NA v MA [2006] EWHC 2900 (Fam)

[2006] EWHC 2900 (Fam)

Case No FD05D02526

IN THE HIGH COURT OF JUSTICE

FAMILY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 24th November 2006

Before

THE HONOURABLE MRS JUSTICE BARON DBE

Between

N.A.Applicant

M.A.Respondent

JEREMY POSNANSKY QC and GAVIN SMITH (instructed by Messrs U) for Applicant

NICHOLAS MOSTYN QC and JUDE ALLEN (instructed by Messrs Z) for Respondent

Hearing Hearing dates: 30th and 31st October, 1st – 3rd and 6th – 10th November 2006

Judgment

But it continues

[144]"You said that you think that he loves you so much and more than anyone else in the world. He is unhappy about going into Counselling and has told you that he despises you at times. You are willing to give the marriage a try but you are not sure that he is. He wants a guarantee now and that is why you do not trust him "

Later it states

[145]"You wanted to sign something initially to show your good faith, but you think that H is treating you like an area of his business life. You have seen a different side of him, one that is hard and mean. You believe his wealth will double or even triple in the next few years and that is why he wants you to sign it". The clauses of the agreement were explained to the Wife and she is reported as saying that if she did not sign the document she thought that it would break down "the process of therapy for [the Husband]". 144). The attendance note then sets out details of an intervention by the assistant, GG. I accept her evidence that it was unusual for her to speak in the meeting and that it was not really considered appropriate. The note refers as follows "[GG] said that if you sign the document now it may not be upheld if you could argue that you were put under enormous amounts of stress and that there was undue influence. If you did not negotiate the document and you did not receive full disclosure it was unlikely the document would be upheld. [Mr V] agreed, but said that this was a very risky strategy. He also said that the law has moved on and in the future it may have gone even further. In the future this document could be upheld, although by signing the document straight away you would avoid painful discussions, you ran the risk that you were getting much less than you could otherwise hope to receive" This passage is asserted to be the foundation of a strategy to make sure that the Wife could exit the agreement if she did, contrary to advice, sign it. I totally disagree with this interpretation of that passage. I accept GG's evidence that this was an unwelcome intervention by a junior solicitor. That said, she was correct in her statement about the various possible ways that an agreement might be overturned. I am clear that GG was not seeking to advise the client to take those steps. Mr V immediately stated that it would be a "risky strategy" only because he was discouraging the use of this type of scenario. He explained that the Law had moved on. It is well known within the profession (and I take judicial notice of this) that the Courts have in recent times placed increasing weight on agreements made between parties after proper disclosure and full legal advice. Far from being the commencement of a strategy, I accept the solicitors' evidence, that it was a proper explanation of possible ways in which an agreement could be overturned. I acquit the solicitors of any base motives in relation to this entry. 145). As a matter of chronology the next attendance note relates to a phone call between Mr Z and Mr V. It reads as follows "Attending Mr Z on his telephoning when he said that your husband was going to be adamant about you singing the Post nuptial agreement. He appreciated that you wanted a clean break but the provision offered would not stop that happening" [emphasis added]. As I have already noted by this Mr Z must have envisaged this occurring through the capitalisation of a periodical payments order. 146). The attendance note of 1st February 2005 states "You said you felt responsible for what has happened and as a result think that you should sign the agreement. You said that your children will suffer enormously as a result of your foolishness and you therefore feel that you should do what you can to improve the situation for them. H has told you that he does not know if he can forgive you. He has imposed restrictions on you such as not talking to your oldest friend. He has told you that he has instructed Mr Z and that there will be no negotiations"

Later

[149]"[GG] said that you could sign the agreement now but it would be risky. You would have to sign it knowing there was a possibility that it would be upheld and this was what you would end up with. Even though you were being pressurised into signing it, the law may not see it this way in the future". This advice was proper and I do not consider that the inclusion of the word "pressure" in that attendance note was to seek to make a case for the future. I am clear that it was a response to a conversation with a client who was saying she was upset, who was giving details of a "big bust up" with her Husband the previous night and who was describing an obviously stressful existence. The allegation that the solicitors did not pursue disclosure or negotiation 147). It has been asserted that, in furtherance of the strategy, Mr V decided that he would not seek full disclosure and would not seek to negotiate the deal. Mr V accepted that this is a stance which can be taken in the context of pre- nuptial agreements. But I did not understand him to accept that that was his course of action in this case. In fact, I do not consider that there was any real or effective room for financial investigation or negotiation in this case. On the 15th February 2005 Mr V wrote a letter to Mr Z in which he asked a series of mild questions (see above). The Husband's reaction to that letter as reported by the Wife and her consequent reaction meant that there was little that these solicitors could do to advance disclosure. Far from there being the implementation of a strategy of no negotiation or discovery, these solicitors had tried to discover further details of the Husband's means and were thwarted. They soon appreciated that in the light of the Husband's stance and its effect upon their client there was, in reality, no possibility of true negotiation. The mild questions they had asked had, as I have already found, provoked an unacceptable outburst from the Husband. The phrase "make as bad as poss" 148). The main complaint is made in relation to the attendance note of the 10th March and the passage at the end of Ms M's manuscript notes which states "make as bad as poss". Ms M told me that these were not her words but were a record of what had indicated. She was unsure whether those were the exact words that had been used but she considered that the import was that she was to make her attendance note as graphic as possible as opposed to anodyne. She was to put in all the details. However, she was clear that she was not expected to exaggerate or be inaccurate. She was very clear that this was not an instruction to put forward a false case. I accept all that evidence. She also told me that the attendance note was accurate, and did not exaggerate or falsify what she had been a witness to that evening. She said the description of the client's extreme distress was honest. I accept her evidence and I acquit her of devising an exaggerated attendance note. 149). I accept that the wording is capable of misinterpretation. However, having seen and heard Ms M, I am fully satisfied that she did not exaggerate the type written note or falsify her evidence. On the 9th March 2005, she was working as a trainee solicitor (she has now qualified), she did not have a great deal of experience and had not been involved in the case before that night. It was mere chance that she was in the office at 7 pm on that fateful evening. In the witness box she struck me as a very truthful person without any guile and I am sure that she told me the truth. 150). In fact, when she was recalled, she told me that she could only tell me about the manner in which attendance notes normally come into being but she could not remember this precise note. She said that it was the practice of the firm that any attendance note which was drafted by a junior member of staff (save those of a few lines) was always checked by some-one more senior. 151). GG also gave me evidence on this point. She told me that she was not a strategist and that she did not recall using the words "make as bad as poss". She stated that she would never have asked anyone to write up a false or exaggerated attendance note. She told me that the document accorded with her memory of the evening. She was obviously offended and distressed at the allegations made against her. I found her to be an obviously honest witness and I acquit her of any professional wrong doing. The serious allegation made against her was, as I find, completely ill founded. I am not certain what words were used on that night but I accept that such instructions as she gave were to ensure that the attendance note was full, accurate and recorded the true facts that this client was very distressed. The alterations to the attendance note of the 10th March 152). I will now deal with the specific points raised in relation to this document. These points only arose after the earlier versions of the document were disclosed pursuant to my direction at Mr Mostyn QC's request. The addition of the passage including the word "destroy" a). The wording which is complained about is "You said that your Husband had told you yesterday that he was going to destroy you, could get away with giving you nothing under Lebanese Law". I have already made a finding that I accept that the Husband did say this to the Wife and so I am not surprised that this word was added, when the text was reviewed by the trainee. I consider that it was added because it had been said by the wife. Once the trainee realised that she had omitted the phrase in her first draft but recalled that it had been said she was absolutely entitled to add it. Her hand written note would indicate that the phrase was used and I do not consider that it was included improperly or for any ulterior motive. I acquit the trainee of any wrong doing on this point. Who is responsible for the amendments on the final version of the document b). The trainee accepted that it was the firm's policy for all attendance notes (other than those of a few lines) to be checked by a senior staff member. She thought that this document had been amended by GG and this is what she told me in her original oral evidence. I am of the clear view that this was her assumption because GG had attended the meeting with her and I expect that she took the attendance note to GG. I see nothing sinister in the trainee's assumption that the changes were made by the assistant. As the Court was informed, at that time GG shared an office with the partner Mr V. c). When Mr V saw the changes on version 5 he considered it was probable that he had been the author of the changes because(i) there was an alteration to the detail in the original conversation between him and the trainee (about which GG would have had no knowledge),

(ii) the bulk of the changes were stylistic and he recognised them as his particular style and

(iii) this was an unusual meeting, which had taken place late at night and as the partner in charge he would have wanted to check the attendance note himself. d). He had no specific recollection of this particular note but doing his best, he believed that he had effected the alterations. Mr Mostyn QC was, apparently, astonished by this evidence which only emerged after versions 1 to 5 had been retrieved from the computer records because it was contrary to the earlier evidence of Ms M and GG. Ms M and Mr V were recalled to give yet further oral evidence on this point. I do not share Mr Mostyn's surprise or scepticism. I accept that Ms M may have been mistaken in her earlier assumptions but these notes were prepared 20 months ago. I am clear she made assumptions as to what had occurred. GG also thought it probable that she had made changes to the document. It may be that she did make some amendments as she shared the office with Mr V. I do not consider that any witness gave me deliberately false evidence on this point. If Ms M in her original oral testimony told me that she believed that GG had made the amendments that is because that is what she genuinely thought had happened. GG said that she made corrections because this was the firm's habitual routine. Once Ms M was informed that the document might have been amended by Mr V she was honest enough to tell me that she might have been mistaken. I doubt that the partner, Mr V, dealt directly with her and she was probably wholly unaware who had made the changes. In fact, her original evidence in relation to the alterations is peppered with remarks such as "I imagine she did" and the like. e). I do not know who made the final alterations to version 5. It may have been Mr V or GG. In fact, as they shared an office, they may well have both looked at the draft and effected some changes. I am clear that the first and final versions bear a striking similarity and there has not been a wholesale alteration of the original prepared by Ms M. The removal of the phrase including the expression "good faith" f). Mr V thinks he was responsible for the deletion of "You said that you wanted to be in good faith to your Husband and you did not know if you wanted to be in your marriage any longer, your husband wanted you to love him". He told me that he would have omitted it because he did not understand what it meant. He was originally cross examined about the forerunner of this phrase (appearing as it did in Ms M's manuscript) and said that he did not know what it meant. He did not know that this point would arise again and so he has been surprisingly consistent about his failure to understand this phrase. He may well be correct that he did not understand it because he did not know that the Wife had resumed her relationship with Mr Y at the time. g). The allegation by Mr Mostyn QC is that this phrase is a potent demonstration that, however unhappy the Wife may have been, her will was not overborne and that she signed freely. Hence, he asserts, its deliberate omission is a clear demonstration of wrongdoing by solicitors. I do not agree with his points. As I have already decided, this phrase does not mean that the Wife was accepting of the fact that she was acting in good faith. In order to procure his construction Mr Mostyn QC had to transpose the 3 parts of the phrase. In his submissions he kept using the phrase "You said that you wanted to be in good faith to your Husband and your husband wanted you to love him, you did not know if you wanted to be in your marriage any longer". Obviously this construction alters the meaning and was never included in any draft. Interpreting the phrase in the correct order, it is not possible to place his construction upon it. On the contrary, as I find, it is supportive of the fact that the Wife was under pressure. I do not believe that it was omitted for any sinister reason and I accept Mr V's explanation that it was removed because it was not understood. I acquit him of any wrong doing. GG has not been re-questioned on this aspect of the case and I do not think it necessary. If she was responsible for its omission I would not consider her guilty of any wrong doing. Ms M's affidavit h). I do not consider that Ms M's affidavit has been incorrectly drafted or that she gave me false evidence. I accept that the phrase "[GG] told Mrs A that her advice and Mr [V's] was still that she should not sign the agreement, but Mrs A said that she had no choice" does not appear in the manuscript or typed attendance note but I am clear that Ms M recalled it and that it was included in her evidence because it had been said. I have already made findings that this Wife felt that she had no choice on the 9th March. I do not accept the criticism that her attendance note was deliberately attenuated or was false. Conclusion 153). I accept the evidence of all 3 solicitors. Each of them presented as wholly honest witnesses and I acquit each of them of any wrongdoing. They did not engage in any strategy or plan to give their client an exit route. Mr V and GG did their best to advise her in very difficult circumstances when she was clearly under (that which I have found to be unacceptable) pressure and, in the final analysis, they followed her instructions. The solicitors appreciated that these attendance notes might be seen in the context of later proceedings but I accept that they did not prepare them with that in mind. GG said that she wanted the attendance note of the meeting of the 9th March to be detailed and graphic because she was concerned that the client might complain at a later stage. It was put to her that she should have made the client sign a letter of exoneration. As a counsel of perfection, I agree that she should, but the agreement was signed at about 8 pm and I expect that all concerned wanted to leave the office. If there had been a plan to present a slanted version of what occurred I doubt that a young trainee would have been entrusted to undertake the drafting (which was not greatly altered). On the basis of the evidence that I heard and the documents that have been placed before me, I am absolutely clear that none of the allegations raised by Mr Mostyn QC are made out. 154). In passing I feel that I should mention that, in his written submissions, Mr Mostyn QC thought it appropriate (some might say disrespectfully) to remind me of my Judicial oath. In oral explanation he indicated that this was felt necessary because I had been instructed by the solicitors involved whilst I was at the Bar. I pointed out that I had also been instructed by his solicitors. I have no personal friendships with anyone in the legal teams in this case. I am not sure what to make of his submission save to record that it is entirely misplaced and demonstrates yet another lack of judgement in the conduct of this litigation. Dealing with these allegations has taken at least 2 days of Court time, hours of my time and some 16 pages of this Judgment. I do not consider that they were well founded and I will deal with the costs implications as a separate issue. The Witnesses 155). Both Husband and Wife struck me as somewhat immature personalities – perhaps because they have lived such a cosseted lifestyle. 156). The Wife. I considered the Wife to be truthful in her evidence to me about the pressure she was under from December 2004 to March 2005 when she signed the agreement. I thought that she was a fragile personality who was (and remains) in awe of her husband. She was much weaker than him in every sense. In general, I accept her evidence to me. The detail appears as set out above. 157). The Husband. I considered that he gave his evidence in a very controlled and measured way. He was obviously keeping himself in check. This was at odds with his general demeanour in my Court. I was able to watch how animated he became with his legal team when points arose with which he did not agree. At one point Mr Mostyn QC said to his client in a loud voice words to the effect "do you want to do this and I will leave". I have no doubt that he was a very demanding client. I also observed the nod of approval he gave to Mr Az on completion of the latter's evidence. The Husband expects to be obeyed, perhaps it is a feature of his upbringing and it was visible in my Court. I am confident that this aspect of his personality was much more evident in his own home. 158). Where his evidence differs from the Wife, I accept her version of events. I consider the Husband to be controlling, domineering and determined to get his own way. I am sure that he is devoted to his children and I believe that he has suffered genuine distress at the ending of his marriage. That said, once he had been crossed by his wife, he was resolute in his actions against her. 159). I have dealt with the other witnesses as I have related the history or dealt with my findings and I do not propose to deal with their evidence in any greater detail as my findings are clear. The assets 160). When the Husband produced the post nuptial agreement he caused a schedule of assets to be prepared. It was presented on the 24th February 2005. On a broad brush basis it gave his assets as being some £60,000,000 in round terms. As I understand it, the schedule was prepared by his commercial solicitor with the assistance of the Husband's accountants and advisers. To ensure that the agreement had a proper chance of success, the schedule had to be accurate. 161). When his Form E was signed on the 27th September 2005 (some 7 months later), the Husband put his assets as being worth £22,492,544 (a very precise figure). He estimated his net income as being some £188,000 for the next 12 months, whilst putting his personal income needs at £232,000 odd per annum. 162). When this matter came before me on the 1st Appointment, in the light of the huge disparity in the figures for his net worth, I ordered that a reconciliation be produced for the purposes of the FDR (fixed for February 2006 before an experienced Judge of the division). The reconciliation was produced on the 17th January 2006. It was prepared by a Mr R (Husband's accountant) and KQ, a trusted employee of the Husband. That reconciliation produced a figure of £47,516,676. The document showed the differences in presentation between the figures given in the previous 2 asset schedules. In the main, the differences related to omissions in the Form E, including the value of wine (£11.7m), indirect interests in family trusts (£11.2m), a reduced valuation for some Lebanese Land (£2.1m) and a reduction in cash (£16.1 million). The notes pointed out that although some funds had been included there was $9.6 million in an indemnity fund in MA No 1 Trust and that the total ignored the fact that there was JAF litigation. The reconciliation took into account the continuing funding costs of the business since the post nuptial agreement (about 1 year). The running costs of some £5 million were noted through an increase in Bank overdraft, provision referred to as ZZZ group financial requirements and a loan from BA of £560,000 odd. This presentation would suggest the business was causing a monthly loss of some £400,000. As I have already pointed out several different figures emerge from the various papers as to the precise level of loss. However I take this reconciliation as providing a reasonable indication. 163). The FDR proceeded on the basis that the Husband was worth £47.5 million odd. It was apparently listed for only ½ day. That is not a sufficient listing for this type of case and it should have been listed for a full day so that proper consideration was given to the issues and to Directions in the event that the mediation failed. I fear that I am partially to blame for this situation having occurred, because I agreed to a reduced time estimate in order to secure a Judge with great expertise for the FDR. However, I am now convinced that cases such as this need a full day. In the event, no proper thought was given to Directions and no provision was made for any further case management. This is to be much regretted because, as far as I can determine, the case went into suspension for many months. 164). In late July 2006 attempts were made to fix a PTR before me but it was too late to accommodate it within my diary (given the Long Vacation and Circuit commitments). 165). The Wife's accountant Mr G prepared two reports. The second is dated 22nd September. His broad assessment of the Husband's net worth was £56 million of which £19.5 million was business assets and £15.7 million was land in the Lebanon/Syria. 166). The Husband's advisers produced a report from their expert Mr N on the 23rd October (5 working days before the commencement of this trial). He put the Husband's net worth at £20 million. This was a substantial reduction from the January presentation. Mr Posnansky QC for the Wife indicated his concern about this reduction at a late stage. It is unfortunate, but it only occurred because none of the parties' advisers put in place a proper structure for effective case management. 167). In reality, the accountants agree about the underlying assets. The difference in presentation relates largely to the application of various discounts by Mr N in his presentation, deduction for "loans" and contingent liabilities. A composite schedule was produced showing the differences. I have added my specific findings and it is now appendix 2 to this Judgment. 168). I found that both accountants gave considered and careful evidence. They were both patently professional and honest. I shall now deal with my findings in relation to the discounts, if any, to be applied. a). Land in the Lebanon and Syria The underlying value i). The Husband owns a number of properties in the Lebanon/Syria and save for one plot, all are owned (i) with his mother and brother and (ii) with his mother/brother and third parties. Thus, he holds a minority interest in these assets. The properties consist of buildings/sites in Beirut and various other parts of the country, including the South close to the recent combat zone. ii). Most of the properties have been valued for the purposes of this litigation but one called the Hotel CDA (in reality a plot) was given a value by the Husband in his Form E of $51 million based on a "professional valuation" (which has not been produced). iii). I ordered that there be a joint valuation of the various properties but this did not occur. Instead, the Husband put in a written valuation by a Mr HH. The Wife then instructed the valuer (who had been proposed as possible joint valuer) a Mr MS who has 15 years experience and is a Court approved expert in the Lebanon. iv). In the event, Mr HH did not wish to co-operate with the Court process (unless ordered so to do by the Lebanese Court). Accordingly, he refused to produce a schedule of agreement/disagreement and did not attend for cross examination (either in person or by video link). The consequence is that his evidence of value is untested and so I can place little or no reliance upon it. On the other hand, Mr MS was forcibly cross examined (via video link) by Mr Mostyn QC. I found him to be a reliable and honest witness. Accordingly, where the evidence of the two valuers differs, I accept the evidence of Mr MS. v). Mr MS had prepared his valuation evidence before the recent conflict in the Middle East. Therefore, it was important to obtain his evidence about the effect that the Israeli invasion had had on the various holdings. He told me, and I accept, that 3 areas near the combat zone (specified in a schedule that he produced at H.117(b)) should be reduced by a factor of 15% but otherwise he said that values had not been affected. He maintained this position in relation to properties in Beirut even though there had been some Israeli action in the city. He told me and I accept that after any serious event, property prices in the city tend to freeze but they recover within a short space of time. He pointed to the fact that Mr HH's valuation had been undertaken shortly after the assassination of a well known politician had destabilised the country. However, shortly thereafter prices had recovered and then increased. He was confident that the same would occur after the latest invasion. I accept his evidence and all his figures. The discounts applied by Mr N vi). Appreciating the difficulty caused by Mr HH's position, Mr N did not use his values for his report save in respect of one building called the S market. As the difference in value between Mr HH and Mr MS was substantial he decided to take the mid point between the 2 values. In the light of my finding above this is not an appropriate deduction and so should be added back. vii). Mr N applied a 40% discount for lack of control to the Husband's minority holdings in each property. He pointed to the case of Irvine v Irvine

2006 EWHC 583

(Ch). However, although the Husband has a minority holding, in most cases the other owners are his mother and brother. The Husband told me and I accept that the family wished "to get out of Lebanon" as soon as possible. Although relationships in the family are (and always have been) strained they have always acted in concert when it comes to realising assets. I am satisfied that, in financial matters, they act for their mutual, group benefit. Accordingly, I do not consider that any application of a minority discount is appropriate for the properties held by the family. This approach accords with the recent decision by Coleridge J in Charman v Charman

[2006] EWHC 1879 (Fam)

. It also accords with the long established practice in this Division, that underlying reality is the relevant test. As history indicates, the Husband will obtain his full share without a discount when family owned assets are sold. viii). Using this logic, there will be no discount in respect of Lebanese properties or other assets which are owned by the family through a corporate entity in which only they have shares. This applies to AA SAL. ix). The Hotel CDA plot is owned through an SAL in which the family have an overall 50% interest. The other holdings are held by 3 other individuals. I was told that they bought a 50% share of the business for $13 million some time ago. I have no information as to how a deadlock in this company might be resolved. The plot is worth (per the Husband) $51 million. I consider that it is appropriate for there to be a minority discount in respect of this holding. I accept the 40% discount applied by Mr N and so this property is worth £2,825,194. x). The S market in Beirut is owned by an SAL in which the Husband has a 36.36% share. His mother has a 20.54% share and the remainder is owned by various third parties. I accept that it is appropriate to apply a minority discount to this entity but on the basis of Mr MS's valuation of $20,483,350. I do not accept that there should be any discount for it being in a War Zone. Accordingly, the figure for his share of the property is $4,468,647 ($20,483,350 x 36.36% x 60%). Using the conversion rate that has been applied throughout $1.785, the value is £2,503,443 xi). Other Middle Eastern entities which are owned by the family do not merit a discount. b). Shares in CDL i). This entity is a gaming house in the Middle East. These shares were originally held within AA SAL (owned as to the Husband 40%, his mother 20% and L 40%) but a portion was transferred out to the individuals in July 2006 in order to save some dividend tax. The family have a seat on the Casino Board by virtue of their overall share holding which in total represents 13% of the company. Unlike the entities listed above, these shares are traded over the counter in the Lebanon. The information that I have indicated that the price was $287.5 as at 26 October 2006. ii). An associated family company manages the casino and this produces a healthy annual income. The Husband considered that it would be imprudent to sell any of these shares because it might put the management contract (which has been renewed to December 2007) in jeopardy. Although it is not necessary for me to make a specific finding, if maintaining a board place is an issue, then I consider it likely he will be able to "sell" these shares to his mother/brother. iii). There is a 50% difference in the 2 values given by the accountants because Mr N has applied a 50% discount for lack of marketability. I remain unclear whether this is based upon (i) the Husband's perception of the need to retain the shares; (ii) perceived economic difficulties in the Lebanon or (iii) a combination of those factors. The first matter would not, in my view, permit of a marketability discount and, if the shares are quoted at a price in Lebanon, neither would the second. Therefore, I do not accept a 50% reduction on the basis of the evidence placed before me. iv). Accordingly, the value which I attribute to those shares for the purposes of these proceedings is based on the quoted price. c). ZZZ (UK and USA) and the other business ventures i). The dispute as to the value of ZZZ (being about £1.1 million) relates to the discount, if any, to be applied when assessing the realisable value of the underlying assets. ii). I have outlined the various business ventures above. The Husband obviously has a dream to emulate his father but, to date, he has been spectacularly unsuccessful and I am concerned about the overall viability of the ventures. The Husband was very positive in his evidence to me about his good "brands". Apart from the Club (which is severely loss making and is being marketed for sale), he told me that other ventures were at break even point and he expected profits in the mid term. I hope that he is correct but I have my doubts. iii). Currently, he is supporting the overall enterprise at the rate of £5 million per annum (minimum). He does not have the wealth to continue this level of support and must rationalise matters in the immediate future. As I have already stated I did not get the impression from his evidence that he had any real business sense. His failure to deal with these losses, save by pumping in more and more funds, does not seem prudent. iv). Assuming a loss rate of £5 million per annum since about 2001, it would seem probable that some £25 million has been expended on the business. In addition he has been paying for personal living costs. Even assuming that he had cash holdings of $97 million (say £54 million) in about 2001, he has potentially squandered half his cash wealth. I am concerned that, if this continues unabated, there will be little with which to support the Wife and his children. This is one of the reasons that I consider that capitalisation of her claims will be essential in this case. v). The Husband told me that he accepts that he needs to find a partner for the Middle East business who can invest a similar amount of cash to his own level of investment to date (which he said was "about 6 million"). Such an investor should ensure that these losses stop or are reduced. This would have a positive effect on cash flow. vi). The Club needs to be sold as soon as practicable. The relevant Agents think that it might be worth some £4 - 5 million, but there are problems relating to the company's tenure in the London Square and it will cost up to £2 million to resolve them. The Husband thought that he had invested £7 million in this venture but, I suspect, that this is an underestimate. Based on the evidence before me, he is likely to recover £2-3 million in the short term. The sale will have the added advantage that the annual losses (in excess of £1million) will also cease. vii). Mr N detailed accumulated losses (to July 2006) in the UK businesses of £20.6 million. This supports my overall impression set out above but seems low. The accountants both agree that, because the companies are loss making, the business ventures fall to be valued on a net realisable asset basis. Mr G originally assessed the recovery rate at 25% of the book value of tangible assets but increased it to 33% in his second assessment. Mr N did not agree this approach and sought to reflect various categories (using 10 – 15% as his guide). The parties did not concentrate on the niceties of the various calculations (perhaps because the difference was only £1.1 million) and I have not been left with a clear impression of the precise calculations. In the final analysis, having read the reports again, I am persuaded that Mr N has carried out a fair analysis and I adopt his figures. viii). The Husband has "invested" $78 million (roughly £43 million subject to exchange rate fluctuations) in his business ventures and they are assessed as worth some £8 million. Those bald figures would suggest a dramatic loss over a relatively short period. Mr N produced a reconciliation which showed how most of the funds had been used. I am not persuaded that this is accurate. Even so, the figures speak for themselves. d). Trust interests i). It is agreed between the accountants that the Husband is entitled to some £10.63 million within the AAF. Of this sum, £7.68 million relates to the expected proceeds of sale from the realisation of remaining assets by June 2008. The remainder due is already held in cash. Mr N reduces this sum by a factor of 50% for two reasons (i) The ongoing litigation with JAF and (ii) the uncertainty and risk that future sales will not materialise. I note that the Husband is no longer a party to the JAF litigation as the personal claim against him has been struck out (subject to appeal). I consider that a 50% deduction for these points is unwarranted. In similar fashion, I consider Mr G is too bullish in allowing no discount. There are some risks involved and there is a time lag to 2008 in respect of 72% of the value of the fund. No satisfactory evidence of other discounts was led and so doing the best I can I consider that 20% is the appropriate deduction for the level of risk involved. e). The BA (Husband's mother) loans i). Mr N has produced a schedule which shows loans from BA to her son. At the date of the Form E (September 05) and the Reconciliation (Jan 06) the loan was said to total $1 million. The Schedule of loans shows that between those two dates a further $4 million was apparently lent. It is asserted that those monies were repaid by 2 Bank Blom loans (which totalled $6 million). Mr Posnansky does not accept this explanation because the reconciliation does not feature additional Bank Blom borrowing. Loan documents were supplied in Arabic and therefore no-one could discern the date when they came into being. After the case had ended translations were supplied to me. They showed that the loans were dated the 18th January 2006 and were due for repayment in tranches from February 2008. This being the case, I am surprised that they were not included in the Reconciliation (even though it was dated the previous day) because it must have been known that they were about to be formalised. ii). The loans from BA have been documented and carry interest at 2%. They are not secured save for the last one when the sum lent was $5 million. The total sums due to her are $12.4 million (£6.95 million) plus £300,000. iii). I am satisfied that BA considers some $7 million of this sum as due to the Husband as a result of the windfall that she received as a result of AA's letter of wishes. I do not consider that she will press for the return of these funds. These funds will therefore be not be deducted from the asset schedule. iv). The $5 million loan has provision for security under Part 6 (none of the other dollar loans have any such provision). I consider that this reinforces my finding that the $7 million will not be repaid. In fact, I doubt that BA will call for the immediate repayment of the $5 million unless her son can afford it. It is a soft loan that I will include in the asset schedule. f). Other Liabilities i). The difference is caused because Mr N has included the Bank Blom debt at $6 million whereas Mr G thought it was $4 million. During the course of the trial documents were produced which satisfy me that the total borrowing is $6 million and this is the figure that I deduct. ii). I should note, however, that no explanation has been given to me of the total funds that the Husband has expended since this litigation began in earnest in mid 2005. Since September 2005 he asserts that he has borrowed a net sum from his mother and Bank Blom totalling some $14.4 million (about £8 million) plus £300,000. Neither Counsel provided me any analysis of the use to which those funds have been put. I know that the Husband has paid (i) the Wife's maintenance and rent (about £600,000), (ii) some £240,000 towards his own legal costs, (iii) about £5 - 6 million to the companies and

(iv) £ ½ million on renovating his home. He told me that his own annual expenses were £250,000. His own cash resources have been depleted during this period and I consider that he has underestimated his annual expenditure to me. However, as no evidence was led on this point, I cannot make any specific findings save that his annual costs are more than he asserted in his evidence. g). Contingent Liabilities i). The sum of $9.7 million (£5.378 million) has been set aside by the Husband's No 1 Trust to abide the result of the JAF litigation. He has been dismissed as a personal defendant to those proceedings. However, the funds are being held "frozen" to meet a potential award against the trustees of the AAF. There is an application to strike out the action as a whole. The Judgment is awaited. The advice in Liechtenstein is to the effect that the JAF litigation will not succeed. I do not consider that the whole of the sum should be omitted from the schedule. However I do propose to make an allowance of 20% for the risk. h). House owned by family retainer. i). This is given a value of £60,000 by Mr G. It is de minimis in the context of the assets in this case. I decline to add a value because the sum is not based on a professional valuation. Costs of realisation and tax 169). I pointed out to Counsel in this case that no attempt had been made in any asset schedule to calculate any deductions for tax or sale costs. I expect that the Husband is domiciled abroad but, in normal circumstances, some tax would be due if any funds imprinted with gain were remitted to this jurisdiction. I was informed that I could ignore this possibility. I do so in respect of all foreign sited and other assets. Sale costs will arise but once again no figures have been put forward and so I do not include any in my schedule. The Asset schedule 170). The asset schedule which takes account of all the findings set out above is annex 2 to this Judgment. I consider that the Husband is worth about £40 million of which about one half (in general terms) is held in assets in the Lebanon and Syria. This figure broadly equates to the presentation that was made in January 2006 (£47.5 million) less the ongoing costs of funding the business, the family and the litigation. Liquidity 171). The experts agree that at least £7 million can be raised almost immediately. Mr G considers that a further £4.77 million is easily realisable in the short term by the sale of wine stocks. I accept his figures and that wine of this amount can be sold within the next 12 months. Mr G also considers that a further £1.8 million could be raised on the sale of the club (after allowing for the costs of purchasing the lease) and I agree. He suggests that the Husband could sell his CDL shares to raise a further £3.6 million odd. Whilst I accept that this is possible, I suspect that the Husband would prefer to keep these shares if possible but they are an asset that could be used if necessary. Of course, the business will have a continuing need for cash in the short term if it is to survive whilst it is being rationalised and sales are being effected. I have no doubt that rationalisation must begin immediately and the Husband should not delay in the hope of improvement. Having heard all the evidence, I do not consider that liquidity will cause insuperable problems in this case and I am willing to hear further submissions on dates for payments once this Judgment has been absorbed by the parties. The award The Law. 172). It is my duty to apply the provisions of the Matrimonial Causes Act 1973 (the "Act") so as to produce a fair outcome. In particular, I have to take into account all the matters which are set out in Section 25 of the Act. I also take into account the ratios of White v White 2001 1 AC 596 and Miller and McFarlane

2006 1 FLR 1186

which have clarified the manner in which the Court assesses a fair outcome. I remind myself of the following passage. White v White

Per Lord Nicholls

[224]"Self-evidently, fairness requires the court to take into account all the circumstances of the case. Indeed, the statute so provides. It is also self-evident that the circumstances in which the statutory powers have to be exercised vary widely. As Butler-Sloss LJ said in Dart v Dart

[1996] 2 FLR 286

, 303, the statutory jurisdiction provides for all applications for ancillary financial relief, from the poverty stricken to the multi-millionaire. But there is one principle of universal application which can be stated with confidence. In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles. Typically, a husband and wife share the activities of earning money, running their home and caring for their children. Traditionally, the husband earned the money, and the wife looked after the home and the children. This traditional division of labour is no longer the order of the day. Frequently both parents work. Sometimes it is the wife who is the money-earner, and the husband runs the home and cares for the children during the day. But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party when considering para (f), relating to the parties' contributions.

(f) :

'… the contribution which each has made or is likely … to make to the welfare of the family, including any contribution by looking after the home or caring for the family'

. If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets. There should be no bias in favour of the money-earner and against the home-maker and the child-carer."

[225]"A practical consideration follows from this. Sometimes, having carried out the statutory exercise, the judge's conclusion involves a more or less equal division of the available assets. More often, this is not so. More often, having looked at all the circumstances, the judge's decision means that one party will receive a bigger share than the other. Before reaching a firm conclusion and making an order along these lines, a judge would always be well advised to check his tentative views against the yardstick of equality of division. As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination" 173). I am clear that this is not a case where there should be an equal division of assets. This relationship which began as cohabitation and led subsequently to marriage lasted some 12 ½ years. There was no marital acquest which falls to be divided. In fact, the assets have diminished substantially over the last 5 years. Moreover, all the assets in this case were inherited by the Husband and that is another factor which is of central relevance. All these factors convince me that an equal division would not be appropriate and it would not be discriminatory to the Wife if she received less than half. 174). The ratio of Miller and McFarlane makes it clear that the Court must give careful consideration to the materiality of the source of the assets that fall to be divided. In this case the assets fall into the bracket known as "Non matrimonial" because they all derive from the Husband's inheritance in 1998. Therefore, I must give proper weight to their origin and I accept that they should not be invaded unnecessarily. However, in this case, there is little marital property (as it has now been defined) and so the award will have to be made from the Husband's inheritance. I have no doubt that the Court is entitled so to do, for this was made clear per Lord Nichols in White. "The fact that property was inherited was one of the circumstances of the case, to be given the weight appropriate in the circumstances. Inherited property could be seen as a contribution made to the welfare of the family by one party to the marriage. However, where the claimant's financial needs could not be met without recourse to the property inherited by the respondent, its source would carry little weight" 175). The former matrimonial home falls into a somewhat different category position. In Miller & McFarlane, at para 22, Lord Nicholls said:

"The parties' matrimonial home, even if this was brought into the marriage at the outset by one of the parties, usually has a central place in any marriage. So it should normally be treated as matrimonial property for this purpose. As already noted, in principle the entitlement of each party to a share of the matrimonial property is the same however long or short the marriage may have been."

I do not take that to mean that the property must be divided equally but its value and the lifestyle that it produced are relevant factors in Court's consideration of fairness. 176). As has been clear for a number of years, I must take into account the parties' contributions both financial and non financial to the welfare of the family and their needs. I must also consider whether the claimant is to be compensated, per Baroness Hale, for "relationship generated disadvantage". At paragraph 138, Baroness Hale said: "The most common rationale is that the relationship has generated needs which it is right that the other party should meet. In the great majority of cases, the court is trying to ensure that each party and their children have enough to supply their needs, set at a level as close as possible to the standard of living which they enjoyed during the marriage (note that the House did not adopt a restrictive view of needs in White: see pp 608g to 609a). This is a perfectly sound rationale where the needs are the consequence of the parties' relationship, as they usually are. The most common source of need is the presence of children, whose welfare is always the first consideration, or of other dependent relatives, such as elderly parents. But another source of need is having had to look after children or other family members in the past. Many parents have seriously compromised their ability to attain self-sufficiency as a result of past family responsibilities. Even if they do their best to re-enter the employment market, it will often be at a lesser level than before, and they will hardly ever be able to make up what they have lost in pension entitlements. A further source of need may be the way in which the parties chose to run their life together. Even dual career families are difficult to manage with completely equal opportunity for both. Compromises often have to be made by one so that the other can get ahead. All couples throughout their lives together have to make choices about who will do what, sometimes forced upon them by circumstances such as redundancy or low pay, sometimes freely made in the interests of them both. The needs generated by such choices are a perfectly sound rationale for adjusting the parties' respective resources in compensation." 177). In this case I do not believe that this Wife suffered any economic disadvantage at all. She met the Husband when she was only 21 years old. She did not have any qualifications or budding career of substance. She made no economic sacrifices for this relationship and, as a result of this marriage, she will be much better off than she would have been had she pursued her chosen career. However, she clearly has needs as a result of her dependency on the Husband during the course of the marriage and the fact that she is going to care for the children until they reach adulthood. 178). The application of section 25 a). Income, earning capacity, property and other financial resources. The assets total some £40 million. At present, such income as the Husband derives from his investments outside his business is, apparently, swallowed up by huge on going business losses and his expenditure. The size of this income has not featured greatly in this case. It was put in excess of £1 million per annum by Mr Posnansky in his opening. The Husband put it at £188,000 odd in his Form E. Given his overall resources, it would normally have been sufficient to cover his needs. b). The financial needs, obligations and responsibilities which each has for the foreseeable future. The Husband has bought and equipped a new home – it cost him £3.7 million and he spent some £ ½ million on it (total £4.25 million). It has 3 bedrooms and is situated in a fine part of London close to Regent's Park. It may well be worth some £4.8 million in the current market. This figure was given to Mr N by KQ (the Husband's business associate) who I would expect to know. However, I make no specific finding as to value as no valuation evidence has been led before me. I have no doubt that the Husband will have sufficient to meet his income needs, provided he does not continue to squander his inheritance on doubtful business ventures. The Wife i). The Wife asserts the need for £6 million for the purchase of a house, plus £240,000 (stamp duty); £450,000 (for refurbishment/redecoration) and £10,000 (moving costs). I do not accept these figures, they are too high. Having looked at the Estate Agents particulars included in the bundle and assessed the Wife's evidence on the cost of housing, I consider that she needs a house costing some £4 million, plus stamp duty of £160,000 and moving costs of £10,000. This will provide a property with a garden in a good area, close to the children's schools. It also reflects the fact that the former matrimonial home sold for in excess of £8 million. In passing I remind myself that the lump sum figure in the agreement was said by Mr Z to be based upon 50% of the gross value of that home. ii). I have not had the usual detailed evidence to support the claim for the costs of refurbishing the new house or furnishing it. No evidence was led and there was no cross examination. I am afraid that this is in line with the manner in which this case was run by both sides. I do not feel that enough concentration was placed upon financial issues. Therefore, I will do my best to assess what I consider would be fair taking into account the lavish lifestyle that the parties lived, the current asset base and what I consider can and should be afforded in the future. I consider that a total housing fund of £4.5 million is appropriate. This will enable the Wife to spend some £330,000 on furnishings and fittings which from my long experience of doing this type of case will prove sufficient. iii). The Wife asserts a need for £6.75 million as capitalised income provision, based on a multiplicand of £450,000 and a multiplier of 15 years. I would not normally expect a case such as this to be resolved by a Fournier type approach. I accept that a Duxbury calculation would not provide the entire answer because the Wife is young and the relationship is of medium length. However, I would have expected at least some bespoke calculations of the sort that were approved in the case of F v F

1995 2 FLR 45

. Mr Mostyn QC produced no final written submissions in relation to this aspect of the case. In fact, until I invited him to do so he made no submissions. It is never prudent to run a case upon the basis that there is only one outcome. His brief submission was to the effect that if the maintenance was capitalised the Wife should receive £240,000 for 12 years being £2.88 - £3 million. During the last year the Wife has apparently spent about £100,000 more than the interim maintenance which I awarded her (which was in line with the agreement). There was no proper assessment of the figure of £240,000 and I do not think that £450,000 can be justified. Overall I consider that a total fund of £4.5 million is appropriate. On a very simplistic basis, this could produce £250,000 per annum for 18 years (which equates broadly to future years of mothering until tertiary education is complete) or £300,000 per annum for 15 years or £375,000 for 12 years. I note that the children are only 6 and 4 years old with the result that there are many years of child care ahead and I consider that the Wife would be very foolish to spend at these rates. If this sum is husbanded properly it will last much longer. iv). The Wife seeks £176,000 to cover debts (including the purchase of two cars and alleged shortfall in maintenance payments/inadequate provision prior to the maintenance pending suit order).

(d) re overdraft incurred prior to the mps

order

£79,833 Total £176,019 I think that it is appropriate that the Wife should have these all these debts covered. They were not effectively challenged in her evidence. v). The total capital award is therefore £9.176 million. vi). The children's interim maintenance was set at £60,000 per annum each plus their school fees. The sum originated in the agreement. No argument has been advanced by the Husband that it should be less and so I do not propose to amend the figure. However before finalising this aspect of the case, I will take further submissions if the Husband wishes to seek to reduce it. c). The standard of living enjoyed by the family before the breakdown of the marriage. This was extremely lavish. It was too lavish to be continued in the long term. d). The age of each party and the duration of the marriage. The parties are Husband 31years old and Wife 35 years old. The relationship was 12 ½ years. e). Any physical or mental disability of either party. Not applicable. f). The contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home and caring for the family. All financial contributions came from the Husband via his inheritance. The Wife cared for the family. g). The conduct of the parties in so far as it would be inequitable to disregard it. All my findings are set out in the body of this lengthy Judgment h). The value of any pension which will be lost upon divorce. Not applicable Affidavits being shown to witnesses. 179). During the course of the case it became clear that Dr B had received copies of the parties' affidavits to retain. This is not appropriate. Given his pivotal role in this case, perhaps it is not surprising but it is not acceptable. Witnesses should be permitted to read/study the affidavits with which they are required to deal but they should not be permitted to remove them from the solicitors' office. . Some of the lessons to be learned from this litigation 180). Effective case management. I have described the preparation of this case as "shambolic" and I stand by that description. The case required more direction and the Court cannot provide it unless summonses are issued in good time. 181). Allegations and how they are to be presented. I have given my detailed findings above. Counsel must investigate fearlessly but they must be careful before making serious allegations unless powerful evidence is available. 182). The wife's legal team remained the same throughout. I do not believe that they ever considered that their bona fides was going to be an issue. No point was ever made about their continuing to act and, it is fair to note, this also occurred in the case of Edgar. However, with hindsight, I consider that it would have been prudent for there to have been a change of legal advisors in this case. When the validity of an agreement is challenged it would be wise for all the solicitors involved in the preparation and signing of the agreement to stand aside in favour of new advisors. 183). There must be more co-operation between Counsel outside court. I consider that a number of delays were caused and issues were raised by each side failing to give advance notice of documentation that was to be used. This was most unfortunate. 184). I hope now that the parties can put this often sad piece of litigation behind them and find some true happiness in their future lives. I expect a draft order to be available when this matter comes before me in relation to submissions on costs.

Cited in 17 later judgments

and 8 more of the most senior