HHJ Vincent. Application by H to set aside dispositions by W of shares to intervenors.

Facts

H (58) and W (48) married in August 2002 and separated in May 2017. The assets comprised a modest amount of equity in a mortgaged property, and Company A and Company B. The parties’ main stream of income derived from Company A, a media channel, and this income was collected by Company B. W held a 70% shareholding in Company B and the remaining shares were held by H’s colleague, ML.

W entered into two agreements with the intervenors, who were directors and equal shareholders of Company X Ltd, who were investors into A and B. The first agreement was that she would sell 51 shares in Company B to the intervenors for £51 rendering them majority shareholders and they would be appointed to the board. In return, the intervenors agreed to settle claims made against the wife by Company X and fund Company B taking legal action against H for losses W said H had inflicted on the business. H had separated Company A from Company B, and thereafter all the income he received from his work with Company A was received by a new business, P Holdings Limited. The second agreement was that if W obtained ML’s 30% shareholding in Company B, she and the intervenors would split this share 50:50. ML did transfer their shareholding to her. Neither H or ML were aware of any of this until the transfers occurred.

H asserted the court should set aside the two sets of dispositions of Company B shares by W pursuant to the powers of the court set out at s 37(2) Matrimonial Causes Act 1973 (MCA 1973). W asserted that the agreements were entered into to protect her own position as she genuinely thought H had sold most of P Holdings Limited, and that her actions served to increase the value of the matrimonial pot as she gained the support of the intervenors in the battle to bring Company A back under the umbrella of Company B.

Issues

1. Were the transactions reviewable dispositions within the meaning of s 37(5) and s 27(2)(b) MCA 1973 ?
2. Could W rebut the presumption of an intention to defeat H’s claim for a financial remedy ?
3. Did the intervenors have a defence under s 37(4) MCA 1973 ?

Held

H’s application to set aside both sets of dispositions of shares pursuant to s 37(2)(b) was successful.

1. The transactions were reviewable dispositions within the meaning of s 37(5) and s 27(2)(b) MCA 1973 as they took place less than three years previously and had the consequence of defeating H’s claims to ancillary relief. This gave rise to a presumption that W disposed of the shares with the intention of defeating H’s claim for financial relief; [67]. W reduced the assets of Company B by 38% through the dispositions and the intervenors were now majority shareholders and might not be willing to comply with orders made in the parties’ financial remedies proceedings; [66].
2. W could not rebut the presumption of intention to defeat the claim for financial remedy. **HHJ Vincent found that W intended to undermine H’s position by removing him as director of Company B; intended to replace H and ML with the intervenors and work together with them to further her own interest; and intended to undermine H’s position in the business and in family proceedings.
3. The intervenors did not have a defence under s 37(4) MCA 1973. Under s 37(4) MCA 1973 the intervenors had a potential defence if they could show the disposition was made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any intention on the part of the other party to defeat the applicant’s claim for financial relief; [86]. HHJ Vincent held that the dispositions were not made for valuable consideration. The intervenors paid £51 for the transfer of 51 Company B shares rather than their SJE assessed value of either £120,000 or £402, and nothing for 17 Company B shares. The offer to fund W’s litigation against H was not valuable consideration as the intervenors themselves had a vested interest in that litigation [93]. W and the intervenors alternatively contended that due to H’s decision to strip out Company A from Company B the shares transferred were effectively worthless and therefore, £51 was valuable consideration for the 68 shares. However, the intervenors clearly placed value on the shares they received given they had spent more than £150,000 on pre-proceedings work; [96]. Accordingly, the intervenors had not acted in good faith towards W, H, nor ML; [97]. The intervenors took advantage of W’s commercial inexperience and divorce and used this ‘to further their own interests’; [98]. Moreover, they knew it was W’s intention to use the dispositions to defeat H’s financial relief claim; [103]. It was held that the intervenors induced W ‘to enter an agreement which was manifestly to their advantage, persuading her that they were pursuing a shared objective, when that has not proved to be the case at all’; [103].
4. The court would make an order that returned the parties to the position they were in prior to the agreements.

Editors’ note: See also the judgment at AP v BP and others (financial remedies – appeal – disclosure – privilege) [2023] EWFC 169 which related to disclosure of an agreement over which privilege was asserted. Summary here.