JK v LM [2026] EWFC 32 (B)

[2026] EWFC 32 (B)Case No 1706-1720-1324-4282
IN THE FAMILY COURT
Date 11 February 2026
CENTRAL FAMILY COURT
First Avenue House
42-49 High Holborn
London
WC1V 6NP
Before
Her Honour Judge Reardon
Between
JKApplicantLMRespondent
Ms Thomas (instructed by HCR Legal LLP) for applicantMr Beddoe (Direct Access) for respondentHearing Hearing dates: 9 – 11 February 2026
Approved Judgment.............................This judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the children and members of their family must be strictly preserved. All persons, including representatives of the media and legal bloggers, must ensure that this condition is strictly complied with. Failure to do so may be a contempt of court.Introduction
[1]This judgment is delivered at the conclusion of financial remedy proceedings following the divorce of JK (“H”) and LM (“W”). H is aged 50 and is a Business Development Manager. W is also aged 50 and works as a project manager for a global bank. The parties have two children, S aged 11 and T aged 9. They live with W and spend time with H at weekends and in school holidays.[2]The assets, as I find, total a little over £2.3m. Although this is a “needs” case, there are sufficient funds available for both parties to house themselves and the children and to continue to afford a reasonable standard of living. This should not have been a difficult case to resolve and it is a shame that between them the parties have spent over £200,000 on legal costs.[3]The bundle contains 1,500 pages (as far as I can see, no permission was granted to extend the page limit). I have read all of the narrative statements and expert reports, and the exhibits to which I was referred during the course of the hearing.[4]The hearing was listed with a time estimate of three days. H was represented by solicitors and counsel and W by counsel instructed on a direct access basis. The evidence and submissions concluded on day two and I am handing down this judgment in writing on day three.

Background

[5]H has [Country X: European country] and British nationality. W is British and grew up in the UK. The parties met in 2011 and married in September 2012. The children have dual British and Country X nationality.[6]During their marriage the parties made their family home in [Town Y: Home Counties location]. Both worked, and through their joint efforts they were able to afford a comfortable home for their family and to accumulate assets including a holiday home in Country X, rental properties and pensions.[7]The marriage came under strain during the covid pandemic when, according to both parties’ evidence, they began to argue about their respective contributions to the family finances. In November 2022 H filed for a divorce in Country X. This came as a shock to W and set the tone for a sharp deterioration in the parties’ relationship. H withdrew those proceedings and agreed to a joint application for divorce in England and Wales, but the damage had already been done. Both parties became increasingly suspicious of each other and each accused the other of unpleasant and sometimes abusive behaviour. In April 2024 both applied within a day of each other for orders under the Family Law Act 1996 and, after agreement was reached at the first hearing, H moved out of the FMH. He stayed locally for a period before moving to live in his parents’ home in [Town Z: 1 – 2 hours’ drive away].[8]Proceedings under the Children Act 1989 followed and a final order was made in May 2025. The Cafcass report, which is in the Exhibits bundle, records no safeguarding issues but a very difficult relationship between the parents, which had impacted the children.[9]H’s Form A was issued in May 2024. The proceedings have followed the conventional route, with an unsuccessful FDR taking place in January 2025. Although both parties have been represented at court hearings, for much of 2025 both were litigants in person and they struggled to communicate effectively about the management of their joint assets. As a result there have been disputes about the properties, rental income has been lost and both parties accuse the other of wasting funds.[10]H’s solicitors came on the record in October 2025 in anticipation of the final hearing which was initially scheduled for January 2026. That listing was vacated by the court shortly before the hearing date and the final hearing was re-listed some four weeks later.

The applicable law

[11]In civil, including family, proceedings, the standard to be applied when resolving disputes of fact is the balance of probabilities, and the burden of proof lies with the party making the assertion.[12]This is not a case where there is any disagreement as to the applicable law. It is sufficient therefore to rely on the well-known summary of principles set out by Peel J in WC v HC [2022] EWFC 22 as follows: i) As a matter of practice, the court will usually embark on a two-stage exercise,(i) computation and(ii) distribution; Charman v Charman [2007] EWCA Civ 503. ii) The objective of the court is to achieve an outcome which ought to be "as fair as possible in all the circumstances"; per Lord Nicholls at 983H in White v White [2000] 2 FLR 981. iii) There is no place for discrimination between husband and wife and their respective roles; White v White at 989C. iv) In an evaluation of fairness, the court is required to have regard to the s25 criteria, first consideration being given to any child of the family. v) S25A is a powerful encouragement towards a clean break, as explained by Baroness Hale at [133] of Miller v Miller; McFarlane v McFarlane [2006] 1 FLR 1186. vi) The three essential principles at play are needs, compensation and sharing; Miller; McFarlane. vii) In practice, compensation is a very rare creature indeed. Since Miller; McFarlane it has only been applied in one first instance reported case at a final hearing of financial remedies, a decision of Moor J in RC v JC [2020] EWHC 466 (although there are one or two examples of its use on variation applications). viii) Where the result suggested by the needs principle is an award greater than the result suggested by the sharing principle, the former shall in principle prevail; Charman v Charman. ix) In the vast majority of cases the enquiry will begin and end with the parties' needs. It is only in those cases where there is a surplus of assets over needs that the sharing principle is engaged. x) Pursuant to the sharing principle, (i) the parties ordinarily are entitled to an equal division of the marital assets and (ii) non-marital assets are ordinarily to be retained by the party to whom they belong absent good reason to the contrary; Scatliffe v Scatliffe [2017] 2 FLR 933 at [25]. In practice, needs will generally be the only justification for a spouse pursuing a claim against non-marital assets. As was famously pointed out by Wilson LJ in K v L [2011] 2 FLR 980 at [22] there was at that time no reported case in which the applicant had secured an award against non-matrimonial assets in excess of her needs. As far as I am aware, that holds true to this day. xi) The evaluation by the court of the demarcation between marital and non-martial assets is not always easy. It must be carried out with the degree of particularity or generality appropriate in each case; Hart v Hart [2018] 1 FLR 1283. Usually, non-marital wealth has one or more of 3 origins, namely (i) property brought into the marriage by one or other party, (ii) property generated by one or other party after separation (for example by significant earnings) and/or(iii) inheritances or gifts received by one or other party. Difficult questions can arise as to whether and to what extent property which starts out as non-marital acquires a marital character requiring it to be divided under the sharing principle. It will all depend on the circumstances, and the court will look at when the property was acquired, how it has been used, whether it has been mingled with the family finances and what the parties intended. xii) Needs are an elastic concept. They cannot be looked at in isolation. In Charman (supra) at [70] the court said:
"The principle of need requires consideration of the financial needs, obligations and responsibilities of the parties (s.25(2)(b); of the standard of living enjoyed by the family before the breakdown of the marriage (s.25(2)(c); of the age of each party (half of s.25(2)(d); and of any physical or mental disability of either of them (s.25(2)(e)". xiii) The Family Justice Council in its Guidance on Financial Needs has stated that: “In an appropriate case, typically a long marriage, and subject to sufficient financial resources being available, courts have taken the view that the lifestyle (i.e “standard of living”) the couple had together should be reflected, as far as possible, in the sort of level of income and housing each should have as a single person afterwards. So too it is generally accepted that it is not appropriate for the divorce to entail a sudden and dramatic disparity in the parties’ lifestyle.” xiv) In Miller/McFarlane Baroness Hale referred to setting needs “at a level as close as possible to the standard of living which they enjoyed during the marriage”. A number of other cases have endorsed the utility of setting the standard of living as a benchmark which is relevant to the assessment of needs: for example, G v G [2012] 2 FLR 48 and BD v FD [2017] 1 FLR 1420. xv) That said, standard of living is not an immutable guide. Each case is fact-specific. As Mostyn J said in FF v KF [2017] EWHC 1093 at [18]; "
The main drivers in the discretionary exercise are the scale of the payer's wealth, the length of the marriage, the applicant's age and health, and the standard of living, although the latter factor cannot be allowed to dominate the exercise". xvi) I would add that the source of the wealth is also relevant to needs. If it is substantially non-marital, then in my judgment it would be unfair not to weigh that factor in the balance. Mostyn J made a similar observation in N v F [2011] 2 FLR 533 at [17-19].[13]Also of relevance in this case is the approach to be taken to family loans. In P v Q [2022] EWFC 9(B) HHJ Hess derived the following principles from the authorities:
“19.(x) (a) Once a judge has decided that a contractually binding obligation by a party to the marriage towards a third party exists, the court may properly wish to go on to consider whether the obligation is in the category of a hard obligation or loan, in which case it should appear on the judges’ computation table, or it is in the category of a soft obligation or loan, in which case the judge may decide as an exercise of discretion to leave it out of the computation table. (b) There is not in the authorities any hard or fast test as to when an obligation or loan will fall into one category or another, and the cases reveal a wide variety of circumstances which cause a particular obligation or loan to fall on one side or other of the line. (c) A common feature of these cases is that the analysis targets whether or not it is likely in reality that the obligation will be enforced. (d) Features which have fallen for consideration to take the case on one side of the line or another include the following and I make it clear that this is not intended to be an exhaustive list. (e) Factors which on their own or in combination point the judge towards the conclusion that an obligation is in the category of a hard obligation include (1) the fact that it is an obligation to a finance company; (2) that the terms of the obligation have the feel of a normal commercial arrangement; (3) that the obligation arises out of a written agreement; (4) that there is a written demand for payment, a threat of litigation or actual litigation or actual or consequent intervention in the financial remedies proceedings; (5) that there has not been a delay in enforcing the obligation; and (6) that the amount of money is such that it would be less likely for a creditor to be likely to waive the obligation either wholly or partly. (f) Factors which may on their own or in combination point the judge towards the conclusion that an obligation is in the category of soft include: (1) it is an obligation to a friend or family member with whom the debtor remains on good terms and who is unlikely to want the debtor to suffer hardship; (2) the obligation arose informally and the terms of the obligation do not have the feel of a normal commercial arrangement; (3) there has been no written demand for payment despite the due date having passed; (4) there has been a delay in enforcing the obligation; or (5) the amount of money is such that it would be more likely for the creditor to be likely to waive the obligation either wholly or partly, albeit that the amount of money involved is not necessarily decisive, and there are examples in the authorities of large amounts of money being treated as being soft obligations. (g) It may be that there are some factors in a particular case which fall on one side of the line and other factors which fall on the other side of the line, and it is for the judge to determine, looking at all of these factors, and maybe other matters, what the appropriate determinations to make in a particular case in the promotion of a fair outcome.” (a) Once a judge has decided that a contractually binding obligation by a party to the marriage towards a third party exists, the court may properly wish to go on to consider whether the obligation is in the category of a hard obligation or loan, in which case it should appear on the judges’ computation table, or it is in the category of a soft obligation or loan, in which case the judge may decide as an exercise of discretion to leave it out of the computation table. (b) There is not in the authorities any hard or fast test as to when an obligation or loan will fall into one category or another, and the cases reveal a wide variety of circumstances which cause a particular obligation or loan to fall on one side or other of the line. (c) A common feature of these cases is that the analysis targets whether or not it is likely in reality that the obligation will be enforced. (d) Features which have fallen for consideration to take the case on one side of the line or another include the following and I make it clear that this is not intended to be an exhaustive list. (e) Factors which on their own or in combination point the judge towards the conclusion that an obligation is in the category of a hard obligation include (1) the fact that it is an obligation to a finance company; (2) that the terms of the obligation have the feel of a normal commercial arrangement; (3) that the obligation arises out of a written agreement; (4) that there is a written demand for payment, a threat of litigation or actual litigation or actual or consequent intervention in the financial remedies proceedings; (5) that there has not been a delay in enforcing the obligation; and (6) that the amount of money is such that it would be less likely for a creditor to be likely to waive the obligation either wholly or partly. (f) Factors which may on their own or in combination point the judge towards the conclusion that an obligation is in the category of soft include: (1) it is an obligation to a friend or family member with whom the debtor remains on good terms and who is unlikely to want the debtor to suffer hardship; (2) the obligation arose informally and the terms of the obligation do not have the feel of a normal commercial arrangement; (3) there has been no written demand for payment despite the due date having passed; (4) there has been a delay in enforcing the obligation; or (5) the amount of money is such that it would be more likely for the creditor to be likely to waive the obligation either wholly or partly, albeit that the amount of money involved is not necessarily decisive, and there are examples in the authorities of large amounts of money being treated as being soft obligations. (g) It may be that there are some factors in a particular case which fall on one side of the line and other factors which fall on the other side of the line, and it is for the judge to determine, looking at all of these factors, and maybe other matters, what the appropriate determinations to make in a particular case in the promotion of a fair outcome.”

The evidence of the parties

[14]I have read all of the parties’ written evidence, considered a substantial amount of documentary evidence produced by them, and watched them both give evidence under cross-examination. My conclusion is that both, fundamentally, are honest, decent, likeable people. Unfortunately the divorce and this litigation seem to have brought out the worst in them.[15]I make the usual allowances for the nature of the proceedings and the stresses of giving evidence. However both parties throughout the course of these proceedings have gone well beyond the norm in their pursuant of ultimately irrelevant issues. There are, in total, four “conduct” statements in which the parties engage in a detailed accounting exercise in which each seems to be trying to demonstrate that they contributed more than their strict 50% share of matrimonial expenditure over the course of the relationship and in the post-separation period. Some of the items “claimed” are tiny – a few hundred pounds – and some date back as far as 2012. I recognise that both parties were acting as litigants in person when these statements were filed, but both had legal representation until after the FDR, and they had each spent in the region of £50,000 in legal costs by that point. I cannot accept therefore that either was entirely ignorant of the approach the court was ultimately likely to take to these arguments.[16]H largely abandoned the forensic accounting exercise after his solicitors came on the record in late 2025, although his s25 statement (1.12.26) still hints at “dissipation of marital funds” by W. W, however, pursued an “addback” claim at final hearing and it has therefore been necessary to hear evidence and make some findings on this issue.[17]As to credibility, I can be certain that at least one of the parties has lied (on the issue of the whereabouts of W’s jewellery: at least one must know the truth). I suspect, although as will be seen I have not needed to make any findings to that effect, that both have at times succumbed to the temptation to misrepresent their own and/ or the other’s financial position. In the end, however, it has not been difficult to make sound findings about the asset base, and to decide issues of distribution, without needing to rely on my assessment of either party’s credibility.

W’s mother (Mrs Q)

[18]W’s mother, PQ, provided a witness statement in support of W’s case that she had borrowed money from her mother which must be repaid. Mrs Q was obviously an honest and straightforward witness and it was not suggested to her that she was mistaken or lying. I accept both her evidence as to the amounts owing and as to the nature of the loan.[19]Mrs Q is in her 70s and of modest means. For that reason her loans to W were evidenced by written loan agreements and incurred interest. W has been repaying these funds via a regular monthly repayment, plus larger capital sums when she is able. While this may not have all the characteristics of a hard commercial loan, I am satisfied that Mrs Q is expecting, and is entitled to, repayment of the funds she has lent at the conclusion of these proceedings. I also find that W considers herself under a binding obligation to make the repayment, and that she will do so. The assets Properties

The assets

[20]The former matrimonial home (“FMH”) is a four-bedroom house in Town Y. It has been valued by a jointly-instructed surveyor at £1.2m. There is a mortgage of £747,171.[21]H disputes the expert’s valuation on the basis of a handful of estate agent market appraisals which suggest a higher value. In July 2025 he issued an application, which does not seem to have been dealt with, seeking a re-valuation. He did not, however, make use of the Part 25 procedure to ask question of the expert or seek a direction for the surveyor to give oral evidence in order to challenge the report. In those circumstances, especially given that the weight I can give to the market appraisals is necessarily limited (none of the agents had viewed the property recently when they provided their estimates), there is no basis on which the expert report can be rejected and I find the valuation to be accurate. That means that the equity in the property, after mortgage and sale costs, is £416,829.[22]Property 2 is the parties’ former family home, also a house in Town Y, which they kept and rented out until July 2025. It is sold subject to contract for £906,000; there has been some recent water damage due to a burst pipe and the parties are in negotiations with the buyer about this, but it seems likely that the repair costs will be covered by insurance and neither party sought to attribute a different value in the ES2. The equity after mortgage and sale costs is £334,895.[23]Property 3 is the parties’ holiday home in Country X. It was bought in 2015, in their joint names. It was valued by an expert surveyor for the purposes of these proceedings. W suggests that the value taken should be what is described in the report as a “residual value” which is about €80,000 below the figure given for market value, which is defined in the report, consistently with the RICS Global Standards, as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.” I cannot see that any of the assumptions in the report are invalid and therefore take the market value as the value of the asset for present purposes.[24]There is no mortgage on the property. The equity after sale costs and CGT is £325,603.[25]Both H and W have rental properties which were brought into the marriage. H’s two properties have equity totalling £450,205. W’s property has equity of £336,542 There is a small dispute about the value which hinges on whether or not the property is steel-framed. I am not in a position to resolve this so have taken the midpoint valuation. .[26]W says that the rental properties should be included in the assets available for distribution. H argues that W’s property has been matrimonialised and should be included in the pot, but his properties should not. I intend to include all the rental properties for division, for two main reasons:a. W took out a substantial mortgage on her rental property during the marriage to fund the purchase of Property 2. On H’s own case, he delegated decisions of this nature to W, trusting that she would make sensible financial decisions to benefit the family as a whole. If the rental properties are now ringfenced (or a fortiori if, on H’s case, just his properties are) that will create real unfairness to W;b. In any event, although the parties will be able to meet their needs reasonably comfortably out of the total assets, this is not a case where there is an obvious surplus of capital, and it is likely that both will have to draw on the rental properties in some way to meet their needs.

Cash and investments

[27]The parties each have several bank accounts. The balances of most of the accounts are de minimis and I ignore them; I have included H’s overdraft under the heading of liabilities, below.[28]There is a dispute as to whether a sum of about £19,000 should be included in W’s funds. W’s evidence was that she had repaid this sum to her uncle, who had originally lent it to her. H’s suspicion that these funds may at some point revert to W is not enough to make this finding.[29]W has shares worth £36,667 net of CGT.

Chattels and contents

[30]I ignore the parties’ cars.[31]The parties are in the process of agreeing a division of the contents of their properties. If that process cannot be completed by the time the order is sealed I will allow a short period of time for an application to be issued, failing which any disputed items will remain where they are.[32]W seeks the “return” of jewellery, worth approximately £20,000, which she says H has removed from the FMH. H disputes that; he says that when he left the home he was locked out by W with no prior notice, and has only been permitted to return when accompanied by the police. In those circumstances I am unable to find that H is in possession of the jewellery. I do not know where the jewellery is; sadly one party (at least) does, and it is being used as a pawn in the ongoing battle between them.

Liabilities

[33]There is some dispute about the extent of each party’s liabilities.[34]Using the ES2, I exclude from W’s list the £250 cost of her forthcoming car service, a further £1,499 for the last five items on her list (all these costs are in the nature of regular expenditure) a sum of £205,963 for works W says are required on the FMH (the condition of the property having already been taken into account in the valuation), and the figure for CGT which has been deducted from the value of the shares listed above.[35]I allow the remaining items. The credit card debts, outstanding legal costs W has in fact paid (some of?) her outstanding legal bills by credit card since the ES2 was filed; this does not alter her overall liability so for convenience I have left these debts where they stand on the schedule. and tax liabilities are, I am satisfied, hard debts which require payment either immediately or in the next few months. The figure for W’s outstanding loan to her mother was, as I have said, supported by Mrs Q’s evidence which I have accepted. I am also satisfied that Mrs Q cannot and should not be expected to wait for repayment of this loan and it should not therefore be treated as “soft”.[36]That gives a total for W’s liabilities of £153,381.[37]From H’s list I deduct the sums included for work he says is required on his rental properties, which again have been taken into account in the valuations. I also deduct the figure for “Country X bills solely paid” which forms part of an addback claim that H is not now pursuing. Finally I deduct the £3,800 asserted to be a loan from H’s parents; this is not, as far as I can see, evidenced and W says that it is some decades old.[38]I allow the remaining hard debts and also include here H’s bank overdraft at £55,089.[39]That gives a total for H’s liabilities of £125,222.

Pensions

[40]W’s main pension from her current employment has a CETV of £326,954. This was disclosed in her Form E and subject to a direction for a PODE report at the First Appointment.[41]Subsequently W accepted, in her Replies to H’s Questionnaire, that she had two further pensions with a combined CETV of about £240,000. W paid for an addendum PODE report to cover these pensions also. The total CETV of all W’s pensions is £570,046.[42]H alleges that W deliberately excluded these pensions from her Form E. I am doubtful that someone as meticulous and financially literate as W would have forgotten assets of this substance, even if, as she explained, her retirement was not her immediate focus. However I am satisfied that W has now made full disclosure of her pension position and so her initial failure to disclose has had no financial consequences.[43]H has a handful of defined contribution pensions with a total CETV of £173,274.

Conduct and “addback” claims

[44]W argues that sums totalling £194,000, of which she says H has had the benefit, should be added back into the pot for notional “distribution”. She has provided a schedule of items. Both parties have at times during the proceedings and at this hearing suggested, with varying degrees of force, that the other has misappropriated or hidden matrimonial funds.[45]I am entirely satisfied that there should be no funds added back into the matrimonial pot for distribution. The law on this issue is clear. There is a high threshold for “addback” claims, and even when that threshold is met the court should be slow to attribute to one party funds that do not in fact exist, particularly when to do so would impact that party’s ability to meet his needs. In this case, what W refers to as “dissipation” of assets is, for the most part, an allegation that H has not always made sensible financial decisions about matters such as rent and interest rates.[46]In those circumstances it is disproportionate and unnecessary to address each item claimed separately. Where it is alleged that funds have been hidden or misappropriated I have made such findings as I consider necessary in computing the assets, above. The observations below set out, for completeness, my reasons for rejecting the remainder of the “addback” claim.

Money paid to H’s mother

[47]For a period of time in 2021, as W accepts, H’s mother was paid a minimal salary through H’s company, ABC Ltd. W argues that this was done to minimise tax and that the intention was that the funds should be returned to the parties. H disputes that: he says that his mother was in fact assisting him in the business, although he seems to accept that she would use some of her “salary” to purchase items for the family. The amount in question is about £20,000. Even assuming that there was some understanding that H’s mother would use the funds to benefit the family, there is no reasonable prospect of recovering them now; and W’s argument, based as it is on what in those circumstances would have been fraud, is an unattractive one.

The children’s accounts

[48]W says that during the marriage H held £19,000 in a child bank account for S, while she held an equivalent sum for T. She says that H has removed these funds and should repay the sum to her so that she can hold it for S.[49]H denies this; he says that as far as he was aware W always managed the children’s accounts. W points to a child account in H’s name, but this does not establish that H ever held the sum of £19,000, still less that he has removed it and used it for his own benefit. I make no order in respect of this sum; I can only trust the parties, once the dust has settled, to put their children first and to do whatever is necessary to ensure that both are treated equally.

Post-separation expenditure

[50]W says that H should account to her for his 50% share of the mortgage on the FMH, which she has paid in full since the separation in April 2024. She makes the same argument in respect of the mortgage on Property 2 which has been vacant since June 2025, and her own rental property on the basis that the mortgage on this property is a joint liability because it was taken out to purchase Property 2.[51]In respect of the FMH, any notional claim W might have against H for mortgage payments would be likely to be offset, were the court to go down that route, by a mirror claim for occupation rent (H’s entitlement to compensation for the period when he has been unable to live in the property). The arguments about Property 2 and why it is not currently tenanted are tortuous and it is simply not sensible or proportionate to conduct an enquiry into the parties’ fruitless communications with each other about this issue. Finally, the debt which W has incurred because the additional costs of the mortgages have exceeded her income will, H accepts, be taken into account as a liability in the division of assets.[52]In any case, I am satisfied that the forensic process W wishes the court to undertake is wrong in principle. It is very rare that the court will engage in an accounting exercise covering the period between separation and the final hearing, particularly where, as in this case, that period is relatively short. In almost all cases the parties’ financial contributions over the interim period are uneven, for a variety of reasons, and any attempt to allocate responsibility for interim expenditure along bright lines quickly becomes artificial and futile. For that reason, the court will almost always take the assets as they are at the date of the final hearing without any notional addback.

Asset summary

[53]The assets, as I find, are as follows. H W Joint FMH 416,892 Property 2 334,895 Property 3 325,603 H’s rental properties 450,205 W’s rental property 336,542 W’s shares 36,667 H’s liabilities -125,222 W’s liabilities -153,381 Total non-pension 324,983 219,828 1,077,390 Pensions 173,274 570,046[54]The non-pension assets total £1,622,201.[55]The pension assets total £743,320.

H’s proposals

[56]H’s proposal is framed as a 50/50 division of all capital assets. However that presentation depends on the court accepting his case as to the value of each of the assets.[57]H proposes: c. A sale of the FMH and Property 2 and the sale proceeds divided equally; d. Property 3 is transferred to H; e. The rental properties remain where they are; f. W pays a lump sum of £90,000 to H; g. A pension sharing order to achieve equality of income in retirement, including all pensions; h. Clean break.[58]Until the end of the hearing H’s position was that the FMH should be sold without giving W an option to release him from the mortgage, even if I concluded that it was affordable for W to retain the property. At the conclusion of his submissions he modified his position to accept that W should have the chance to retain the FMH provided that the overall division was 50/50, and Property 3 was transferred to him.[59]On my findings as to the extent of the assets, H’s proposal would in fact result in him receiving 69% of the non-pension assets (plus an equal pension share).

W’s proposals

[60]W proposes: i. W to retain the FMH; j. Property 2 is transferred to H (a change in position during the hearing; W’s open proposal was a 50/50 split); k. W to retain Property 3; l. The rental properties remain where they are; m. H to pay £19,000 into a junior ISA for S; n. H to return W’s jewellery (£20,000); o. An “addback” repayment from H to W of £96,711; p. H to pay a 50% share of various items of expenditure for the children, in addition to the CMS figure; q. A pension order to achieve equality of income in retirement, excluding W’s pre-marital pensions; r. Clean break.[61]On my findings as to the asset base, W’s proposal would result in her receiving 67% of the non-pension assets, and (very roughly, on a CETV basis) 68% of the pension assets.

The s25 factors

[62]The parties are the same age. Neither has any physical or mental disability. This was a medium-length marriage.[63]The children are S, aged 11 and in Year 7; and T, aged 9 and in Year 4. S has struggled as a result of the parties’ difficult separation and is currently receiving counselling. Both children need stability, a secure home and the opportunity to spend time with both parents with, as far as possible, an easy transition between the two homes.[64]The order made in the Children Act proceedings provides for the children to spend alternate weekends and holidays with H, and the balance of their time with W. Having heard the evidence and glanced over the Cafcass report, which appears in the bundle, it seems that the term time arrangements were driven by the parties’ respective locations, and indeed W suggested in her evidence that she would welcome more assistance from H with child care arrangements during the week. In any case, and whether or not the arrangements evolve in future, it is likely that W will need to continue to provide the children with a primary home, and H will need to live in a property that is suitable for them to stay, within reasonable distance of W’s home and their schools.[65]The capital resources available to the parties are set out above.[66]H earns £70,000 gross per annum (£48,696 net). There is an issue, explored during the evidence, as to whether or not H is maximising his earning capacity. I do not find, because the evidence does not support such a finding, that H has deliberately reduced his earnings as a response to the separation as W alleges. However his employment history suggests that his current earnings are rather lower than he might be expected to generate. His employment pattern is one of a series of short- to medium-term positions; it may well be that in his next job he will be able to earn closer to the salaries he has earned in recent years (c. £90,000 - £100,000 gross). It is unnecessary, because a clean break is agreed, to make a precise finding as to H’s earning capacity.[67]In the past H has run his income through a limited company, ABC Ltd. In about 2023 he attempted to turn the company into an ecommerce business but was not successful. It was not suggested that this represents a significant source of income for H.[68]The rental properties generate a modest income for H (currently £5,609 pa net of mortgages, management costs and tax). W says H could increase the rent and achieve a more favourable mortgage rate, but it is unlikely even if he does that this will represent a substantial proportion of his income for the foreseeable future.[69]H’s current child maintenance liability as assessed by the CMS is £13,177 pa.[70]H has a mortgage capacity of £225,951. That should increase a little once his debts are paid off.[71]W earns £108,492 gross or £73,499 net. The figures include a modest bonus. She works full time and it is accepted that she is maximising her earning capacity. The income she receives from her rental property is £5,860 net pa.[72]W has produced an estimate of her maximum mortgage capacity at £597,796. That seems a little high and it is not explicit that her debts were taken into account. Curiously, an illustration H obtained for W produced a lower figure of £537,000. That seems more realistic.[73]Each party’s primary need is for housing. They will each be able to meet their day to day expenditure out of income and a clean break is agreed. In due course they will need sufficient resources to fund their outgoings in retirement, but they have established earning capacities, and sufficient years of working life ahead of them for that not to be an immediate concern.[74]W needs a minimum of three good-sized bedrooms, in Town Y within a reasonable distance of T’s primary school and close enough to the station for her to commute to work and S to travel to school. Although she would like to remain in the FMH if possible she accepts that she could, if necessary, downsize and has put forward particulars for suitable properties in the region of £850,000 - £900,000.[75]W was cross-examined about H’s proposed properties (for both parties) which are three-bedroom houses, on the market for c. £650,000. I accept that these are smaller properties in less convenient locations (one at least is a long distance from both the station and T’s school.) They are right at the bottom of W’s needs bracket, in my view, and would represent a significant reduction in the children’s standard of living.[76]In my view W’s reasonable housing need, taking into account the available resources, is a property worth £850,000. Including stamp duty W would need a housing fund of £882,500.[77]H needs a two or, if possible, three bedroom property, close enough to the children’s home for contact to take place at weekends without the children feeling that they are a long way away from their centre of interests and their friends. W’s case is that H should live in Town Z (where he is currently staying, in his parents’ home) or in Town W (where he works); it does not seem to me that H has particularly strong connections to either area and in my view he should be able to house himself in the [around Town Y] area where he lived for many years prior to the separation, and where his children will be based.[78]H’s properties (produced for himself and W) are, as I have said, a little further away from Town Y and smaller than the FMH, but would meet his needs including his need to provide a good “secondary” home for the children. With stamp duty he will need a housing fund of £672,500.[79]The parties’ standard of living during the marriage was comfortable. They could afford a holiday home, frequent travel and meals out. The FMH is a four-bedroom house with a very big garden. I have taken that into account when assessing the parties’ housing needs.[80]It follows from my conclusions as to conduct (above) that I consider each party to have made a full contribution to the marriage and that these factors are not relevant to my determination.

Discussion

[81]My obligation is to give first consideration to the welfare of the children. This is a “needs” case where the majority of the available capital, including the parties’ pre-acquired rental properties, is likely to be employed to house each party and the children.[82]If W retains the equity in the FMH plus her rental property, and H has the equity in Property 2 plus his rental properties, they will in fact have very similar funds (W: £636,720; H: £659,878). W will have greater purchasing power because of her higher income and, consequently, higher mortgage capacity. She will be able comfortably to afford a property for £850,000 without needing to stretch to her full mortgage capacity.[83]I have assessed W’s housing need as capable of being met in a cheaper property than the FMH. However her wish to retain the FMH in order to provide the children with stability is reasonable and it is, in my judgement, perfectly possible to give her that opportunity, without impacting in any way on H’s ability to meet his needs. Assuming that W retains her own rental property she will be able to sell it and pay down the mortgage on the FMH to an affordable level. That would seem a better use of the funds given that the rental income produced is limited; but of course, whether or not W takes that option is entirely a matter for her.[84]H will be able to buy a property for £650,000 plus stamp duty, either mortgage-free or with a small mortgage.[85]The equity in Property 3 will not be required to meet either party’s need for a primary home. They have enjoyed a holiday home during the marriage and there are sufficient funds for both to have one in future, if that is what they choose to do.[86]It is not, however, possible for both to retain Property 3. The most obvious option is to order a sale, and to divide the proceeds. However it would be a shame to lose the property if the children have enjoyed spending time there. H is a [Country X] national, his parents are living in Country X, and he is a fluent [language X] speaker so, as W has pointed out, he is likely to find it easier to take over the management of the property. For those reasons, I intend to give H a first option to buy out W’s share in Property 3, and then if he does not take up that option W may buy him out. Otherwise, the property will be sold and the proceeds equally divided.[87]The issue between the parties on pensions is whether it is right for the court to share any part of W’s pre-acquired pension funds. W’s proposal excludes both of her pre-marital pensions, and reduces H’s share of her current employment pension to exclude the proportion which she says is pre-marital. H’s position is that all pensions should be shared to provide equality of income for both parties in retirement.[88]In my view, the equal share H seeks cannot be justified on a needs basis. The parties are only 50; they are on good incomes and have plenty of years of working life ahead. While their respective needs for housing are immediate and justify the invasion of pre-marital liquid property, their needs for pension income are much more distant.[89]I have also considered H’s argument that during the marriage he invested less into his own pension, on the understanding that his rental properties would provide him with income in retirement. If he is now required to use those properties to house himself there is an argument that the pension apportionment W seeks is unfair. I give some weight to this argument, although it cannot take H all the way to a position of equal sharing in circumstances where my decision on the distribution of liquid capital will allow him to rehouse mortgage-free: that decision means that H has the option, if he would prefer, of taking out a mortgage to buy his home and retaining one of the rental properties as an investment for the future.[90]The outcome which I consider fair in respect of pensions is to exclude W’s two completely pre-marital pensions, but to share the entirety of the pension from her current employment without seeking to apportion that part which is matrimonial. That requires a pension sharing order in H’s favour of 26.37% of that pension, rather than the 17.5% offered by W. That adjustment recognises the different nature of the pension assets and the non-matrimonial status of the two pre-acquired pensions, while also acknowledging some merit in H’s arguments based on the parties’ retirement planning during the marriage.

Outcome: net effect and fairness

[91]My conclusions as to the appropriate division of the non-pension assets produce the following result: H W FMH 416,892 Property 2 334,895 Property 3 162,801 162,801 H’s rental properties 450,205 W’s rental property 336,542 W’s shares 36,667 H’s liabilities -125,222 W’s liabilities -153,381 Total non-pension 822,679 799,521 50.8% 49.2%[92]The outcome in terms of non-pension assets is very close to an equal division.[93]The pension assets will be divided 65%/35% in W’s favour. This is of course a rough and potentially misleading estimate, because it is based solely on CETV rather than income-generating potential. I note however that the figures for future income are in similar proportions, in that H will have approximately £16,000 pa and W £34,000.[94]Overall I am satisfied that this outcome meets both parties’ needs, giving first consideration to the welfare of the children, and is fair.

Child maintenance issues

[95]In her open proposal W sought an order for H to pay a 50% contribution towards various items of expenditure for the children, over and above the CMS calculation. Although the court has jurisdiction, when a CMS calculation is in force, to make a freestanding child maintenance order for expenses incurred in connection with “instruction at an educational establishment” (ie school fees: CSA 1991, s9(7)), the expenditure listed by W would not fall within this exception and jurisdiction therefore lies solely with the CMS and not with the court.

Summary of orders

[96]The orders I make are as follows: s. The FMH to be transferred to W, subject to her releasing H from the mortgage within 6 months, in default of which the property will be sold and the proceeds paid to W. t. Property 2 to be sold and the proceeds paid to H. u. H to have the first option to purchase W’s share of Property 3 for £81,400. If he does not take up that option, W to have the option to purchase H’s share for the same price. If she does not do so, the property to be sold and the proceeds divided equally. v. Pension sharing order in H’s favour for 26.37% of W’s pension from her current employment. w. Clean break.

Costs

[97]After this judgment was handed down in draft both parties indicated that they would not pursue an order for costs.

Publication

[98]I am publishing this anonymised version of my judgment for transparency purposes only, in accordance with the Practice Guidance of June 2024. The judgment is of no interest to lawyers and, for the avoidance of doubt, there is no intention that it should be citable. It may be of some interest to those involved in similar litigation, as an example of how the court typically deals with a case of this nature.