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9th July 2019

Henry Hood and Anna Roiser examine the Mandy Gray case in LexisNexis Family Law

Henry Hood and Anna Roiser examine the Mandy Gray case in LexisNexis Family Law
Henry Hood
Henry Hood
Senior Partner

Regretful spending decisions: millionaire divorcee to serve as a lesson?

While family lawyers now frequently deal with cases arising on the separation of unmarried families, the jurisdictional basis for such proceedings falls to be considered less often and arises in a legal framework which may be unfamiliar to family lawyers. The recent decision of Mr Justice Lavender on jurisdiction in Gray v Hurley [2019] EWHC 1636 (QB) provides assistance on some of the issues which may arise in such cases.

Mandy Gray, the claimant in these proceedings, is a familiar figure to family practitioners, having been the applicant in the financial remedy case of Work v Gray [2017] EWCA 270, in which she was awarded half of her husband’s $225m wealth. The current proceedings concern the fallout of Ms Gray’s six year relationship with Hamish Hurley, her former physical therapist.

Ms Gray and Mr Hurley, a New Zealand national who had lived in the UK since 2002, were in a relationship between March 2013 and early 2019. They travelled widely and acquired, by use of Ms Gray’s resources, assets worth tens of millions of pounds, including a property in Italy, a farm in New Zealand, a collection of super-cars, and numerous investments. Many of these assets were purchased in joint names or in Mr Hurley’s name, either directly or through various vehicles.

Whilst Mr Hurley characterises the transactions as gifts, Ms Gray claims that they had never been intended as gifts, and that Mr Hurley held the various assets on resulting trust for her, as she had paid for them. Ms Gray argues in the alternative that the transfers and payments were the result of undue influence exercised by Mr Hurley, giving rise to constructive trusts in her favour.

Mr Hurley seeks to have the dispute settled in New Zealand, where, under New Zealand’s Property (Relationships) Act, the court would have jurisdiction to divide “relationship property” where there has been no marriage. By contrast, under English law and in such circumstances, the court simply has the power to make declarations as to the existing ownership of the assets.

In considering the English court’s jurisdiction to hear the case, the first step was to determine whether EU Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (referred to in the judgment as “the Judgments Regulation”, also known as the Recast Brussels Regulation) applied. If so, jurisdiction would be based on the defendant’s domicile, and if not, jurisdiction would be based on common law principles including forum conveniens.

The Judgments Regulation applies where the defendant to proceedings is domiciled in an EU Member State. Ms Gray argued that Mr Hurley was domiciled in the UK, whereas Mr Hurley’s position was that he was domiciled in New Zealand. In accordance with an aspect of the legal framework which may be unfamiliar to family lawyers, Ms Gray only had to satisfy the court that she had a “good arguable case”, this being the evidential standard applicable when the English Court is determining whether it has jurisdiction under the Judgment Regulation.

However, even before considering Mr Hurley’s domicile, there were other issues relating to the applicability of the Judgments Regulation which the court had to address.

The first was whether the proceedings related to “rights in property arising out of a matrimonial relationship or out of a relationship deemed by the law applicable to such relationship to have comparable effects to marriage”. If so, under Article 1(2)(a) of the Judgments Regulation, the case would be outside the Regulation.

Mr Hurley had to recognise that, under English law, the relationship did not have comparable effects to marriage. Mr Hurley further accepted that the provision should be interpreted in accordance with the law of the court seised, so in this case English law. However, he relied on the 1956 case of In Re Egerton’s Will Trusts [1956] Ch 593 to argue that there is, in English choice of law rules, a presumption that the law of the husband’s domicile applies to govern the mutual property rights of the spouses, and that this should be extended to non-marital relationships, such that New Zealand law, under which the relationship did have comparable effects to marriage, would determine whether Article 1(2)(a) applied.

Perhaps unsurprisingly Mr Justice Lavender was unpersuaded by this argument, noting that In Re Egerton’s Will Trusts was a controversial decision and, whatever its status, it would not be appropriate to extend it to non-matrimonial relationships. He also observed that it may be contrary to the Human Rights Act 1998 to apply a choice of law rule which discriminated on the ground of sex.

The case, therefore, provides helpful confirmation that, for the purposes of determining jurisdiction, proceedings between separated unmarried couples in respect of the ownership of their assets will be treated by the English court as civil, rather than family, proceedings irrespective of the position under the law in any competing jurisdiction.

Next, the court considered Mr Hurley’s argument that, under the Judgment Regulation, the Italian court, rather than the English court, would have jurisdiction in respect of the parties’ house in Italy, held in joint names. This argument was based on Article 24(1) which provides that “in proceedings which have as their object rights in rem in immovable property or tenancies of immovable property, the courts of the Member State in which the property is situated” have exclusive jurisdiction.

Ms Gray countered that her claim was not in rem, as she sought a declaration that Mr Hurley held the property on trust for her. She was, therefore, claiming rights as against him, not against the world. Mr Hurley’s response was that the court should look at the substance of the claim and the relief sought, rather than the exact wording.

Mr Justice Lavender considered a number of authorities in support of each party’s position and ultimately came down in favour of Ms Gray. In doing so he followed the approach of the European Court of Justice in Webb v Webb C-294/92 [1994] 3 All ER 911, concerning a claim by a father for a declaration that his son held a flat in France on trust for the father.

In Webb the court held that Article 24(1) did not apply, stating that “the immovable nature of the property held in trust and its location are irrelevant to the issues to be determined in the main proceedings which would have been the same if the dispute had concerned a flat situated in the United Kingdom or a yacht”.

Other cases, which took a different approach to Webb, were distinguished, with Mr Justice Lavender highlighting that Ms Gray was not seeking an order for sale, nor an order to give effect to her existing interest in the property, but rather determination of whether Mr Hurley’s interest in the property was held on trust for her.

So, where a party to a non-marital relationship seeks a determination by the English court in respect of the ownership of a foreign property, particular consideration will need to be given to how the claim is put and what relief is sought, and the specific facts will need to be carefully considered under Mr Justice Lavender’s detailed analysis at paragraphs 116 130 of the judgment.

Mr Justice Lavender then went on to consider Mr Hurley’s domicile. Family practitioners should note that the test for domicile used for the purposes of the Judgment Regulation is set out in the Civil Jurisdiction and Judgements Order 2001 (SI 2001/3929), which provides that an individual is domiciled in a state only if he is resident there and the nature and circumstances of his residence indicate that he has a substantial connection with that state. This differs from the common law test for domicile which applies when considering the court’s jurisdiction in respect of matrimonial proceedings under Brussels II Revised or the Domicile and Matrimonial Proceedings Act 1973. In particular, under the test applicable under the Judgments Regulation, it is not possible to be domiciled in a state without being resident there.

Mr Justice Lavender found that Mr Hurley had ceased to be resident, and therefore ceased to be domiciled, in England in January 2019. However, Mr Hurley did not return to New Zealand until after Ms Gray’s claim was issued on 26th March 2019 (he appears to have been travelling in the interim). As a result he was not resident, and therefore not domiciled, in New Zealand at that point. The Judge accepted Ms Gray’s argument that the Judgment Regulation should be read as providing that, in circumstances where the court is unable to identify the defendant’s place of domicile, and has no firm evidence to support the conclusion that the defendant is domiciled outside the EU, the court of the last known domicile has jurisdiction. At the time Ms Hurley’s claim was issued, England was Mr Hurley’s last known domicile. The court therefore had jurisdiction to hear the matter.

As Mr Justice Lavender had concluded that the court had jurisdiction under the Judgments Regulation, Ms Gray’s alternative claim under the common law rules was redundant. Nevertheless, the judge considered the claim and again found in Ms Gray’s favour, holding that there was a serious issue to be tried on the merits of the claim save for one aspect of it, that it fell within one of the relevant paragraphs of CPR Practice Direction 6B para 3.1, and that England was the appropriate forum in which to hear the case.

If Ms Gray and Mr Hurley cannot now settle their dispute, it seems likely that we will hear more of them in due course as the court proceeds to consider the substance of Ms Gray’s claims.

The judgment is a useful reminder of the jurisdiction regime which applies to civil cases (at least pending Brexit) and the type of issues which are likely to arise when jurisdiction for a case concerning the property rights of unmarried partners falls to be considered.

This article was originally published in LexisNexis Family Law here.