Introduction
- This judgment follows the hearing of the wife's financial remedy application. The wife was represented by Mr Martin Wood and the husband by Mr Rodney Ferm.
- I begin this judgment by commenting that, far from there being agreed valuations in every instance, there is not even an agreed schedule of assets and liabilities. The reason for this will become apparent later in this judgment. Certain assets had been hotly contested throughout the proceedings only to be conceded at a late stage in the hearing. This has added significantly to the length of the hearing. It has also meant that those advising the wife felt unable to put forward detailed open proposals until the end of the hearing before me. The overall result is that this judgment is necessarily lengthier than it otherwise might have been given that I have been required to construct a schedule of assets and liabilities in order to carry out the distributive exercise required of me.
History
- The parties married on 16 May 1997 having commenced cohabitation in March 1993. The wife is now aged 40 (and will be 41 in July); the husband is aged 61. There are no children of the family. The parties separated on 28 January 2008. I therefore treat the marriage as one of 15 years' duration. The wife now lives in rented accommodation; the husband remains at the former matrimonial home with his current partner and her mother. The wife filed a petition for divorce on 5 March 2008 upon which a decree nisi was pronounced on 5 August 2008.
- When the parties began cohabitation, the wife moved into a property ('the first property') which the husband had purchased in 1976. In 2002, they moved to the former matrimonial home, which was purchased for £430,000 in joint names, funded in part by the proceeds of sale of the first property of £300,000 together with funds provided by the husband of £50,000 and a bank mortgage of £80,000.
- When the parties met, the wife was aged 21 and was employed as a credit controller. She had left school aged 15½ and has no formal qualifications. The husband was aged 42. The husband left school at the age of 16 and has pursued a successful business career. Having obtained an accountancy qualification, he did not pursue that profession, but worked on a self-employed basis initially as a potato merchant and then operating a garage before acquiring his first commercial property in 1983, the vehicle for which was A Co Limited ('A Co'). A Co was owned as to 74% by the husband and as to 26% by his brother, Robert Betts. It is in the sphere of commercial property that the parties' wealth has been built up.
- The commercial property enterprise flourished such that the decision was taken in 1992 to proceed with a Stock Exchange flotation. The result was B Co Plc ('B Co'). B Co continued to acquire further commercial property. The husband decided to leave B Co in 1996 and, in about 1997, he set about realising his interest in that company. The sum so realised has been the subject of much forensic analysis.
- At the same time, in 1997, the couple decided to move to Gibraltar to benefit from what they had been advised would be a significantly more benign tax regime. The wife gave up her employment at this time. An apartment was purchased in Gibraltar in the husband's sole name.
- Following the husband's sale of his shares in B Co, he continued to use A Co (which had earlier been part of B Co) to develop small industrial units as well as incorporating a new company C Limited ('C Co') in September 1997 to purchase a site. This was carried out initially in conjunction with another shareholder, but the husband later acquired that individual's shares.
- The husband's mother died in 1998 and he and his brother used their inheritance to purchase a commercial property in 1999, using as the vehicle for this D Limited ('D Co'), the shares in which are owned equally by the two brothers.
- A Co, C Co and D Co own between them five industrial sites equating to 220,000 square feet let as industrial units. A Co and C Co have also provided a means for the husband to pursue certain hobbies. Each of these two companies owns motor vehicles. The husband has an interest in motor racing with vehicles owned by C Co. A Co has owned a number of motor yachts.
- Following the supposed relocation to Gibraltar, the husband decided to reorganise his companies making A Co and C Co subsidiaries of a holding company incorporated in Gibraltar, A (Gibraltar) Limited ('AG Co'). On tax advice, the husband's brother transferred his 26% interest in A Co to the husband on 15 April 2006. On 19 December 2006, AG Co acquired the whole of the issued share capital in both A Co and C Co. At some point between June 2008 and August 2009, 25% of the shares in AG Co were transferred by the husband to his brother. It has been suggested by the husband that this transfer was in recognition of the historic 26% interest that the brother had had in A Co, although it is conceded that he also transferred to his brother a 25% interest in C Co which he had never originally held.
- Shortly before the separation, the husband transferred 49 shares in AG Co to the wife. The wife's case is that she wanted more involvement in the business and had been requesting a shareholding. Whilst the husband had, on the wife's case, initially agreed to transfer a 49% interest, he transferred in the event only 49 shares, as he was suspicious about the reasons for the wife's request.
- In a statement dated 22 January 2010, the husband set out his belief that the wife had then been living with Mr Z for 18 months. In a statement dated 12 April 2010, the wife conceded that she had occasionally been out socially with Mr Z since the separation. However, she denied that they were in a relationship or were living together. Specifically, she stated that Mr Z had never set foot in any property in which she had lived since the separation. The husband decided to instruct an enquiry agent who carried out observations on the wife's then home between 24 May 2010 and 30 July 2010. The agent's report reveals that, during this period, Mr Z stayed overnight at the wife's address on 21 out of 69 nights. The wife does not dispute the sightings. The wife asserts that there are dates during the period of the enquiry agent's enquiries, when no observations were carried out when her mother and sister stayed with her. She is frank enough to concede that she did not make any mention of Mr Z until the enquiry agent's report had been disclosed. She felt that she had no need to do so in view of the fact that she was not in a relationship. Her evidence is that he stays over at her home a couple of times a week. Mr Z is aged 50 and is a businessman. The wife claimed not to know about Mr Z's financial circumstances. The wife pointed to the fact that, prior to the separation, her circle of friends had been in the main the wives of the husband's friends. That circle has now gone. She had known Mr Z prior to the separation. She stated that she had no current intention of living with Mr Z. The husband, who has not seen the wife and Mr Z together, believes that she will, following the conclusion of these proceedings, live with Mr Z, in what he describes as the beautiful home Mr Z has.
- Whilst in my judgment the wife was initially less than frank about Mr Z, I form the view that the husband has – perhaps because of injured pride – allowed this aspect of the proceedings to assume an unwarranted dominance.
Pre-marital wealth
- The approach which the court should adopt to pre-marital wealth as non-matrimonial property has recently been comprehensibly reviewed by Mostyn J in N v F (Financial Orders: Pre-acquired Wealth) [2011] EWHC 586. He referred to two schools of thought, the first of which was simply to adjust the percentage from 50% and the second being to exclude the non-matrimonial property, leaving the matrimonial property to be divided in accordance with the equal sharing principle. He then went on to endorse a two-stage approach adopted by Burton J in S v S (Non-Matrimonial Property: Conduct) [2006] EWHC 2793 (Fam) and Wilson LJ (as he then was) in Jones v Jones [2011] EWCA Civ 41. At paragraph [14], Mostyn J summarised the steps which the court needs to consider as follows:
"(i) whether the existence of pre-marital property should be reflected at all, this depends on questions of duration and mingling;
(ii) if it does decide that reflection is fair and just, the court should then decide how much of the pre-marital property should be excluded. Should it be the actual historic sum? Or less, if there has been much mingling? Or more, to reflect a springboard and passive growth, as happened in Jones?
(iii) the remaining matrimonial property should then normally be divided equally;
(iv) the fairness of the award should then be tested by the overall percentage technique."
- Mostyn J was at pains to point out that consideration of pre-marital wealth was subject to the question of need. In most cases, the search for fairness begins and ends at the needs stage, as Lord Nicholls put it in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24. Furthermore, as Moylan J has recently observed in AR v AR [2011] EWHC 2717 (Fam), considering recent authorities including Robson v Robson [2010] EWCA Civ 1171 and K v L [2011] EWCA Civ 550, fairness may require the application of the sharing principle to non-matrimonial property.
- I have already adverted to the difficulties facing me in making certain findings. As Mostyn J observed in N v F at paragraph [24]:
"If a party is going to assert the existence of pre-marital assets then it is incumbent on him to prove the same by clear documentary evidence".
I cannot overstate the importance of this principle and the onus of proof which it places upon the husband.
- Whilst the existence of certain pre-marital assets is clear, the value is not. The husband produced a list of assets dated 2 June 1988 totalling £1,464,000. He also produced lists of assets after the commencement of cohabitation as at 29 June 1996 and 2 September 1997. I would comment that, as Mr Ferm concedes, no list has been advanced of the husband's assets as at 1993. The husband's evidence is that he was in the habit of preparing lists of his assets from time to time. His explanation for being able to provide only a small number of these lists was initially that he thought that they had been lost in a house move until he discovered the three, which he now puts forward, in his medical file in November 2011. However, in re-examination, he claimed that the bulk of the lists had been removed by the police when criminal proceedings, where he was acquitted, were commenced against him in 1997 or 1998.
- On behalf of the husband, Mr Ferm submits that the husband's pre-marital wealth is as follows:
(a) The first property free of mortgage;
(b) A half interest in a property in the Lake District also free of mortgage;
(c) An E-type Jaguar, a Porsche and a Kawasaki motorcycle;
(d) Pension fund;
(e) Shareholdings/investments;
(f) Shares in B Co.
- So far as the first property is concerned, the only information I have is that it was sold in 2002 for £300,000. It is not in dispute that the husband owned this property free of mortgage when the parties formed their relationship. Doing the best that I can, I calculate that in 1993 the property would have been worth approximately £175,000 applying the Halifax Property Indices.
- In 1993, the husband was the owner of a half-share in a property in the Lake District. He acquired the other half share in or about 1994. The property was sold in 1999 for £220,000. With this scant information, I again apply the Halifax Property Indices and, as a holiday home making some allowance for capital gains tax, reach a figure of £85,000 for the husband's half-share as at 1993.
- I face significant difficulties in relation to the motor vehicles, motor cycles and registration plates. These difficulties are referred to by the forensic accountant in his first report dated 20 January 2010. First, I have no clear evidence before me as to which vehicles were owned personally by the husband and which were owned by either A Co or C Co. Furthermore, I have no evidence as to valuation as at 1993 and do not treat these assets within the husband's pre-marital wealth.
- Whilst I note the husband's assertion that the whole of his pension rights now transferred into his Standard Life SIPP had been acquired prior to the commencement of cohabitation, I have no means of assessing the value of such rights as at 1993 and have therefore ignored this, as the husband has not discharged the onus of proof upon him.
- The husband was unable to help me with any precision as to the identity and value of his investments as at 1993 outside his personal business interests referred to at paragraph [25]. I cannot rely upon the list dated 2 June 1998. I therefore disregard this aspect when assessing the husband's pre-marital wealth.
- The commencement of cohabitation coincided with the acquisition of the husband's various business interests by B Co. The husband has never quantified with precision, supported by documentary evidence, the value of his shareholding in B Co either in 1993 or on its ultimate sale. He blandly claims to have ultimately sold his interest for £2.5m to £3m. The only attempt to value this interest as at July 1993 has been made by the wife's solicitors. Relying on information provided by Fyshe Horton Finney Limited, stockbrokers, they advanced a valuation of the husband's shareholding of £935,070.04 in a letter to the husband's solicitors dated 17 June 2011. In cross-examination, the husband conceded that £935,000 was possibly the right figure for the value of his shareholding in B Co in 1993. I therefore propose to take for the purposes of assessing the husband's pre-marital wealth a figure of £935,070 for the value of the husband's holding in B Co. I have been provided with no information as to possible latent capital gains tax. The husband should not benefit from this failure and I propose to make, as best I can, a notional deduction for capital gains tax of £371,708 treating the value of the husband's net interest as being £563,362.
- I have done my best on the evidence available to me and the husband's pre-marital assets as at 1993 may be tabulated as follows, deducting in each case latent capital gains tax where appropriate:
| The first property [20] |
£175,000 |
| Lake District property [21] |
£85,000 |
| B Co [25] |
£563,362 |
| Total |
£823,362 |
- I have not adjusted the husband's pre-marital wealth to reflect a springboard or passive growth. I do so on the basis of Mr Ferm's submission that the wealth which the Respondent brought into the marriage has not appreciated in real terms. Mr Wood supports this submission. Furthermore, such investment return as there has been on such wealth should in my view be regarded as matrimonial rather than non-matrimonial property.
Proceedings
- The wife's application for what was then ancillary relief is dated 5 March 2008. I pause only to say that it has taken almost four years for her application to be resolved, during the course of which there has been an application under the Matrimonial Causes Act 1973 (MCA), section 37, an order for maintenance pending suit, an application to vary that order, three judgment summons hearings and a non-molestation order made in favour of the wife.
- Both parties have filed forms E and a number of narrative statements. They have each provided replies to questionnaires. I have heard oral evidence from the husband and the wife as well as from the husband's brother and a friend of the husband. I have also had the benefit of written evidence from Mr Alfred Pare, a forensic accountant appointed as a single joint expert supported by valuation evidence from Hanson, Chartered Surveyors. I propose only to refer to some elements of the evidence during the course of this judgment, but have taken it all into account when determining the issues relevant to this application and how to exercise my distributive powers under the MCA.
- The wife struck me (except in regard to Mr Z as referred to at paragraph [13]) as a wholly reliable witness. She was prepared to make realistic concessions where appropriate and impressed me as an intelligent and confident individual. In contrast, the husband was at best most unconvincing. Wherever possible, I have found it necessary to look for corroboration of his evidence. He was unwilling to acknowledge anything more than a very limited contribution on the wife's part. It may well be that his views remain coloured by his unshakeable belief that the wife is cohabiting.
- The wife has made an application under MCA 1973, s 37 to set aside a number of disposals made by the husband. The husband has now conceded that certain of these transactions should be reattributed to him. When this application came before Moylan J in 2010, he expressed the view that it was unnecessary to go through the process of setting aside if it were possible simply to reattribute the capital involved to the husband. I agree with that view which follows the course adopted by the Court of Appeal in Purba v Purba [2000] 1 FCR 652 and by Mostyn J in N v F at para [39].
Section 25 factors
Financial resources:
[a] Capital:
- As I have already indicated, there has been no schedule of agreed assets, let alone valuations, available to me. Some concessions have been made only during the course of the hearing. I set out below my findings only in relation to those assets and liabilities still in dispute.
Contents and jewellery
- In the absence of submissions as to any better method of valuation, I have taken the contents of the former matrimonial home and the flat in Gibraltar as being valued at one-half of their insured value. I have left the jewellery of each party and the wife's clothing out of account, such items as being too peripheral to the overall issues.
AG Co shares
- The husband has a holding of 1,451 shares in AG Co which constitutes a 72.55% interest. The wife holds 49 shares, which constitutes a 2.45% interest. The valuation of each holding has been the subject of Mr Pare's expert evidence. I am invited by the parties, on the basis of Mr Pare's evidence, to treat the value of the husband's interest as being £690,209 and the value of the wife's interest as £28,723, in each case net of capital gains tax. However, the valuation placed upon the husband's interest is subject to a 10% discount based upon paragraphs 8.04 and 8.05 of Mr Pare's first report dated 20 January 2010. In view of the findings made in relation to the transfer of shares in AG Co to the husband's brother at paragraphs [36]-[37], an additional holding of 13.14% is reattributed to the husband giving him a total interest in AG Co of 85.69%, as a result of which it is inappropriate to allow any discount on the original 72.55% interest on the basis of Mr Pare's expert evidence. Furthermore, the valuation of each party's holding is also affected to a marginal extent by the increase in the value of the net assets of A Co by £12,826 arising from the sale of the yacht owned by A Co referred to in paragraphs [39] and [42]. Accordingly, allowing for these adjustments, I treat the net value of the husband's and wife's interests in AG Co as being £773,528 (72.55%) and £28,949 (2.45%) respectively adopting the rates of capital gains tax agreed by the parties. I deal separately at paragraph [37] with the sum to be reattributed to the husband in relation to his additional 13.14% interest.
Loan to Mr Y
- The husband disclosed in his Form E dated 10 June 2008 £30,000 due to him from Mr Y, who is described as a personal friend. The description in Form E reads "the money has been outstanding for a number of years and I am not sure when and if he will repay". It is now said that the debt is statute barred and should be ignored. I cannot see why the husband should elect to disclose this loan as an asset in his Form E, unless he regards it as being recoverable at some point. I propose therefore to treat this loan as fully repayable.
Transfer of shares in AG Co to the husband's brother
- As already indicated above, the husband transferred between June 2008 and August 2009 a 25% interest in AG Co to his brother. The wife asserts that this is a sham aimed at reducing husband's net worth in these proceedings, as a result of which the transaction should be set aside or the holding reattributed to the husband. The wife points in particular to the fact that the husband's brother was content to be out of ownership of the shares for between two and three years. The husband could only explain the delay by saying that his brother had brought the matter up having done a lot of work for him in the last 10 or so years since he retired from the police force in 2003. The husband concedes that an adjustment should be made to reflect the fact that the transfer of a 25% shareholding in AG Co to his brother conferred on him a 25% interest in C Co which he had not originally held. It is accepted by the husband and his brother that the brother had played no part in the operation of A Co or AG Co until he ceased to be a serving police officer. He had received no dividend until the payment referred to in paragraph [46].
- The husband's brother regarded the initial issue of a 26% interest in A Co to him as a form of pension. The brothers were close and I accept the brother's account of the original allocation of shares to him in 1983. I regard it as reasonable that the husband should seek to put his brother, following the share reorganisation, back in the position he had been in 1983, some 10 years before the parties began cohabitation. When viewed against the background to the original allocation of shares to the brother, I do not believe that the delay in the transfer of shares in AG Co is such as to warrant the transaction being set aside or reattributed to the husband. However, I accept the husband's concession that it would, in the context of this application, be unfair to the wife to confer on his brother the uncovenanted bonus of a 25% holding in C Co. Accordingly, I reattribute to the husband £138,107 representing this element of uncovenanted bonus together with an adjustment reflecting the fact that the brother had originally a 26% interest in A Co, whereas he now has a 25% interest in AG Co. I adopt Mr Ferm's calculation net of capital gains tax. The small adjustment required because of the increase in the net assets of A Co referred to in paragraphs [39] and [42] I have already factored into account in reaching the net value of the husband's interest in AG Co at paragraph [34].
Loan by the husband's partner's mother
- In January 2011, the mother of the husband's current partner, loaned to the husband £700,000. This loan is evidenced by a written loan agreement dated 15 January 2011 prepared by the husband who had downloaded the form from the internet. He accepts that this document cannot effect any form of charge upon the former matrimonial home as it purports to do. His position is that he was unable to locate a form of personal loan. The loan is expressed to carry interest at 5% per annum. The loan was used to discharge the dividend payment to his brother of £440,000 referred to at paragraph [46] and to discharge the tax liability to HM Revenue and Customs of £257,920 referred to in paragraph [48]. The mother has moved into the former matrimonial home with the husband and her daughter. There is, however, no evidence to show that the loan is in any way a form of gift or advance inheritance. It is clear how it has been spent. I do not therefore treat the loan as a "soft" loan and count it amongst the husband's liabilities. I make no provision for interest as I do not believe that interest will be sought or paid. Interest was simply one of the provisions of the agreement which the husband lighted upon.
Husband's loan accounts
- The husband has three loan accounts with each of A Co, C Co and D Co. These are dealt with by Mr Pare in his replies to questions dated 17 November 2011. He has used the best information available to him. As at 31 March 2011, the A Co loan account stood at £1,104,467. As at 31 December 2010, the C Co loan account stood at £745,525. As at 31 March 2010, the D Co loan account stood at £165,345, of which only £108,691 is, according to Mr Pare, realisable. On Mr Ferm's submissions, the position regarding the A Co and C Co loan accounts is a starting point only. He submits that two adjustments need to be made. First, in relation to both the A Co and C Co loan accounts, reductions should be made to reflect the up to date state of each loan account as a result of drawings made. Secondly, as regards the A Co loan account, Mr Ferm also submits that this should also be reduced to reflect the fact that Phantom Fairline Yacht, which was treated as a capital asset of A Co in its balance sheet, has been sold and the sale proceeds not paid to the company by the husband, but retained by him. I will deal with each of these submissions in turn.
- If the husband claims that the A Co and C Co loan accounts have been reduced since 31 March 2011 and 31 December 2010 respectively, it is for him to produce evidence of such reductions. The only attempt to produce such evidence, which should have been produced to Mr Pare at a much earlier stage, came in a letter from the husband's accountants, Balance Accountants Limited, to his solicitors dated 5 December 2011, ie during the course of the hearing before me. This letter states as follows:
"Based on historical figures, we would anticipate [the husband's] directors' (sic) loan account in in (sic) the following companies to decrease as shown below:
- [C Co]: £47,528 (between 1.1.11-30.11.11)
- [A Co]: £51,532 (between 1.4.11-30.11.11)
However, these figures are based on past data as we have not seen any current year records. They are consistent with the last three years' drawings levels nevertheless. We understand that [the husband] has drawn out money for legal fees and, based on information provided by [the husband], we anticipate drawings to be no lower than in previous years."
- The husband's evidence was that it would have been a waste of money to undertake an audit. He had therefore asked his accountants to have a 'stab' at the state of the loan accounts during the course of the hearing. I accept that the husband has been making drawings to cover his own living expenses as well as paying maintenance pending suit to the wife of £5,000 per month. The husband's accountants acknowledge that they were working in the dark. Doing the best I can, I propose to reduce the C Co loan account by £42,500 and the A Co loan account by £45,000.
- Turning next to the yacht owned by A Co, this was sold in 2005 or 2006 for approximately £200,000. The proceeds of sale were retained by the husband rather than being paid to A Co. They therefore represent a partial repayment of his director's loan account with that company. This has not as yet been reflected in the financial statements of A Co and will need to be done. The effect of the transaction is also to increase the value of the net assets of A Co by £12,826, this being the profit on the disposal. Mr Wood submits that no deduction should be made because the husband has not demonstrated how the sum of £200,000 has been applied. The husband's evidence was that the £200,000 went into a bank account, which he could not identify, but he was "pretty sure" that it was spent on providing the deposit for a new flat in Gibraltar. I regard the husband's evidence as being unsatisfactory in the extreme in relation to this issue. I find it significant that the yacht was sold perhaps as early as 2005, whereas the deposit on the new flat was not paid until 2007. I do not propose to make any reduction to the husband's A Co loan account in relation to the sale of the yacht. In my judgment, the sum of £200,000 remains unaccounted for. I have increased the value of A Co by £12,826
The new flat in Gibraltar
- In March 2007, the husband and wife decided to purchase off plan a further more luxurious and expensive flat in Gibraltar. The purchase was to be in joint names. The purchase price was £830,000 and a 20% deposit of £166,000 was paid. The source of this deposit is in dispute. The purchase was due for completion in the Spring of 2009. By this time, the marriage was in difficulties. The husband asserts that he tried to raise the balance through two mortgages, one on the security of the former matrimonial home for half the balance and the rest on the security of the new flat. However, his position is that the wife would not sign the necessary security documentation and accordingly the purchase could not proceed. By June 2010, he was informed that the deposit would be forfeited. The developer did, however, indicate that he was prepared to allow the sale to proceed to a third party on payment of the 80% balance. Accordingly, the husband approached Mr X, who he describes as his 'best mate', and agreed with him that the purchase could proceed with him as purchaser effectively at a 20% discount. The husband asserts that the advantage to him and to the wife was that they would not be pursued by the developer for breach of contract. Mr X completed the purchase using a company incorporated in Gibraltar known as E (International) Limited ('E Co') for this purpose. Mr X had formed this company as long ago as 2002 for possible future use. Mr X played virtually no part in the arrangements for the purchase. Everything was dealt with by the husband who arranged a mortgage for Mr X with Hambros Bank in Gibraltar on the security of the new flat and, it is suggested, a personal guarantee from Mr X. The husband claimed that he went with Mr X to Hambros Bank in Gibraltar. This evidence was contradicted by Mr Mitchell, who indicated that everything was dealt with postally or by telephone. In the course of preparations for trial, Mr X had spoken to the wife's solicitor and had been, as he concedes, very evasive with him over this transaction on his case because he regarded it as his personal business.
- The new flat has been on the market since the time of purchase by E Co for £845,000. It was initially tenanted, but the tenant left in September 2011. Mr X believes that the price has dropped slightly from £845,000. The husband believes that E Co would be lucky to get £700,000 to £750,000 in the current climate. I have no current independent valuation evidence before me. It is the wife's case that the purchase by E Co is a stratagem designed to put the deposit out of her reach and that E Co is holding the deposit element of the new flat as a nominee for the husband. I regard Mr X as a most unsatisfactory witness. Mr Wood submitted that a less convincing performance by a beneficial owner could not be imagined. I agree. I find that upon completion of the sale of the new flat, Mr X will, through E Co, repay to the husband such part of the sale proceeds as represents his deposit allowing for any loss which E Co may have made on the transaction due to the fall in value of the property. On the evidence before me, I place a current value on the new flat of £750,000. Allowing for costs of sale in Gibraltar of 5% (£37,500) and repayment to E Co of its original injection of £664,000, I reattribute to the husband the sum of £48,500.
F Limited
- In 2005, the husband started dealing with a quasi-partnership business known as F Limited ('F Co') in relation to his motor racing interests. In the course of this relationship, a Ferrari Daytona was purchased equally by F Co and the husband. Before work could be completed on this car, the business became insolvent and the husband lost £30,000. One of the partners committed suicide and the remaining partner, who lives in the USA, agreed to repay the husband at the rate of £250 per month. He stopped paying these monthly instalments in August 2011. The amount currently outstanding is £11,250. The husband states that he has no current expectation of getting the balance back. However, I do not accept this bland assertion. Monthly payments have only recently ceased. Indeed, had the hearing of this application proceeded as originally intended in June 2011, the husband would not have been able to assert that repayment was unlikely. I am not satisfied that the husband has been sufficiently diligent in his attempts to recover this debt and treat it as part of his assets.
Dividend payment to the husband's brother
- In late 2010, the husband made a dividend payment of £440,000 to his brother. This payment has been the subject of much pre-trial forensic enquiry and evidence. It was only disclosed the day before the hearing before Parker J on 13 May 2011. Mr Ferm finally conceded in his closing submissions that this payment should be reattributed to the husband.
Motor vehicles and personalised plates:
- The motor vehicles and personalised plates have been the subject of several valuations during the course of this application. Certain of the vehicles are owned by C Co and at least one by A Co. However, as is explained by paragraphs 7.27 and 7.28 of Mr Pare's first report dated 20 January 2010, certain vehicles do belong to the husband personally. Indeed, he lists five vehicles with a total value of £327,000 in his Form E. During the course of the hearing, the valuations were agreed with two exceptions at £352,550. I am proceeding on the basis that the agreed valuations relate to the husband's personally owned vehicles. The exceptions were the Mercedes SL55 and its personalised plate. This vehicle had been used by the wife. Shortly after the separation, this vehicle was removed by the husband and subsequently sold. The wife's position is that the vehicle was sold to one of the husband's tenants for £35,000. The husband concedes the sale, but claims that he realised only £20,000 for the vehicle which is now spent. So far as the personalised plate is concerned, the wife asserts that this was advertised for sale by the husband at £35,000. The husband asserts that he paid £25,000 or £26,000 for it and sold it following the separation for £20,000 or £21,000, which sum has also been spent. The wife submits that both of these figures should be reattributed to the husband. I find that both of these sums have been absorbed within the husband's capital and that, as such, there should be no reattribution, whilst acknowledging that the wife does have a capital need for a replacement vehicle.
HM Revenue and Customs Liability
- The removal to Gibraltar for tax purposes failed. The husband was assessed by HM Revenue and Customs for tax of £257,920. This liability was unsuccessfully appealed. It consists of tax and interest, but not penalties. The wife asserts that part of this liability of £171,000 should be reattributed to the husband as it arose from the husband's flagrant disregard of the rules applicable to non-residents. Mr Ferm, on behalf of the husband, submits that there has been an assessment, an unsuccessful appeal and payment of the amount due and there the matter should rest. The husband finds himself in a similar position to other tax payers whose non-resident status has been challenged (R (on the application of Davies and Another) v The Commissioners for HM Revenue & Customs; R (on the application of Gaines-Cooper) v The Commissioners for HM Revenue & Customs [2011] UKSC 47). Indeed, having regard to paragraph [45] of the decision of the Supreme Court, it is difficult to imagine how the husband could have established non-resident status. The husband and the wife acquired a more substantial place of residence in England during the period of alleged non-residence and were continuing to run businesses only in this jurisdiction, as Mr Ferm concedes. The issue then arose as to whether the husband might have any cause of action against his professional advisors. Mr Ferm argued that any such claim will be statute barred; Mr Wood submitted that problems of causation would inevitably arise because of the regularity of the husband's visits to England. Having considered this issue with care, I have reached the conclusion that it would be wrong to reattribute any part of what is a clear liability on the part of the husband to him. The extent of any such reattribution would necessarily be arbitrary. I reach this conclusion on the basis that the wife, as an intelligent person, must necessarily have appreciated that the parties were not living in Gibraltar to the extent originally contemplated and, further, she was involved in, and will benefit from, the operation of the English subsidiary companies. It is accepted on behalf of the wife that there is an outstanding tax liability of £11,160 confirmed by a letter from HM Revenue & Customs dated 25 November 2011.
Gibraltar tax
- The husband also claims to have a tax liability in Gibraltar of £100,000, but possibly as much as £130,000 to £140,000. His Form E referred to an unquantified tax liability "on disposal of my Gibraltar property and business assets". I take this to be a reference to capital gains tax rather than income tax. During the course of the hearing on 6 December 2011, the husband produced a document dated 29 January 2009 showing a net liability of £50,100 covering tax years 1997/1998 to 2004/2005. It is the husband's case that he will have to pay his liability sooner or later, but that the Gibraltar tax authorities are very slack in pursuing what is owing to them. He has not sought any expert tax advice on dual taxation relief. I can only work on the information before me. I have no evidence as to what (if anything) has been paid by the husband after 29 January 2009. There is no documentation to support a liability of £100,000-£140,000. Such liability as may arise may be offset by the considerable amounts of tax which the husband has had to pay to HM Revenue & Customs. In all these circumstances, I have not included any element of Gibraltar tax in the husband's liabilities.
Pensions
- The husband has a SIPP with Standard Life, which had a fund value of £137,967.18 as confirmed by a letter from Standard Life dated 2 July 2011. On that letter is endorsed in manuscript a fund value as at 19 July 2011 of £134,176.72. A tax free cash sum of £39,148.01 was paid out to the husband on 5 May 2005. Mr Ferm submits that because the pension is in payment it has no capital value. This is not, of course, correct. The fund value is not the same as the valuation methodology provided for by the Pensions on Divorce etc (Provision of Information) Regulations 2000, reg 3, which provides for the use of the Cash Equivalent. Formerly, the valuation methodology for a pension in payment was the Cash Equivalent of Benefits. However, as a result of amendments brought about by the Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 with effect from 1 October 2008, there is no longer a separate valuation methodology for pensions in payment. The prescribed valuation methodology is the Cash Equivalent in almost all cases. In the case of a SIPP, the fund value will be approximately the same as the Cash Equivalent and I therefore take as the value of the husband's pension £134,176. Mr Wood in his opening submissions asked me to make a pension sharing order in favour of the wife. Perhaps realising the difficulties which I faced, he suggested in his closing submissions that the husband should retain his pension. If a court is to make a pension sharing order, it must be provided with the valuation evidence required by reg 3. As Thorpe LJ observed in Martin–Dye v Martin–Dye [2006] 2 FLR 601 at paragraph [70], actuarial advice on a single joint expert basis will be appropriate where proportionate. This will be particularly important where the argument is to be advanced that a pension sharing order should be made by reference to equality of projected income rather than equality of capital values, as might well have been appropriate in the present instance. Such evidence of protected income would have been of particular importance here because of the disparity in ages between the parties, where the wife would require a lower percentage to achieve equality of income at, say, age 65. Furthermore, I am concerned that no evidence has been adduced as to either party's Additional State Pension notwithstanding the fact that the capital value of such rights may exceed £100,000.
- The overall asset and liability position in summary is, therefore, as follows:
| Joint assets |
|
| Former matrimonial home |
£652,886 |
| Contents of former matrimonial home [33] |
£38,500 |
| Contents of Gibraltar flat [33] |
£21,000 |
| Subtotal |
£712,386 |
| Wife's sole assets |
|
| Bank accounts |
(£1,349) |
| AG Co (2.45%) [34] |
£28,949 |
| Unpaid legal costs |
(£146,211) |
| Subtotal |
(£118,611) |
| Husband's sole assets |
|
| Gibraltar flat |
£403,750 |
| AG Co (72.55%) [34] |
£773,528 |
| AG Co (partial re-attribution of shares transferred to the husband's brother) [37] |
£138,107 |
| D Co |
0 |
| W loan |
£260,000 |
| Y loan [35] |
£30,000 |
| Loan accounts: [39]-[42] |
|
| A Co |
£1,059.467 |
| C Co |
£703,025 |
| D Co |
£108,691 |
| Share portfolio |
£3,748 |
| New flat in Gibraltar [43]-[44] |
£48,500 |
| F Co [45] |
£11,250 |
| Dividend payment to the husband's brother [46] |
£440,000 |
| Bank accounts |
£2,903 |
| Cars [47] |
£352,550 |
| HMRC reattribution [48] |
0 |
| Loan from husband's partner's mother [38] |
(£700,000) |
| Gibraltar tax liability [49] |
0 |
| HMRC tax liability [48] |
(£11,161) |
| Unpaid legal costs |
(£50,734) |
| Subtotal |
£3,573,624 |
| Pension (husband) [50] |
£134,176 |
| Total net assets and pensions |
£4,301,575 |
[b] Income and earning capacity
- The wife's only current income is the maintenance pending suit which she receives from the husband under the order dated 11 June 2008 at the rate of £5,000 per month. Of this, £1,000 per month was allocated by the court for legal expenses, although in fact the wife has been paying her solicitors at the rate of £1,200 per month.
- There has been much argument about the wife's future earning capacity. I have referred to her education, qualifications and employment background in paragraph [5]. She has not been in employment since December 1996. She surrendered her place in the employment market, when the parties jointly decided to live in Gibraltar, although she has remained engaged in the parties' businesses. Since the separation, she has not been in work nor has she sought employment. Her position is that her time has been engaged in this litigation. For the future, she wishes to use the skills she has acquired during the course of the marriage to set up a commercial property business of her own. She was unable to put any figure on her earning capacity, but accepts that she could earn something. No evidence was put forward on behalf of the wife in the form of a business plan for her proposal with accompanying projections, cashflow forecasts and an assessment of her borrowing capacity. Indeed, the only evidence which the wife did provide on this issue, unsupported by any documentation, was in answer to my questions when she indicated a wish to purchase a property for £750,000 which she believed would generate a rental income of £62,000 per annum. In short, the wife's position is that, having spent a significant part of her life building up the current businesses, she should receive a lump sum to set up in business on her own account.
- On behalf of the husband, Mr Ferm refers me to the Office Salary Survey at Table 12 in At a Glance and to the New Earnings Survey, of which judicial notice is taken as a matter of routine in personal injury and breach of contract cases. I do not find either survey of particular help in the assessment I have to make. In the current economic climate, I have no doubt that she will not find it easy to secure work having regard to the factors I have referred to in paragraph [53]. However, she is in my assessment a resourceful person and will generate an income, as she accepts. She has not assisted her case by her vagueness about her proposed business venture. Without any specific documented proposals, I am unable to consider her proposal. If she wishes to use part of her capital received as a result of my order, that is a matter for her. Indeed, the wife's open proposal, as finally formulated in closing submissions, did not include any element to establish a business, but was based solely upon housing needs and a Duxbury calculation.
- Mr Ferm contends for an earning capacity of £18,000 per annum net. Mr Wood contends that the relevance of the wife's earning capacity cannot be anything more than "topping up". Doing the best I can on the material available to me, I assess the wife's net annual earning capacity of £10,000 per annum.
- So far as the husband is concerned, his Standard Life SIPP is in payment producing approximately £12,000 per annum gross. Beyond that, he is able to extract further income from the various companies by way of salary, dividends, benefits in kind and withdrawals from his loan accounts.
Financial needs and obligations
[a] Housing needs
- The wife's case is that she wishes to return to the former matrimonial home. In her Form E dated 19 May 2008 she stated simply that she would "certainly require a lump sum for a house and furniture". However, in the skeleton argument prepared on her behalf for what was to have been the final hearing for Holman J in June 2011, it was submitted for the first time on the wife's behalf that she wished to return to the former matrimonial home. The former matrimonial home is a large property including garaging for approximately 10 motor vehicles and a gym. It has been extended to include a new stone conservatory and the garden has been re-landscaped. It is in an isolated location. Since the separation, the husband has carried out further works and a stairlift is in the process of installation for the husband's partner's mother at her expense.
- The husband has put before me particulars of properties which he regards as being suitable for the wife ranging in price from £287,500 to £339,950. These are for three or four bedroomed properties. For her part, the wife has put before me housing particulars ranging from £695,000 to £750,000 not only local to her current home but also in one of the more expensive areas of Leeds with which she has no prior connection.
- Mr Ferm has rightly pointed out that one of the unusual features of this case is that, despite the overall capital involved, the housing needs of the parties are not high because of the part of Yorkshire in which they have chosen to live.
- The husband no longer sees his future as being in Gibraltar. However, having regard to the overall wealth, I do not regard it as unreasonable that he should have a holiday home there. The first flat is suitable for this purpose. He indicates that he may wish to acquire, as an alternative, a holiday home in Florida. That is a matter for him. He sees his main home for the future as being in Yorkshire.
[b] Other capital needs
- The wife has other capital needs consisting of the purchase of a car, clearing her overdraft as well as additional capital for unspecified future expenditure, as Mr Ferm concedes.
[c] Income needs
- For the purposes of the hearing before me, the wife produced a revised schedule of her outgoings based upon her current expenditure in rented accommodation amounting to £6,395 per month. This figure expressly indicates that it does not include holidays. It is clear that there are other items not included in this budget which will be relevant to the purchase of a new home. This was clearly the view adopted by Moylan J in AR v AR at paragraph [71] where he commented:
"… it is reasonable for the wife to have the ability to incur expenditure which is not allowed for as part of her regular annual income needs as set out in the budget."
Equally, there are items which are not long-term commitments, namely, rent of £975 per month, legal fees of £1,200 per month and the lease payments of the wife's Porsche Boxster, which will end in July 2013, of £815 per month. It may be possible for the car lease to be terminated prematurely, should the wife decide to purchase a car. These three items total £2,990 and reduce the wife's schedule of outgoings to £3,405. Mr Ferm takes issue with certain items in the schedule, for example, petrol.
- I have little doubt that the husband's entrepreneurial flair is such that he will continue to work as long as he reasonably can and that his income needs will be more than adequately provided for by the capital which will remain to him together with such further capital as he may build up in the future. No evidence was produced as to his income needs beyond the schedule contained in his Form E, which totalled £1,655 per month together with certain additional expenses paid through the husband's companies.
Standard of living:
- The parties have enjoyed on any view an excellent standard of living. This is exemplified by the fact that the husband was able to pursue an expensive interest in motor racing (personally or through C Co) having access to approximately ten motor vehicles and to own a succession of yachts (run through A Co). The wife's evidence also bears this out with her account which included holidays in 5-star hotels with first class travel to destinations such as California, Thailand, Florida, Mauritius and the Caribbean.
Age of parties and duration of marriage
- I have already referred to the respective ages of the parties and to the duration of the marriage. I take account of the disparity in ages between the parties and the fact that the husband is coming towards the end of his working life, whilst the wife has left to her twenty years or so of potential earning capacity.
Contributions
- The husband has made undoubted contributions to the family wealth. The age difference between the parties necessarily meant that he brought wealth into the relationship. I have analysed the extent of the husband's pre-marital wealth at paragraph [26]. This is acknowledged by the wife. The wife made no corresponding financial contribution.
- One of the less attractive features of the husband's case is his total unwillingness to recognise the contribution made by the wife in building up their businesses since their relationship began. In essence, the husband's case is that the wife was simply involved in the less than onerous tasks of typing invoices and carrying out some book-keeping work. He produced letters from several tenants indicating their lack of contact with the wife. The husband believed that the wife had inflated her time commitment in the various businesses.
[68] I remind myself of the observations of Moylan J in AR v AR at paragraph [75]:
"This case teetered on the brink of falling into a dispute about the nature and extent of the parties' respective contributions during their relationship. Evidence on this issue was said to be required to deal with the parties' standard of living and in part to seek to meet the wife's case that her contributions, among other factors, supported her entitlement to a share in the husband's wealth. In my view, this evidence was not required for either of these purposes. I appreciate that the specific reference to contributions in section 25 might suggest that an analysis or account of each party's contributions is necessary to enable the court properly to exercise its powers. This is not so. Absent reliance on exceptional contribution and/or on conduct, evidence is not required about the nature of each party's contributions during the marriage beyond the broad history of the marriage."
- I have no hesitation in reaching the conclusion that the wife did make a full and significant contribution not only in her role as a wife but also a business partner. The wife conceded that the husband knew the property scene very well. I am satisfied that he alone dealt with issues such as negotiating the terms of leases, lease renewals, notices to quit and property repairs. I am equally satisfied that the wife played her own part in contributing beyond the very limited extent which the husband concedes by, for example, managing credit control, preparing VAT returns and carrying out meter readings. I bear in mind that the companies had no employees. I am satisfied that, as the relationship progressed, the wife learnt from the husband such that she was able to support him to the point where it became a joint venture with the two of them bouncing ideas one off the other. In reaching this conclusion, I do not ignore the important fact that the origins of the property business stemmed from the husband. The wife does not claim otherwise.
Submissions
- Counsel have made extensive written and oral submissions, all of which I have taken into account in reaching my decision. I will summarise their submissions.
- Mr Wood submits that the wife's housing needs should be met by a transfer to her of the former matrimonial home subject to the two small outstanding mortgages. He submits that the wife's housing needs cannot properly be differentiated from those of the husband. The husband will be able to live in his partner's home in England and will also have the original flat in Gibraltar.
- On the basis that the wife transfers her 49 shares in AG Co to the husband and that the husband retains his other capital, Mr Wood submits that the husband should pay to the wife a lump sum of £1.5m representing income of approximately £60,000 per annum, being the level of the award of maintenance pending suit, albeit that this contains a costs allowance of £1,000 per month. It is submitted that such an additional lump sum would constitute a fair share of the [disputed] resources and that there should be no departure from equalisation. He seeks, therefore, in total a sum of £2,191,386.
- Mr Wood reminds me that I must apply the test in Kimber v Kimber [2000] 1 FLR 383 in determining whether there is cohabitation between the wife and Mr Z. The six signposts, any combination of which may point to a couple living together as husband and wife, referred to in Kimber (as well as in G v G (Non-Molestation Order: Jurisdiction) [2000] 2 FLR 533, Wall J (as he then was)) are:
(a) whether the man and woman are members of the same household;
(b) whether the relationship is stable;
(c) whether there is financial support;
(d) whether there is a sexual relationship;
(e) whether they have children; and
(f) whether there is public acknowledgment.
- Mr Wood also relies upon the lucid summary provided by Mostyn J in N v F applying the principles laid down by the Court of Appeal in Jones v Jones [2011] 1 FLR 1723. Having regard to these decisions, he submits that the court's task is:
(a) to quantify the present asset base bringing into the calculation costs spent, monies dissipated or wrongly diverted or given away;
(b) to decide whether an equalisation of the present assets would make more than enough provision for the wife. If the court considers that it does no more than meet her needs as it interprets them, then it does not need to, nor should engage in, any analysis of the effect of pre-marital contributions. However, if it is satisfied that there is a surplus, it should continue its considerations;
(c) to identify the extent of the husband's pre-marital wealth (the wife having none);
(d) to decide whether the figure it attaches to pre-marital wealth should be increased to recognise any elements of passive growth or to any springboard elements;
(e) to make a preliminary assessment of any adjustment and then stand back and look at its overall effect;
(f) finally, to make an order that the court considers to be fair.
- Mr Wood refers me also to the decision of Moylan J in AR v AR, which involved total wealth in the region of £21m to £24m and was thus in a different league to the case before me. Mr Wood relies in particular on paragraphs [71] and [75], to each of which I have referred earlier.
- Mr Wood submits, relying on paragraph [24] of the decision in N v F, that the husband has failed to show what he was worth in March 1993, whilst acknowledging that there clearly did exist pre-marital wealth. He invites me to do my best in assessing this and suggests that the pre-marital wealth is worth less than £1m. Mr Wood submits that during the course of the relationship – from 1993 to 2008 – the value of the asset base rose exponentially and that this is not a case of passive growth.
- In his final oral submissions, Mr Wood argued that, whilst this is not a classic big money case, it is on the cusp of that level and it is simply not sustainable to limit the wife's claims to needs only. However, in previous written submissions, Mr Wood had argued that this was "plainly a needs case". I should, however, add that he went on to argue that the authorities required a generous interpretation of needs having regard to the parties' standard of living, in which context he referred me to White v White [2001] 1 AC 596 and Miller v Miller; McFarlane v McFarlane.
- On behalf of the husband, Mr Ferm submits that I should adopt a needs-based approach, not an equalisation of assets or a percentage approach. He identifies the wife's needs as consisting of a property to live in, in which context £350,000 would be more than adequate, a suitable motor vehicle and capital provision for replacements, a supplement to her earning capacity to provide for future needs and additional capital for unspecified, but inevitable, future expenditure.
- The husband set out his open proposals in a letter from his solicitors to the wife's solicitors dated 23 June 2011. The offer was as follows:
(a) The wife was to transfer her interest in the former family home to the husband in consideration of a payment of £323,750;
(b) The wife was to transfer to the husband her shareholding in AG Co upon the husband undertaking to indemnify the wife against any tax liabilities arising from the transfer;
(c) The husband was to pay a further payment of £550,000 comprising the following elements:
(i) a further £75,000 to meet the wife's housing needs to include provision for stamp duty and furnishing; and
(ii) a further sum of £475,000 representing the wife's income needs and an element of further capital. This sum was based upon income needs of £30,000 per annum, of which £18,000 per annum would be met by the wife's net earning capacity. The offer letter states that the "residual element" (ie needs less earning capacity) is £2,000 per month and that the husband was prepared to acknowledge a total income requirement of £2,500 per month. These figures would appear to be a miscalculation given that the residual element on the husband's estimate was £1,000 per month. Be that as it may, the offer was formulated upon a Duxbury figure of £302,000 representing an income of £15,000 per annum, the balance being for future capital requirements including the purchase of a motor vehicle;
(iii) the husband did not seek to recover any sums paid on account by way of costs through maintenance pending suit.
(d) This proposal was put in full and final settlement of all claims and on the basis of no order as to costs.
In short, the wife was to receive £873,750 on a clean break basis, notwithstanding the husband's strong assertion that the wife is cohabiting with Mr Z.
- Mr Ferm justifies this approach on the basis that all of the assets have been created other than through the joint efforts of the parties. He submits that the asset base is wealth pre-owned by the husband or, if not or not entirely, then its direct product, such that, had it not been for the existence of such prior wealth, it could not have been acquired, the only exception being D Co. His case is that the marriage played no, or at most a negligible, part even indirectly in the acquisition of the assets available for redistribution. He supports this submission by arguing that such assets as were acquired within the first five years of the marriage were acquired at a time when the parties' income was insufficient to support their lifestyle let alone to permit further accumulation of capital. However, Mr Ferm acknowledges that the assets which the husband brought into the marriage have not appreciated in real terms over the course of the marriage.
- Mr Ferm concludes that the non-matrimonial assets constitute the vast bulk of the available wealth and, if such assets were excluded, there would be insufficient assets to meet the wife's needs. It is on this basis that he invites me to adopt a needs-based approach rather than an application of the sharing principle.
- Mr Ferm refers me to the decision of the Court of Appeal in B v B (Ancillary Relief: Division of Assets) [2008] 2 FLR 1627 and, in particular, to the judgment of Hughes LJ at paragraphs [24]-[26] and [31], which draws upon White v White; Miller v Miller; McFarlane v McFarlane and Charman v Charman (No 4) [2007] 1 FLR 1246. There, Hughes LJ emphasises the two-fold importance of the "yardstick of equality" (at para [24]):
"First, it underlines the necessity not to treat financial contributions differently from those in non-monetary form. Second, it underlines the essential fairness of equal division in a large number of cases of shared matrimonial life."
At paras [25] and [26], Hughes LJ goes on to identify one possible reason for departing from equality where assets are the product not of efforts of different kinds during the marriage, but of inheritance by one spouse alone. I pause simply to observe that the only inherited asset which is clearly identifiable is the husband's interest in D Co, which has on the evidence before me no value.
- Mr Ferm also referred me to K v L and N v F, to which I have made reference earlier. Finally, Mr Ferm refers me to the decision of Mostyn J in FZ v SZ (Ancillary Relief: Conduct: Valuations) [2011] 1 FLR 64 and, in particular, to paragraph [139] which deals with the identification, and separate treatment of non-matrimonial property.
Authorities
- I have already referred to a number of authorities. I would only additionally refer to the decision of Moylan J in J v J (Financial Orders: Wife's Long-Term Needs) [2011] 2 FLR 1280, where the asset base was not too far distant from that before me. Having considered the guidance given by Ward LJ in Robson v Robson [2011] 1 FLR 751 at paragraph [43], Moylan J concluded that, because fairness was the ultimate objective and because the needs principle should prevail over the sharing principle when the result suggested by the former was an award greater than that suggested by the latter, the outcome would be the same whichever principle was considered first.
Conclusions
- In my judgment, it would be unfair not to exclude any of the husband's pre-marital wealth from the sharing principle. It underpinned the couple's future financial prosperity notwithstanding the wife's subsequent contributions. With some difficulty, I have concluded that a rounded figure of £820,000 should be excluded. The residual sum is sufficient to meet the wife's needs as identified at paragraph [90] and to do justice to the sharing principle.
- I conclude that it is reasonable for the husband to remain at the former matrimonial home. It is better suited to his needs and the needs of those with whom he now lives. I believe that the wife can be suitably re-housed for £550,000, but that she will require an additional sum of £50,000 to cover the costs of the move (including legal costs, stamp duty of £22,000, removal costs and some element of refurbishment and refurnishing).
- The wife needs to purchase a car. Having regard to the number of cars of which the husband has available to him, it is reasonable for the wife to be able to purchase a car of the type which she currently leases. I believe that a reasonable amount in this context is £50,000 to allow some provision in due course for a replacement vehicle. The wife also needs to clear her overdraft of £1,349.
- Mr Ferm also acknowledges that the wife needs additional capital for unspecified, but inevitable, future expenditure. I agree. I find that, in the context of the overall available wealth and standard of living, a sum of £50,000 would be reasonable for this purpose.
- In summary, the wife's total capital needs in my judgment amount to £701,349. As Mostyn J observed in N v F, the assessment of need is not an insulated metric and the presence of pre-marital property may lead to a more conservative assessment of needs. In reaching my conclusion in relation to the wife's capital needs, I also have regard to the husband's pre-marital wealth.
- As for the wife's income needs, I have to say that I do not regard the wife's schedule of outgoings as being unrealistic. I accept the wife's evidence that her current standard of living compares unfavourably with that which she enjoyed during the course of the marriage. I accept her evidence that she has nothing left at the end of the month, has only been able to take one brief holiday since the separation and is unable to afford, by way of example, a beautician or the type of clothing she enjoyed in the past. Allowing for provision for holidays and expenses incidental to the ownership of the home not contained in the wife's current schedule, I assess her income needs at £4,500 per month or, after deduction of a net earning capacity of £833 per month, a rounded figure of £3,700 per month. In my judgment, this assessment properly balances all of the section 25 factors. This would require a Duxbury fund, allowing for the state retirement pension in due course, of approximately £1.04m. This results in the wife's overall financial needs amounting to £1.74m. In my judgment, this division fairly reflects the needs of each party and their respective contributions including the husband's contribution of an element of pre-marital wealth as well as the other section 25 factors. Whilst recognising that I must first apply the principle of need and then consider the sharing principle, the outcome in this instance is virtually the same. The percentage that the wife will receive of the divisible whole is 40.45%. The precise calculation is set out at paragraph [91]. I base my order on a rounded figure of £1.74m. I am satisfied that the overall effect of the division is one which achieves a fair outcome.
- The division may, therefore, be tabulated as follows:
| Total assets [51] |
£4,301,575 |
| Excluded pre-marital wealth of husband (rounded) [26] |
(£820,000) |
| Divisible whole |
£3,481,575 |
| 50% to wife |
£1,740,787 |
| Percentage of total assets |
40.46% |
| Sum to husband |
£2,560,788 |
| Percentage of total assets |
59.56% |
- Whilst I recognise that where a wife seeks capitalisation of her maintenance in a case involving cohabitation the award will be scaled down accordingly, on the evidence before me, the husband has failed to establish cohabitation between the wife and Mr Z in any sense which would influence my award.
- So far as the husband's income needs are concerned, having regard to what I have said at paragraphs [56] and [63], I conclude that his income needs will be adequately met for the future.
- The resultant disposition will, therefore, be as follows:
(a) The former matrimonial home will be transferred to the husband subject to the two small mortgages in favour of HSBC. The husband has undertaken in his open proposals to use his best endeavours to secure the wife's release from these mortgages and to indemnify her in respect of them.
(b) The husband will retain the jointly owned contents of the former matrimonial home and of the original flat in Gibraltar..
(c) The wife will transfer to the husband her shareholding in AG Co, The husband has again undertaken in his open proposals to indemnify the wife against any tax liabilities arising from the transfer.
(d) The wife will receive a lump sum of £1,887,560, from which she will pay her unpaid legal costs and bank overdraft totalling £147,560, leaving her with £1,740,000. The husband has paid up to November 2011 £41,000 towards the wife's costs under the terms of the order for maintenance pending suit. He receives credit for the sum paid because, in other circumstances, the wife would have required a larger lump sum in order to discharge her legal costs. Mr Ferm argues that six months should be allowed for the payment of the lump sum; Mr Wood contends for a period of three months. In my judgment, six months is a reasonable period to enable the husband to raise the lump sum required of him.
(e) Pending payment of the lump sum, maintenance pending suit or, from the date of final decree, periodical payments will continue at the rate of £4,000 per month, that is, the rate set by the district judge in his order for maintenance pending suit without any allowance for legal costs. I would not expect the wife to have to make further payments on a monthly basis to her solicitors in view of the lump sum order made.
(f) There will be a lifetime clean break between the parties and upon death.
(g) There will be no order as to costs.
