for the wife in competition with a confiscation order to succeed in an ancillary relief claim, such non complicity was not a sufficient condition. This was not a case in which the confiscation order related to surplus income derived from crime; it related to a debt to the Revenue spanning many years. The spouses had both lived well on the basis of a domestic economy that relied upon non-payment of tax and penalties. The issue of taint was relevant if assets could be traced to acquisition from the proceeds of crime, but in a case such as this, in which the domestic economy and the assets accumulated were only the size they were because the husband had failed to pay the tax due, taint was not directly relevant. For that reason it was not critical that the two matrimonial properties had not been obtained from crime; what was critical was that those properties could not have been maintained without non-payment of tax and penalties. The concession made by the wife's counsel that the Revenue could have recovered the sums due by bankrupting the husband, rather than by way of confiscation order, was fatal to the wife's claim. It was not possible to argue that there should be no distinction between a wife with a proprietary interest in certain assets and a wife with a non-proprietary ancillary relief claim; the distinction was a critical one because to the extent that the wife had a proprietary interest in property, that property did not form part of the husband's assets, and was not available to satisfy the confiscation order.

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