BM v MB and Others [2025] EWFC 129

Judgment date: 3 January 2025

https://caselaw.nationalarchives.gov.uk/ewfc/2025/129

Fiona Hay sitting as a Deputy High Court Judge. Seven-day final hearing before Judge Hay. The parties had a long marriage and the key issues revolved around a business which H had inherited shortly before the parties began cohabiting but which had been transformed during the marriage, arguments concerning non-matrimonial property, and a s 37 application.

Background

The parties consisted of the husband (H) and wife (W); the husband’s mother; Mr X (a trustee of the children’s Trust and member of the LLP); and the parties’ children (K & E).

The background of the business is set out in detail at [21] and the relevant points for this summary are below:

1. In 1987 H became a partner in the family business with a 47.5% share.
2. In 1988 H’s grandfather gifted him land on which H subsequently built the property called HV.
3. The parties began to cohabit in 1991, and H’s father inherited a plot of land (plot 3) which was owned equally by H and H’s father.
4. In 1992 H acquired another piece of land (plot 2). Judge Hay found this to be non-marital as it was purchased with money that came from pre-marital endeavour.
5. In approx. 1997 the shares in the partnership were distributed as to 25% to H and 25% to W and 25% to H’s father and 25% to H’s mother. Judge Hay concluded it was irrelevant whether the allocation of shares to W was due to work done or merely tax advantageous. The company was subsequently incorporated.
6. In 2014, H’s mother transferred one of her shares to H so he was the largest shareholder and in 2016 H inherited a further 25% share from his father, taking his share to 51%. Various land was purchased, some held by the company and some held personally by H.
7. H sought advice relating to passing down his shares to K and transferring the land owned by him into the company. On 17 February 2022 W’s solicitors wrote to H referring to the difficulties in the marriage and lack of trust and sought confirmation that H was not intending to ring-fence assets outside the matrimonial pot by way of a trust. H on 4 April created the children’s settlement, with he and Mr X as trustees. H placed 25% of his shares in the business into the children’s Trust. H subsequently placed three parcels of land (some marital, some not) into an LLP. The members of the LLP were H and Mr X.

Non-marital assets

Pre-marital contribution

H brought into the marriage:

• 47.5% share in the business;
• land on which HV was built which was consequently sold to build the FMH;
• half of plot 3, which was worth £32,500; and
• land bought in 1992 (plot 2) for £35,000 bought with pre-acquired asset.

Judge Hay treated the FMH as entirely marital as HV was the marital home for most of the first decade of the marriage and was sold to enable the purchase of the FMH.

H argued that the growth of the business was attributable to the wider family endeavour (of himself, his father, K and his mother) and therefore there should not be an uplift for matrimonial endeavour that was shareable in the same way. W argued that the assets are fully marital as they have been transformed to such a degree during the marriage that the original contribution is effectively irrelevant.

With respect of contributions by H to the business Judge Hay concluded that:

1. The parties contributed to the uplift in their 50% share and should be attributed this. Any land purchased by H does not alter this as it was purchased by funds for the business, and K’s contribution to the business does not alter this as he is not an owner, shareholder, or director.
2. With regards to valuing H’s initial contribution to the business, which is non-marital, the fairest approach, given there was no reliable 1991 valuation, was to take the Robertson intuitive approach and 25% of the current value was the reasonable amount to apportion in order to reflect the value of H’s initial contribution in 1991. Therefore only 75% of the business was marital.

Gifts

H was gifted:

a) In 2014, H’s mother gifted H a share.

b) In 2016, H’s father died and left 25% of company to H.

As a result in 2016 H and W became 76% owners of the company and the growth in the business following this was largely due to the acumen of H.

With respect to these assets Judge Hay reviewed Standish and concluded that uplift created by marital endeavour is not a matrimonialisation issue, otherwise a small business inherited at the beginning of the marriage which the parties grew into a large one could be argued to be totally outside the sharing principle. Therefore, Judge Hay concluded H was entitled to ringfence his inherited shares and the passive growth on them, but the remainder of the uplift was marital acquest and open to sharing; [103]–[105].

W’s s 37 application

W made a s 37 application in respect of H’s placing of 25% of his shares into the Trust, and the placing of the parcels of land into the LLP.

Judge Hay had to determine:

a) Did the disposition affect the likely claim by preventing or reducing the amount of any financial relief which might be so granted, or by frustrating or impeding the enforcement of any order which might be made?

b) Was the disposition made with that intention?

c) Should the disposition be set aside?

Judge Hay concluded:

a) Both transactions had the effect of defeating W’s claims.

b) The defeat of W’s claims was a material part of H’s motivation for both transactions even if he also had other motivations. Recorder Hay made clear that although something may have been an innocent transaction previously, after the parties separate and there is a realisation that the transaction defeats a claim, that becomes a material motive.

c) There was no reason why the transaction should not be set aside, however as a concession due to the estate planning aspect of H’s motive, if H wished to satisfy the award with the Trust and LLP structures still in place, an order on that basis could be considered.

Costs

W was ordered to pay 25% of H’s costs on the basis that she failed to negotiate reasonably. Only one open offer was made by W which was entirely unrealistic, whereas H showed a willingness to negotiate openly – effectively negotiating against himself. H was ordered to pay W’s costs for the s 37 application.

H was ordered to pay Mr X’s and K’s costs as they were occasioned by the s 37 application.

H’s mother was joined as a result of W’s open offer which proposed the sale of the business. However, H’s mother did not need to remain a party to protect her shareholding and had been informed of the same, yet chose to remain a party. It was clear H viewed his mother as being on his side. Therefore, H and W were ordered to pay 25% of H’s mother’s costs each and H’s mother was to pay the rest as she chose to remain a party.