S v S [2014] EWHC 4732 (Fam)

Neutral Citation Number: 2014 EWHC 4732 (Fam)Case No FD13D02074
IN THE HIGH COURT OF JUSTICE
(FAMILY DIVISION)
Venue The Royal Courts of JusticeDate 15 th December 2014
The Strand
London WC2A 1LL
Before
MR JUSTICE BODEY__________________B e t w e e n:
Between
SApplicant- v -
Between
SRespondent_________________Transcribed by Cater Walsh Reporting Limited(Official Court Reporters and Audio Transcribers)1 st Floor Paddington House New Road Kidderminster DY10 1ALTel. 01562 60921: Fax 01562 743235: info@caterwalsh.co.uk____________________MR SOUTHGATE QC AND MR CALHAEM appeared for ApplicantMS BANGAY QC AND MR SEAR appeared for Respondent________________JUDGMENT
[1]A: Introduction: This is an application by Mrs S for financial remedy orders against Mr S. For convenience I will refer to them as “the husband” and “the wife.” It raises questions as to how to deal fairly with the fact that the husband brought into the relationship and marriage substantial wealth (£13 million) upon which the current kitty of some £25 million is directly or indirectly based. It also raises fiercely disputed factual issues as to when the parties’ ‘relationship leading to marriage’ began; whether in 1995 or 1997. This is said to matter because within that disputed period the husband received a crucial payment of £9 million from a particular business transaction which enabled his business to grow. It is a case of considerable bitterness as between the parties which has impacted negatively on their attitudes to one another and on their approach to a fair overall outcome.[2]The wife has been represented by Mr Southgate QC and Mr Calhaem; the husband by Miss Bangay QC and Mr Sear. I have been provided with extensive written and oral submissions together with a bundle of authorities regarding pre-marital wealth and the so-called ‘marital acquest’. There are two core bundles and some 14 lever arch files of documents which would certainly not have satisfied the new dispensation as regards bundling in financial remedy cases. I have heard evidence from the following witnesses:(i) the wife;(ii) her accountant, Jason Lane;(iii) the husband;(iv) his accountant Julia Wallace-Walker;(v) the husband’s daughter B;(vi) his son, C, and(vii) his PA, Mrs D.[3]There is a drive for shorter judgments in financial remedy cases (see eg per Wilson LJ as he then was at paragraph 24 of K v L [2011] 2 FLR 980). But there is much ground to cover here and I have failed in my objective of brevity. Apart from the 14 issues set out in the undated ‘agreed composite statement of issues’ there are numerous sub-issues and mini-disputes. An attempt to resolve them is neither necessary nor proportionate for the resolution of the simple underlying issue:
‘how much should the wife be awarded?’
I have however read and re-read my notes all the documents to which reference has been made and so have all these sub-issues well in mind. B: THE PARTIES’ OPEN POSITIONS[4]The wife seeks a 33% to 40% share of the current ‘kitty’ which, on the figures used, translated to a lump sum of £9,150,000. That would be on the basis that she would transfer to the husband a property (“The Small House”) in the country adjacent to the former matrimonial home at a value of £450,000 gross. This would leave her worth £8.7 million on a clean break basis with no order as to costs. She accepts that the husband will retain the former matrimonial home (“The Big House”) and the seaside holiday house (“The Seaside House”).[5]The husband maintains that this is a so-called ‘needs’ case because the wealth brought by him into the marriage, coupled with ‘passive growth’ on it, means that there is in fact no ‘matrimonial property’ or so-called ‘marital acquest’; all the assets are non-matrimonial property. Alternatively, he says that the maximum amount of ‘matrimonial property’ as calculated by the wife’s accountant is only £6.3 million, which he accepts would be insufficient shared equally to meet the wife’s needs. His open offer, ignoring timing of payments, is to pay the wife £3.5 million, comprising a lump sum of £3.3 million and preference shares worth £200,000 in the main company, redeemable after five years. He would retain The Big House and The Seaside House. The wife would transfer to him her interest in The Small House, being responsible for her own tax on the transfer. There would be no order as to costs. So the parties’ open positions are £5.2 million apart (£8.7 million sought, £3.5 million offered).[6]Leaving aside the disputed question of the duration of the parties’ pre-marriage cohabitation, the core issues are as follows: (a). Is this essentially a ‘sharing’ case? If so, at what percentage? (b) Or is this essentially a needs case? If so, what are the wife’s needs? Should any such needs award, if it seems inadequate, be enhanced to take account of the ‘sharing’ principle? (c) What award would be a fair outcome in all the circumstances of the case having regard to section 25 of the Matrimonial Causes Act 1973? C: SIMPLIFIED BACKGROUND[7]The factual background is long and detailed. It appears from a ‘Composite Chronology’ dated 10th November 2014, which Mr Calhaem has prepared in an attempt to combine both sides’ chronologies, for which I am grateful, I adopt it as a working document. Reference may be made to it for any greater detail than appears herein. To make this judgment free-standing, I highlight the more important features of the history as follows.[8]In 1943 the husband was born, making him now aged 71. He has two adult children by his first wife, Mrs E (whom he married in 1969) namely B aged 42 and C aged 37. As I say, he called them as witnesses at this hearing. In 1964, aged 21 (some 50 years ago), having qualified at night school as a Chartered Surveyor, he began property holding and development as his business. He has continued in that business ever since. He has a particular interest in giving new life to historic old buildings, which he has combined with a significant degree of charitable work. He holds a number of prestigious positions which it is unnecessary to describe.[9]In 1967 the wife was born making her now 47. She has no children. The parties tried IVF but unhappily were unsuccessful.[10]On 13th July 1973, aged 30, the husband incorporated F Ltd which later became G Ltd. In October 1996 it changed its name to H Ltd, the husband’s current main company. As from the date of a Declaration of Trust dated 31st March 1976, creating a Settlement for B and C (“the children’s trust”), the ownership of the shares in F Ltd / G Ltd / H Ltd became and remains: the husband’s 77.5%; the children’s trust 22.5%. .[11]In 1973 the husband incorporated J Ltd, a property company which was subsequently floated in 1981 and later collapsed in 1993.[12]In 1981 the husband bought land and built on it a seaside property, The Seaside House. By now he and Mrs E had their two children, B and C, whose names were incorporated into the brickwork. The husband says he regards himself merely as a custodian of The Seaside House for them and has in mind conveying it to them. The wife said in evidence that she thought this would be reasonable. In 1986 the husband set up a charitable trust.[13]In August 1988 the husband purchased the long leasehold of a property in London W1 (“the London House”) for some £600,000 odd via one of his property companies. Originally it was an investment property but much later, having been renovated and converted by the husband from medical use into a fine five storey Georgian residence, it was to become the parties’ first matrimonial home.[14]In about 1992 or 1993 the husband and Mrs E separated. He moved to a flat in Mayfair, London, W1, which he or one of his companies already owned.[15]At about the same time as separating from Mrs E J Ltd collapsed with debts of around many hundreds of millions. According to the husband’s Form E dated 24th April 1997 in his financial proceedings with Mrs E, the value of his assets reduced thereafter to some £2 million.[16]On 1st October 1993 the husband purchased a one third share in K Ltd for £1. It bought out divisions of a government agency and subsequently ‘turned them around’. K Ltd was a genius project which, within a few years, made the husband a great deal of money.[17]On 5th October 1993, aged 26, the wife moved to London from Ireland where she had been brought up. She had been an insurance clerk there from 1986 when she was 21 and she wanted to make a change. She moved into rented accommodation with her sister, a cousin, and a couple of others in East London (“the East London House”). A few days later she commenced working as a PA with K Ltd, which is how she came to meet the husband.[18]In and after November 1994 the parties’ relationship started, initially with dinners out at good restaurants. The husband originally said it started in 1995 but I am satisfied from all the evidence, including the wife’s diaries, that it was in 1994. He was then aged about 51 and the wife about 27. He was still living on his own in the flat in Mayfair and was comfortably off. The wife accepts that she had no capital.[19]At about the beginning of 1995, as I am satisfied on the evidence, the husband moved into The London House whilst the renovation works there were still going on.[20]On or about 8th September 1995 the wife gave up her job with K Ltd and a few days later started a year’s floristry course. At the end of that month (September 1995) her sister returned to Ireland. No significant investigation occurred at the hearing as to what exactly happened to the East London House at that time.[21]During 1995 the husband purchased the long leasehold of The London House from his company which owned it, at a price of £1,050,000 with a mortgage of £650,000. He thus became personally the owner of the property.[22]At the end of October 1995 (the husband says it was not until late 1997) the wife says she moved into The London House and that the parties started to cohabit. She says that such cohabitation led seamlessly to their marriage in 2003.[23]On 23rd August 1996 the husband sold his one third interest in K Ltd (bought for £1) for £9.7 million gross, £9.1 million net. He invested about £7.8 million of this in H Ltd by way of credits to his Director’s Loan Account (“DLA”) and the purchase of H Ltd preference shares.[24]On 16th September 1996, having finished her year’s floristry course, the wife incorporated Florists Ltd. With financial help from the husband she started trading on 10th October 1996 and thereafter ran a flower shop in West London, for some ten years until December 2006.[25]On 29th May 1997 the husband purchased The Big House, near a country town (“The Country Town”) for some £900,000 as a weekend home.[26]Late 1997 is when the husband says that the parties began to cohabit at The London House. The parties’ accountants agree that he was then worth some £13 million.[27]In June 2000 the husband acquired the freehold of The London House for £12,000.[28]On 6th July 2000 the wife took a one year’s lease on a flat in N Street, just round the corner from The London House. She relinquished it seven months later in February 2001. She says it was a temporary bolthole after the parties had argued and that she only stayed there a few nights. The husband says that she stayed there for weeks and weeks.[29]On 21st September 2003 the parties were married.[30]On 30th September 2005 arrangements were made for the purchase in the wife’s name of a flat in Oxford, part of a substantial development which the husband was undertaking. It cost about £345,000 with a mortgage of £250,000.[31]On 24th December 2006 the wife did her last day’s trading at her flower shop and closed down the business. Since that time she has not worked in the commercial sense.[32]On 22nd February 2007 the husband purchased The Small House (above) in the wife’s name for £350,000. It is immediately adjacent to The Big House and is currently used by the husband as an office, with one of his companies paying the wife a rental.[33]On 22nd November 2007 the husband sold a property in Majorca for €231,000 (some £165,000) being a property transferred to him by Mrs E as part of their divorce settlement.[34]On 19th January 2009, The London House was sold for £7.4 million gross, £5.7 million net. Of this sum, the husband invested £4.2 million into H Ltd to give it working capital and to replenish his DLA. Thereafter, the parties made The Big House their main home. It is where they have both been living until recently in very strained circumstances. The wife has just now rented a house in the country town on a temporary basis.[35]In August 2010 one of the husband’s special purpose vehicle companies, P Ltd, needed to refinance its undertaking. To facilitate this, he mortgaged The Big House for £1.25 million lending that sum to P Ltd. The interest due from P Ltd to him on the loan is fixed to equate to the interest which in turn is due from him to the lender bank.[36]In March 2012 the parties began using a company-owned property in Chelsea as a London pied à terre. From the time of the sale of The London House in 2009 until March 2012 they had used hotels when staying in London.[37]In September 2012 the wife says that the parties separated, although continuing to live in The Big House. The husband’s case was originally that such separation took place 17 months earlier in April 2011, but in cross-examination he shifted from this to nearer to the wife’s case.[38]On 16th February 2013 in response to a letter from the wife’s solicitors asserting that the marriage had broken down, the husband sent them a terse, written note stating that he did not agree that the marriage was over.[39]On 24th April 2013 the wife’s petition was issued. Since then the financial aspect has ground on with a fair amount of difficulty and contention, now coming on before me (my first sight of the case) for final hearing.[40]In December 2013, the property in Chelsea was sold. It had thus been available to the parties as a pied à terre in London from March 2012 to December 2013, a period of some 21 months. Since its sale, the parties have not had a property for use as a pied à terre in London. Instead the husband has used one of his clubs when necessary to stay in town overnight and the wife has on occasions used hotels to do so. D: THE ASSETS[41]Counsel produced to me a relatively agreed Schedule of Assets, net of latent costs of realisation (costs of sale and any tax). It does however contain six points upon which agreement had not been possible. In a case with this degree of wealth, I do not consider that these non-agreed items are of any significance, save perhaps for point (f). So I shall take them quite shortly.(a) As to the ‘marriage value’ of the Big House and The Small House when The Small House is transferred by the wife to the husband, this put at £184,000. I consider it should be included in the Schedule as an asset of his. Miss Bangay said in submission (I do not think it is in evidence) that the husband intends to do The Small House up and sell it for liquidity; so there is no ‘marriage value’. In response, Mr Southgate said that in that case the wife would prefer to keep it. In my view, the continued ownership of adjacent properties would be a recipe for disaster. It is much more sensible that the agreement for the transfer of The Small House by the wife to the husband should proceed. It is a matter for the husband then what he does with it, but the disputed ‘marriage value’ would be established.(b) As to the CGT on the husband’s recent sale of [a particular property], I understand that the money has come to him from the net proceeds of sale in order for him to satisfy the CGT, whether on his own behalf or on behalf of the children’s trust. That CGT in the sum of £180,000 should be included as a liability of his in the Schedule.(c) As to the husband’s unpaid costs, there is a dispute over £50,000. This is de minimis. I propose that the figure remain in the Schedule at some £175,000 (not at £125,000 as argued for by the wife) since that is the figure which I am assured by Ms Bangay is the correct one.(d) I do not propose to deal with the difference between the parties of £5000 (sic) in respect of a balance on one of the wife’s bank accounts.(e) The husband seeks to include in the Schedule the wife’s jewellery in the sum of £196,000. The wife objects. She says that this has only just emerged as an issue and that her jewellery has never been valued on a sale basis, the figure of £196,000 being from an insurance inventory. She points out that the husband’s chattels, including his collection of cars, have been excluded from the Schedule and that he is also going to be or remain the owner of the lion’s share of the chattels at The Big House and The Seaside House. My decision is that her jewellery should not be included in the Schedule.(f) There is a dispute between the accountancy experts as to whether or not there should be a discount from the otherwise agreed valuation of H Ltd if it or parts of it came to be sold. Julia Wallace-Walker for the husband contends for such a discount from the going concern valuation. She originally quantified it at £2 million, described as 20% (although the maths do not correlate) and she now puts it at £1 million. This halving of the proposed discount is to take account of the fact that when she and Mr Lane reached their agreed value for H Ltd it was based on deducting 3% from its net asset value (NAV) to allow for realisation costs, including tax. Mr Lane does not agree with any further discount beyond that 3% already deducted. He contends that it is quite inappropriate and that having taken the 3% off NAV, the resulting figure is the value at which he would expect any sale to proceed. He does, however, more or less accept a further deduction of £250,000 to take account of contingent Corporation Tax arising from updating the Balance Sheet property values. So the experts are effectively £750,000 apart.[42]Both Ms Wallace-Walker and Mr Lane are experienced accountants accustomed to giving expert evidence in court. I have read both their CVs. I am satisfied that each is doing his/her best objectively to assist the court. They appear however to have conflicting experiences of valuing unlisted companies such as this. Ms Wallace-Walker describes a 20% discount as commonplace, whilst Mr Lane states that he has never come across it. Both are predominantly experts in the forensic sense, as distinct from seeing their valuation opinions regularly validated in the marketplace.[43]A major difference between the experts is as to whether the approach regarding listed companies, which generally trade at a discount of 16 or 17% to NAV (as per the Index produced by the European Public Real Estate Association) is also applicable to unlisted companies. Ms Wallace-Walker says that it is so referable, as there is no reason to distinguish between the two types of company. Mr Lane says that listed and unlisted companies are distinct entities, to which different valuation considerations apply. For example, he points out that listed shares are influenced by outside considerations, such as market sentiment, which is not the case (or is less so) as regards unlisted companies. The experts disagree further as to whether the fact of the children’s trust owning 22% of H Ltd should be seen as a contributory justification for the disputed discount. Ms Wallace-Walker says it should. Mr Lane says that the trustees of the children’s trust would very likely conjoin with the husband on any realisations, because everyone involved is ‘in the family’ and would probably be pleased to achieve useful liquidity. So he maintains that a purchase of H Ltd would be buying ‘control’; whereas most purchasers of listed shares are not doing so. Other points on this discount issue were made and challenged which I have in mind, but which are not necessary to rehearse.[44]Given that the experts agreed a value for H Ltd, netted off by 3% for costs of realisation and tax, it is for the husband to satisfy me that a further discount is either standard or else subjectively called for on the facts of this case. I did not find Ms Wallace-Walker’s oral evidence on this particular occasion to be as well marshalled as would have been more persuasive. I was given the impression that the justifications for the disputed discount emerged in a somewhat unscientific way, although this in itself does not of course mean that she is not right. For example, both her substantive reports of 5th November 2013 and 20th October 2014 state the rationale for a 20% discount as being “to take into account of realisation costs (such as agent’s fees and legal expenses not provided for in the accounts) and mortgage penalties”. However, in her oral evidence, other justifications for the disputed discount emerged; for example, the perceived disadvantages attaching to certain properties within the husband’s companies’ portfolios. Mr Lane’s evidence came over as clear and precise, supported to some extent by chapter 14 of Tolly on Valuations which, whilst referring to the level of discounts as being subjective, does not mention a conventional percentage discount of the type under discussion. There seems a logic to Mr Lane’s point that common discounts to NAV in respect of listed companies would not necessarily transpose to unlisted companies, unless justified by the particular circumstances of the company and its assets, I observe, too, that when Ms Wallace-Walker first introduced her point about the 20% discount, it was in the context of listed companies. I am not in the event persuaded that there should be a further deduction of £1 million from the agreed value of H Ltd.[45]That said, Ms Wallace-Walker did give evidence of the probable need for one of the companies in the husband’s portfolio to find some £200,000 towards harbour repairs following storm damage since the valuation exercise; and Mr Lane himself (whilst opposing the principle of further discounting) was prepared to go to £250,000 (above). Taking a broad brush approach, I propose to discount the value of H Ltd in Counsel’s Schedule of Assets by a round figure of £500,000.[46]The impact of these six rulings on the Schedule of Assets, subject to my maths, seems to me to be as follows. Taking the husband’s column, his calculation of his own wealth goes down from £25,679,895 to £25,004,730. That is by the deduction of the £500,000 discount from H Ltd’s NAV and the sum for his unpaid costs of £175,165 (which although set out in the Schedule in red, had not been included when reaching the total of £25,679,895). The husband’s estimate for the wife reduces from £503,073 to £306,498 by the deduction of the sum for her jewellery in the sum of £196,575 which sum (by contrast) is included within the stated total of £503,073. These adjusted totals of £25,004,730 (husband) plus £306,498 (wife) give an aggregated figure of £25,311,228. Making similar adjustments in the wife’s column I get a slightly higher figure but the difference is small and would not affect the outcome. I therefore take the overall net wealth in this case as being roughly £25.3 million.[47]As to the actual composition of the agreed Schedule of Assets, now modified by virtue of the decisions in (a) to (f) above, reference may be made to the Schedule itself. In summary, the most significant assets are as follows. First, by way of assets in the husband’s name, there is The Big House at £3,360,000 less the mortgage of £1,250,000 (above) less costs of sale and CGT: net £1.7 million. Then there is The Seaside House, valued at £990,000 less costs of sale and CGT: net £776,000. His pension appears in the sum of £1,950,000. His business assets (the largest by far being H Ltd, together with four much smaller companies wholly owned by him) appear in the Schedule at £21,399,000. Second, as regards assets presently in the wife’s name, there are The Small House at £411,000 and her flat in Oxford at £243,000. All these sums for both husband and wife are, as I say, net of latent costs of sale and taxes.[48]The Schedule also deducts the parties’ outstanding costs. The husband’s total costs are £743,226 of which he has paid £568,061, leaving £175,165 still to be paid. The wife’s total costs are £577,281 of which she has paid £176,922 leaving £400,359 still to be paid. The parties have therefore spent in aggregate £1,320,500 on this litigation. E: THE HEAVILY DISPUTED ISSUE AS TO LENGTH OF THE PARTIES’ PRE-MARRIAGE COHABITATION:[49]The wife says cohabitation started at the end of October 1995, just after she started her floristry course. The husband says it did not start until the end of 1997. The importance of the difference is perceived to arise from the fact that it was during 1996 that the husband was engaged on negotiating the sale of K Ltd. That gave rise to the injection of nearly £8 million into H Ltd fuelling the revival of the husband’s financial fortunes after the collapse of J Ltd. The wife considers that the proceeds of sale of K Ltd should be regarded as matrimonial property. The husband strongly disagrees.[50]The evidence about the date when cohabitation started consists mainly of(a) the competing recollection of the parties,(b) the evidence of the husband’s witnesses and(c) various contemporaneous documents. The documentary evidence goes both ways, some supporting the wife and some supporting the husband. In addition, I have before me a Schedule prepared on behalf of the wife identifying numerous social events between 11th November 1994 and 17th December 1996. It is based on original diaries of her’s for 1994 and 1995 and on a clip of letters between the parties and their friends between 8th April 1995 and 17th December 1996 (“the thank you letters bundle”). The standard of proof is the balance of probabilities and it is for the wife to satisfy me that the cohabitation started at the end of 1995. I have searched hard for a ‘smoking gun’ point to give me a clear and independent steer on this heavily disputed issue, but I have not found one. I, therefore, propose, to identify the factors pointing in each direction, in no particular order, and thereafter to state my conclusion.[51]Favouring the husband’s case are these points.(i) In his 1997 Form E in his financial proceedings with Mrs E, he filled in the box as to who was living at The London House as being himself, B and C. He did not include the wife. That may of course be significant; or he may simply not have been applying his mind to a new partner who was not directly relevant to the issues as between himself and Mrs E.(ii) Historical electoral roll and credit agency information relating to The London House does not show the wife as being resident there until 1998. If she was living there any earlier, as she claims, then the electoral roll was not brought or kept up to date.(iii) When the wife’s solicitors instructed Mr Lane on 13th January 2014, they asked him to report on the “... likely marital acquest looking at the date of the parties’ relationship as a whole (i.e., from 1997 to date).” The husband relies on that as supporting his case. On the other hand, that letter is not accurate nor reliable, since on the same page it requests a value of the husband’s assets “... in 1997 when the parties met.” In fact they met in 1994. In addition, at a directions’ hearing before Coleridge J on 4th April 2014 Mr Southgate pressed for documentary disclosure back to 1995, although this was refused. Hence the accountants’ work has commenced in 1997.(iv) The husband relies on the wife having torn a couple of pages from her 1995 diary and on her having scribbled out certain entries. These scribblings out are difficult to explain without perusing the original diary which I have before me. On 20th October 1995 there is the word “dinner” with the rest of the entry scribbled out so as to be illegible. On 26th October 1995 there is “dinner – Ivor” but with an asterisk either side of the entry, the second one being such that it might be obscuring an ‘apostrophe s’. That would make the entry “dinner – Ivor’s.” On 31st October 1995 there is an untouched entry which is easily legible as “dinner – Ivor’s.” This is about the time when the wife says she moved into The London House. On 3rd November 1995 there is “dinner - ” and then a short word scribbled out. In my view, that word is too short to be “Ivor”. On Monday 11th December 1995 there is an entry “dinner” with a word scribbled out which looks as though it started with an “I”; but the rest of the word is wholly illegible. Above it the wife has written “L and M.” There is indeed a letter from “L” in the ‘thank you letters bundle’, written on behalf of herself and M, dated Wednesday 13th December 1995, thanking the husband and wife for “a lovely evening on Monday” (by inference, Monday 11th December 1995). On 15th December 1995 there is an entry which is wholly scribbled out, but the word “dinner” is just discernible. The second word looks to start with an “I” and might end with “or.” It is about the right length to be the word “Ivor”. Ms Bangay says that the wife has scratched these entries out because she (the wife) realises that she would have been unlikely to have written “dinner at Ivor’s” if she had by then in fact been living with him at The London House. These original diaries were not, however, called for until after the wife had given evidence and she was recalled to deal with them briefly at the very end of the case, when the allocated time on the template was running out. There is no expert evidence about them which might have revealed the original entries. I will come back later to state my conclusions about them.(v) The wife has not produced any documents (letters, bank statements, etc) addressed to her at The London House; nor any evidence from her sister or others with whom she shared The East London House about their having given up that property in September 1995 (after which month she says she moved in with the husband at The London House).(vi) The wife was inconsistent in her evidence in two particular respects. First, she said originally that she had moved into The London House during September 1995 but during cross-examination this became the end of October 1995. Second, she said that she was “there” before Mrs D started as the husband’s PA (which all agree was August 1995) but she then said with almost the next breath that she moved in at the end of October 1995 (i.e., after Mrs D had started).(vii) The husband is supported by his three witnesses. They recall the wife’s moving into The London House as being in late 1997. His daughter, B, states in her written statement that to the best of her recollection she must have been introduced to the wife in late 1995 or early 1996. However, in cross-examination the husband accepted the wife’s case that at around Easter 1995 she (the wife) went on the family’s skiing holiday which B and C were also on. Such skiing holiday (although not the presence of B or C) is noted in the wife’s 1995 diary. Further, the wife’s diary has a clear entry for June 1995 “dinner B’s birthday.” B also agreed in cross-examination that the husband (her father) brought the wife on the family’s summer holiday in Majorca in the summer of 1995, which she (B) was on. So it is clear that B’s recollections and statement about when she first met the wife (late 1995 or early 1996) are wrong. As regards the husband’s son, C, his statement says that he was first introduced to the wife in late 1996, early 1997. However, he ‘assumed’ in cross-examination that he would have gone on the Majorca holiday in the summer of 1995, as he went there most years. That corresponds with the wife’s evidence that he was indeed there. I repeat what I have just said about the skiing holiday at about Easter 1995. In addition, there are letters in the ‘thank you letters bundle’ from which one can infer that C must have met the wife much earlier than he recalls. Whilst these letters are hearsay, they are contemporaneous and manifestly not written to serve any forensic aim. On 28th December 1995 KE wrote to thank the husband for a great Christmas party the previous day, singling out “C and [the wife].” A friend’s letter dated 29th August 1996 refers to C being present when the wife accompanied the husband on the family holiday, presumably in Majorca. These letters show, and I find, that C’s recollections and statement are wrong when he says that he and the wife were not introduced until late 1996 or early 1997. As to Mrs D she (like both the husband and the wife) was completely mistaken as to the date when the wife took the flat in N Street referred to in Part C above. All three of them had thought and had stated in statements that this had happened in 1997. It was only when the computer records of the lease were obtained during the hearing that the correct date of 2000 emerged. All agree that she (Mrs D) started working for the husband as his PA in August 1995, at which time she says in her statement that “... neither the husband, his children nor anyone else was living at The London House.” She must, however, be wrong about that for this reason. The wife asserts and the husband accepts that from the beginning of 1995 he employed a housekeeper at The London House called Miss X. She (Miss X) was employed by him there in that capacity until the summer of 1995 when he asked her to leave and took on Miss Y as housekeeper in her place. The husband said in evidence that the duties of Miss X had been to keep the house (The London House) clean and to make a bed for him if he was sleeping there; but that he had found her to act inappropriately, as she would put chocolates on his pillow. Mrs D told me that she had not heard of Miss X. This shows (contrary to Mrs D’s recollection) that the husband must have been living at The London House (Miss X being employed there as his housekeeper) before August 1995 when Mrs D started. The evidence of Mrs D was, however, firm that the wife had not moved into The London House until the staff moved out to a new office in London W1 (seemingly from her statement in about February 1997, but in her oral evidence in about June or July 1997). Mr Southgate urges me to be cautious about Mrs D’s evidence since she accepts that she has read the papers in this case and has accompanied the husband to conferences with his lawyers.[52]I turn to the points favouring the wife’s case about the start of cohabitation being in late 1995.(i) The ‘thank you letters bundle’ running from April 1995 to December 1996 is compelling that the husband and wife must have been giving all the outward signs of being a couple. Time and again the wife is complimented and thanked by the parties’ friend. For example, on 26th June 1996 a friend FP wrote to “Dear [the husband] and [the wife],” thanking them for a pleasant evening and referring to “... your lovely home, so cosy and welcoming.” All the letters need to be read for their full impact. This does not of course in itself mean that the wife was actually living full time at The London House. As Ms Bangay submits, she may have been living elsewhere but being present (and perhaps staying over) for social events.(ii) At Christmas 1995 the husband sent the wife a Christmas card “…with my love” followed by kisses and “…thank you for making The London House a home.” He says he was merely referring to the fact that she had put some flowers around and that as a single man he appreciated a woman’s touch about the house: she was not living there full time, just staying over sometimes when it was convenient.(iii) In October 1996 when registering her floristry business with Companies House, the wife gave her own address as The London House. She says this indicates that she was living there at least by then and shows that the husband’s case (late 1997) is wrong. The husband maintains that he allowed her to use his address as it would look ‘more prestigious’ than her actual address, the East London House.(iv) The wife maintains there was a very logical reason for her moving into The London House in October 1995. She says that her income had recently stopped when she had resigned from K Ltd and that, whilst on her one year’s floristry course, she had no income with which to pay any rent. So, she says, the husband invited her to move in with him.(v) The wife relies on a curiously convoluted answer by the husband given to Mr Southgate when Mr Southgate put it to him in cross-examination that the wife had moved in to The London House in October 1995. Mr Calhaem’s notes of the husband’s answer is; “... if that is when she says she started to leave clothes there – if that is your interpretation that it was her home – perhaps she could stay there as it was convenient. Maybe that metamorphosed into a more regular period, never invited or requested by me. The alternative was to go to the East London House to that shared house in a back street. That is all I can say about it. I don’t think there is a better reason.”(vi) There is no doubt that the husband was wrong about the date of his own moving into The London House, which he stated had not occurred until late 1995 (paragraph 6 of his statement at C83) or 1996 (paragraph 16 of his statement at C112). I have mentioned how, on his own evidence, Miss X was putting the chocolates on his pillow before Mrs D started working as his PA in August 1995. So he must have moved in earlier in 1995. The wife’s recollection is proved to have been right on that point.(vii) Similarly, I am satisfied that the husband was very inaccurate in his recollection about the date when the parties separated. The wife has throughout said it was in September 2012. He has throughout said April 2011. The wife, however, produced a five page detailed list of social events which they attended together from May 2011 to August 2012. It led the husband to shift a long way in cross-examination towards the wife’s case, including his having to amend his written evidence for their last appearance together at a particular Arts Festival from July 2011 to July 2012. That is only two and a half years ago. It is clear, and I find, that the wife’s case about the date of the ending of the marriage is right and that the husband’s recollection was flawed. I reiterate his response to the wife’s solicitors in February 2013 that even then he did not agree that the marriage had broken down. I accept the husband saying in his evidence that his age makes it more difficult to remember details nowadays; but then the wife would say that this may explain how he has misrecalled the date when their cohabitation began.[53]One factual issue blew up at the very end of the case which contributed to both parties being briefly recalled. During the hearing Miss Bangay called for the wife’s letters and diaries on which the wife had relied in her written evidence. She, the wife, therefore, returned from London to The Big House overnight to collect them. Unbeknown to her, the husband was himself also staying there that night. She had thought that, like her, he was staying in London during the hearing. Late at night there was an unseemly confrontation between them at The Big House. Both behaved in a manner which I expect they regret. The wife accuses the husband of not disclosing the letters, as he should have done being relevant to the issue of the parties’ cohabitation. He accuses her of being in his study without permission and rifling through his documents trying to find them. She says it is not ‘his study’ but ‘the study in our house’. Miss Bangay submits that the husband is so much more likely to be right about the study being his ‘sanctuary’ that this goes to show the wife’s overall lack of credit. I cannot, however, accept that. Given the late stage at which the issue emerged, there was no opportunity for any meaningful investigation of it and I decline to ‘take a punt’ at who is right. It seems counter-intuitive that during the happier times of a marriage one spouse should ‘ring-fence’ a particular room and, having seen this wife, I rather doubt that she would have accepted it. It may very well be, given the bitterness between the parties, that their perceptions of the status of the study have become polarised. In any event, whoever is right (or whether the truth is somewhere in the middle) this is not a point which I find assists me as to which party is generally the more credible.[54]So where on this review of the evidence am I left on the issue as to when the parties started to live together? On any view everyone’s recollection, the husband’s, the wife’s and Mrs D’s, was comprehensively wrong about the date of the wife taking the flat in N Street. The suggestion that this was leased in 1997/1998 originally came from the husband in a Questionnaire and it looks as though the wife just went along with that date assuming it to be accurate. The recollections of B, C and Mrs D as to certain dates have also been shown by clear evidence to be wrong although, that said, they remained firm on the point of the wife not moving into The London House until 1997. The husband’s Christmas card in December 1995 and the ‘thank you letters bundle’ clearly imply a couple who were, if not living together, then at least very close. But what about the wife’s 1995 diary with its scribbled out entries? Assuming for the sake of argument that the words scratched out after the word “dinner” are “at Ivor’s,” it could nevertheless be that someone in the very early stages of cohabiting would still refer to the home concerned as being that of its owner. I accept it could be that by scratching out “at Ivor’s”, if the wife did so, she was trying to pre-empt Ms Bangay’s point referred to at paragraph 51(iv) above. If so, she did it in a remarkably inept way, including leaving one such entry fully legible. I find myself left in a state of uncertainty about the scored out diary entries, the late stage during the hearing at which the point emerged having impeded my being able to come to a reliable conclusion. Nor do I consider that the wife’s removal of the two diary pages has been established as being ‘sinister’ (i.e., that the pages may have shown something detrimental to her case) because, as she said, she could simply have used those end pages of her diary for scrap notes. All in all, although the diary deletions concern me, I am not persuaded that the wife scribbled out the words concerned with a devious intention; or, if she did so (which I repeat I am not finding), I do not consider, having seen and heard her, that this shows that she was in fact not living at The London House when she says she was.[55]I am satisfied that the wife, the husband and his three witnesses all genuinely believe what they have said in evidence. I do not consider that any witness has set out to lie about when the parties’ cohabitation started. These events happened getting on for 20 years ago. It must be extremely difficult to remember dates which were unimportant at the time, as the unanimous but wrong recollection about N Street shows. In addition, the parties are, as I say, in bitter conflict about this litigation, each fighting vigorously his/her polarised corner. This affects the reliability of recollections. There is no doubt from my having seen and heard the husband that his attitude to the wife has been negatively influenced by his sense of affront at the extent of her financial claims. Having brought all the wealth into the marriage, he feels (as stated expressly in his Form E) that her claim should be assessed in the context of the rented the East London House from which she came. He told me and clearly believes that she married him for his money. I do not, however, find that to be so. On the contrary, the contemporaneous correspondence implies that he would have been proud of her and grateful to her. I have no doubt that she was in love with him and he with her. His evidence is that he took all the decisions and that the wife “always lived in my houses.” He does not consider that she contributed anything much to the marriage at all.[56]The wife, for her part, has put forward over-aspirational claims which have compounded the problem. For example, her first budget was for £360,000 per annum which was too high and the husband clearly saw it as provocative. It has since been reduced to nearer £160,000 per annum. She exaggerated in one of her statements the speed with which the property in Chelsea became available to the parties as a London pied à terre. She has spoken of ‘a fleet of luxury cars’, which I find to have been an exaggeration. She referred to a box at Ascot in terms which made it sound like a regular event, although in cross-examination she accepted that the last time was eleven years ago in 2003. On the other hand, contrary to the husband’s perception, I am satisfied that she supported him fully within the home in the various ways of which she spoke in evidence; and that she complemented him as a supportive businessman’s wife and hostess within the social world of culture and the arts (music, opera and museums) and of philanthropy and fund-raising in which he moved.[57]Taking everything into account, my conclusion is that the wife probably did start living essentially at The London House at or about the time when she says she did. I do not consider it was as late as the latter part of 1997. It may well be that there was a transitional period of time after October 1995 when she stayed most but not all nights at The London House, although that presupposes The East London House having remained available for her to use after her sister’s return to Ireland in September 1995, which was barely explored in evidence. The question still arises as to when this became a settled, enduring cohabitation of an equivalence to marriage but without the paper work. The husband’s case is that the relationship was not originally in his mind committed or exclusive. This was not amplified until during the hearing. However, his evidence was clear about it and I doubt he was lying. In addition, he has support on this point (of his not originally being ‘committed’) from B and from Mrs D, even though I take Mr Southgate’s point that such evidence was introduced other than as obvious answers to the particular questions asked. There is also a small measure of support for the husband by way of a letter dated 5th November 1996 in the thank you letters bundle about the valuation of a watch which he says belonged to a named lady friend. I have to take a broad view about this and I acknowledge the submission on behalf of the wife that the husband’s evidence may show merely that he was ‘two-timing’ her. Nevertheless, the question is by when the parties’ cohabitation had settled into a committed and enduring relationship of an equivalence to marriage and I have concluded that the most likely date is the mid to latter part of 1996. This is the product of taking a broad view of the probabilities and is not expressly supported by any particular piece of evidence. I do not, however, think it does injustice to either party and I suspect that, nearly 20 years on, it is about the best that fallible judgment can achieve.[58]As to the wife’s taking the flat in N Street in 2000, this clearly demonstrates a rocky patch in the parties’ relationship. It is common ground that she did buy some flat-pack type furniture for it; nevertheless, she was very clear that she actually spent very little time there, because she was scared of sleeping there alone and because the flat was noisy. She also said she left the majority of her clothes and belongings at The London House, which I do not think was rebutted by the husband. I accept that she did not use N Street for very long and I do not consider that such a break in the parties’ relationship interferes significantly with the otherwise ‘seamless’ move from settled relationship starting in the mid to latter part of 1996 to marriage in 2003. F: THE SECTION 25 EXERCISE[59]I have to take into account all the circumstances of the case including particularly the following factors.(a) Income, earning capacity and so on. The husband does not draw a conventional income. He takes money from his DLA in H Ltd as and when he needs it to fund his living and other expenses. He has a wide portfolio of properties held through his many special vehicle companies and there is no reason to think that he will not be able to continue living to a comfortable standard following the outcome of this application. His budget for the future is in the sum of about £161,000 per annum, brought up to £181,000 per annum by the addition of school fees for his grandchildren. Within such budget there is a sum of £84,000 per annum for ‘household’ at The Big House and a sum of £26,800 per annum for The Seaside House, aggregating to £111,000 per annum in respect of expenditure on accommodation. The wife has no current income from any kind of paid work and she has about £14,000 a year rental income from the flat in Oxford net of mortgage but pre-tax. At the age of 47 she could augment the additional investment income which she will have after this hearing, but I do not think to a very significant extent. She has not been a PA for nearly 20 years. It would not be reasonable, given the lifestyle to which she has been accustomed, to expect her to go back to ‘mopping and emptying buckets’ (her words) in floristry. I shall approach the case on the basis that if she does want a better standard than is available through the award which I shall make, then she could find something modest to do to augment it. Her budget for the future is in the sum of about £164,000 per annum. It is uncannily similar to the husband’s of £161,000 per annum (excluding his grandchildren’s school fees) but made up differently. For example, her estimate for her future housing needs is only £59,000 per annum (less by £52,000 per annum than the husband’s for himself) but her aggregated figure of £48,000 for clothes, shoes, entertainment and holidays is greatly larger than his for those items.(b) Financial needs, obligations and so on. Both parties have similar needs, a decent level of accommodation and a decent income. The husband has and will have both. He will also be able to continue with his charitable works and with making provision for his five grandchildren, in respect of both of which aims he feels an understandable sense of moral obligation. As for the wife, her needs will probably be of much longer duration than the husband’s. The award should enable her to continue not in the same way as before the marriage broke down, but to have a standard of life which bears a proper relation to that to which she has been accustomed and to that of the husband. It should not be assessed, as the husband has said, in the context of her rented accommodation in East London in 1994.(c) Standard of living during the marriage. The wife says this was very high, bordering on the luxurious. The husband says it was good but not spectacular. He relies on a Schedule put in during Ms Bangay’s final submissions suggesting that in 2012 the couple spent £192,000, of which £104,000 was attributable to him and £88,000 to the wife. However, the wife does not accept that. She says (although the Schedule concerned was put in too late for her for comment) that she was not spending as much as usual by 2012. She also asserted, in paragraph 14 of her statement at C106, that much spending went through the business. I do not think I have the husband’s express response to that, although I note that at C113 when dealing specifically with the wife’s paragraph 14 he does not gainsay that particular assertion of her’s; nor do I know the amounts said to be involved as going through the business. What is clear, however, is that on 31st October 2006 the husband wrote to Savill’s private finance seeking a mortgage for the wife. In the letter he said that the wife was ‘giving up the daily grind’ of her flower business (which she did in December 2006) and that they both intended for her to build up a residential investment portfolio. He continued “... as to her future income, I am happy to confirm that her expenditure met through me is in the order of £100,000 per annum net of tax and I see no reason to expect that it will be less than that for the future! (sic). As my wife, she has no household expenses and staff are employed in our three homes.” That strikes me as a rough guide to the sort of ‘income’ (drawn from the husband’s DLA) and standard of living which the parties must have been able to enjoy towards the end of the marriage. All the usual household expenditure, staff and motoring were on top, as well as the husband’s own personal expenditure. The point is made to me that £100,000 per annum for the wife in 2006 would be worth £125,000 per annum now.(d) The age of each party to the marriage and the duration of the marriage. The husband is aged 71 and the wife 47. The marriage lasted nine years from 2003 to about September 2012 with pre-marriage cohabitation of a sufficiently established character from the mid to latter part of 1996 as found. So the overall relevant relationship was about 16 years.(e) Any physical or mental disability. The husband has had recent surgery and the wife has spoken of some deafness; but neither prays health seriously in aid as affecting what would be a fair outcome.(f) The parties’ contributions. As regards the wife I repeat what I say at paragraph 56 above: a full contribution as a wife in the home and by way of supporting and complementing the husband in his business and charitable socialising. As regards the husband, this is an aspect requiring further consideration which I undertake in part G below.(g) Conduct. This is not relied on by either party.(h) Lost benefits. None applicable. G: THE HUSBAND’S CONTRIBUTION OF WEALTH AT THE OUTSET: MATRIMONIAL AND NON-MATRIMONIAL PROPERTY[60]The wealth brought into the relationship and marriage by the husband comprised essentially The London House, The Seaside House and his business assets held within the corporate structure. The date for valuing his wealth at the outset does not correlate precisely, since the accountants’ exercise relates back only to 1997, whereas I have held that it was by the mid to latter part of 1996 that the parties’ relationship had gained a sufficient equivalence to marriage for their cohabitation to be counted as such. But this difference is not significant. The accountants have agreed that the husband’s total net assets were at the outset around £13 million and are now around £26 million. The revised figure of £25.3 million net for the present combined total of the parties’ assets as found at D above is slightly lower essentially by the incidence of outstanding costs. The core dispute is as to how to deal with the fact of the husband’s contribution of his pre-owned wealth and his use of it during the parties’ relationship and marriage to provide for their accommodation and costs of living over the years.[61]Ms Bangay submits that the right approach is to augment the introduced sum of £13 million by a sum for ‘passive growth’ and to deduct the combined amount from the current £25.3 million so as to identify ‘the fruits of the parties’ partnership’ as being the ‘matrimonial property’ (the so-called ‘marital acquest’). There would then be a notional equal sharing of the ‘matrimonial property’ following which the wife’s share would be tested against her needs. Any additional sum required to meet those needs would come from the sum characterised as non-matrimonial property. This process would in itself create a fair outcome: sharing would not come into it. It was with this approach in mind that Ms Wallace-Walker was instructed on behalf of the husband amongst other things to calculate the ‘marital acquest’. Her report was exhibited to the husband’s Form E. It says that the £13 million introduced by the husband, enhanced by passive growth on it, can be seen as accounting for the entirety of the current ‘kitty’. This would result in there being no matrimonial assets for sharing, leaving the wife’s case based exclusively on needs.[62]At the first appointment before the District Judge, faced with Ms Wallace-Walker’s exhibited report, the wife obtained permission to instruct an expert of her own, Mr Lane. With hindsight this was an error of case management. The exhibiting of an expert’s report by the husband was without the leave of the court and contrary to the rules. It should have been dealt with robustly by an order for a single joint expert. That is what would or should have been ordered if the husband had not jumped the gun. The single joint expert would or should then have been told that what the court needed was a broad-brush approach set out in a succinct page-limited report. It would greatly have reduced the costs and reading time. It would have lessened the significant burden on the lawyers and on the court of having a lever arch file (sic) of competing accountancy evidence.[63]Be that as it may, Mr Lane, too, did his best to grapple with passive growth in respect of a property development company being actively ‘worked’ by the husband. His calculations and analyses led him to the conclusion that the current ‘matrimonial assets’ amount to some £6.3 million being referable to the husband’s ‘active management’ of particularly(a) H Ltd itself; of(b) The London House (the husband’s decision to sell it and invest most of the proceeds into H Ltd); and of(c) The Big House which was refurbished and improved at a cost of about £500,000, using part of the proceeds of sale of The London House. The balance of the current total kitty (being £25.3 million less £6.3 million equals £19 million) would thus be referable to the husband’s pre-relationship wealth augmented by its passive growth. However, Mr Southgate emphasised from the outset that, notwithstanding Mr Lane’s opinion, this was not actually how he was putting his case; rather, that this is a case for simple sharing of the current kitty, albeit in proportions favouring the husband.[64]A great deal of time, effort and expense must have gone into the accountancy evidence. But in the result neither party relies on it. Ms Bangay’s approach looks only to ‘needs’ and Mr Southgate’s looks only to ‘sharing’, both avoiding the need to grapple with passive growth. That said, both counsel addressed me on it and it is integral to the dispute between the parties as to the appropriate approach. I have, therefore, read and re-read the authorities in this area to which I was referred, the main ones of which are: Miller v Miller; McFarlane v McFarlane [2006] 1 FLR 1186 [House of Lords]: Charman v Charman [2007] 1 FLR 1246 [CA]; FZ v SZ [2011] 1 FLR 64 [Mostyn J]; Robson v Robson [2011] 1 FLR 751 [CA]; Jones v Jones [2011] 1 FLR 1723 [CA]; N v F [2011] 2 FLR 533 [Mostyn J]; K v L [2011] 2 FLR 980 [CA]; AR v AR [2012] 2 FLR 1 [Moylan J]; and S v AG [2012] 1 FLR 651 [Mostyn J].[65]Where a party brought financial resources into a marriage, that is clearly a form of contribution which falls to be taken into account under section 25(2)(f) above as one of the circumstances of the case. The weight to be attached to it will vary according to all the circumstances. In Miller and McFarlane Lord Nicholls referred to the ‘real difference in source’ [paragraph 22] as between(a) ‘the financial fruits of the marriage partnership’ [paragraph 21] and(b) resources brought into the marriage. He said at paragraph 23:
“...This difference in treatment of matrimonial property and non-matrimonial property might suggest that in every case a clear and precise boundary should be drawn between these two categories of property. This is not so. Fairness has a broad horizon ... accordingly, where it becomes necessary to distinguish matrimonial property from non-matrimonial property, the court may do so with the degree of particularity or generality appropriate to the case. The judge will then give to the contribution made by one party's non-matrimonial property the weight he considers just. He will do so with such generality or particularity as he considers appropriate in the circumstances of the case.”
[66]In Robson, referring to inheritances (but the same applies to pre-owned wealth) Hughes LJ (as he then was) said:
“...What is fair will depend on all the circumstances; those cannot exhaustively be stated but will often include the nature of the assets, the time of inheritance, the use made of them by the parties and the needs of the parties at the time of trial. In the present case, although the assets were inherited from the husband's family, the parties had jointly elected to live off them and, in effect, to use them as a substitute for earned income.”
Ward LJ gave guidance at paragraph 43, recommending a concentration on the factors in S25 (above) without judicial gloss. He concluded:
“... The fact is that no formula and no resort to percentages will provide the right answer. Weighing the various factors and striking the balance of fairness is, after all, an art not a science.”
[67]In Jones v Jones the husband had brought his pre-owned company into the marriage and, thereafter, continued working it during the marriage. The wife sought a straight 40% of the current net assets of £25 million, while the husband argued for a distinction to be made between(a) the matrimonial property and(b) the introduced wealth, with only the former to be shared. Wilson LJ at paragraph 33 determined that the approach there should be to make the distinction for which the husband argued; but he stressed that the court must then test the result by:
“... identifying for allocation to the wife such lesser percentage than 50% of the total assets as seems to make fair overall allowance for the husband’s introduction of his company into the marriage.”
On the facts of that case it was held to be appropriate to reflect ‘passive growth’ on the value of the company introduced by the husband, which reflection was achieved by reference to what seems to be the nearest relevant Index. That passive growth, with one other adjustment, brought the value of the husband’s original contribution (non-matrimonial assets) up from £2 million to £9 million. Deducting that £9 million from the current overall assets of £25 million left £16 million as matrimonial assets, leading to an award to the wife of 50% thereof, being £8 million. The essential cross check (paragraph 55 per Wilson LJ and paragraph 64 per Arden LJ) showed £8 million to be 32% of the total assets, which corresponded on the facts with the court’s intuitive view of overall fairness.[68]In N v F Mostyn J followed Wilson LJ’s approach in Jones reiterating his own view that (subject always to need) the court should generally speaking carry out the following steps:(a) decide whether the fact of pre-marital property should be reflected at all, depending on questions of duration and mingling;(b) if so, decide how much of the pre-marital property should be excluded;(c) and then divide the remaining property equally checking ‘the fairness of the award by the overall percentage technique’.[69]In K v L it was submitted to the Court of Appeal that an award of mine was disproportionately low. A schedule was presented showing that my award of only 9% of the total assets (on the unusual facts of that case) was way below awards in all other ‘wealth contribution’ cases. Wilson LJ dismissed that argument and the asserted probative value of a particular award of 23% in one of the cases on the schedule. He said:
“... [the fact] that it there amounted to 23% demonstrates nothing. What was much more interesting was ... [that] when we asked Mr Pointer to show us a reported decision in which the assets were entirely non-matrimonial and in which, by reference to the sharing principle, the applicant secured an award in excess of her or his needs [he] confessed to be unable to do so. Such a decision will no doubt be made – but not in this court today.”
[70]In A R v A R Moylan was faced with a similar argument, the wife seeking a 30% share of the overall wealth and the husband arguing for the Jones and N v F approach. The assets there were between £21 million and £24 million, say £22.5 million, of which all but £1 million had been gifted to or inherited by the husband. At paragraph 81 Moylan said, “... It is clear to me that the bulk of the wealth in this case is accurately described as non-matrimonial; in other words, it is not the product of the parties’ endeavours during the marriage ... the former matrimonial home has been lived in and the family have clearly, in part, used the invested income generated from the husband’s inherited wealth. But nothing has happened to the bulk of the wealth which has changed it into matrimonial property or diminished the weight to be attached to it as a factor in this case. In my judgment, the principle which in this case best guides me in the exercise of my discretion under section 25 to the determination of a fair award is that of needs. I do not consider that the sharing principle justifies any additional or enhanced award as submitted by Ms Bangay [and continuing down to the end of paragraph 82].” The award there was of £3.2 million which, coupled with the wife’s own assets of £1.1 million left her worth £4.3 million, just over 19% of the total assets of £22.5 million.[71]Last, in paragraph 7 of S v AG Mostyn J spoke of matrimonial property normally being divided equally saying that, by contrast, and except to meet needs:
“... it will be a rare case where the sharing principle will lead to any distribution to the claimant of non- matrimonial property.”
In paragraph 8 he said:
“... sometimes one party brings assets in which become part of the economic life of the marriage ... utilised, converted, sustained and enjoyed during the contribution period. This is the concept of mingling ... [although] ... even if there has been much mingling, the original non-matrimonial source of the money often demands reflection in the award.”
[72]Cases in this sphere are notoriously fact-specific and are subject to the exercise of a wide discretion. In practice, outcomes expressed in percentage terms will be influenced by a combination of the ratio which the original contribution bore to the original kitty and which it bears to the final kitty; by the way in which the contributed wealth was treated and/or used during the marriage; and by the assessed amount of the claimant’s needs as a proportion of the final kitty. It is because such factors vary so much from case to case that schedules of ‘comparables’ cannot be of much, and are certainly not of decisive, value.[73]I propose here to follow the approach used in Jones and N v F, described by Ms Bangay as the orthodox approach. I have not always done so in taking such decisions and I am still of the view that there are cases where, on the facts, the exercise of a simple broad discretion under Section 25 will be more appropriate, that is will be necessary and/or proportionate and fair. The decision as to the better approach is itself discretionary. It will depend on the particular circumstances of the case and on the available evidence; but I accept that there is generally force in Mostyn J’s concern in FZ v SZ about ‘insufficient logical rigour’ being brought to bear if a discretionary percentage is just selected out of the air. If 33% is ‘right’, why is 36% ‘wrong’? Yet, the difference in this case would be £800,000.[74]Here I accept the £13 million figure agreed by the accountants as representing the worth of the assets brought into the marriage by the husband. It contains the nearly £8 million injected into H Ltd from the sale of his interest in K Ltd. Contrary to the wife’s case, I find that the basis for this funding from K Ltd was in place before the parties met and that the sale negotiations essentially took place before they were in a settled relationship bearing a sufficient equivalence to marriage. The fact that the deal was completed and the money paid to the husband at the time of the start of their ‘relationship akin to marriage’ is not such as to make the money ‘matrimonial property’. The husband continued to ‘work’ his company assets during the parties’ relationship and marriage by way of property development, sales and property holding for rental income. This absorbed him, along with his charitable interests, for some 60 hours per week. So distinguishing between(a) ‘passive growth’ on the £13 million, which would accrue to the husband (per Jones) and(b) enhanced wealth due to his business activities, which would be shared equally, is a considerable challenge. At paragraph 46 of Jones Wilson LJ said:
“... passive growth is to be contrasted with growth as a result of the contributions of one sort or another made during the marriage, i.e., of activity, irrespective of whether such is achieved with the assistance of a springboard already in position.”
Speaking of a small industrial company requiring active management, he said at paragraph 49:
“... there is in truth profound difficulty about quantifying an allowance for passive economic growth in such a case ... [but] ... I do not see how the law can logically decline to attempt to enquire into the existence and, if so, the amount of such growth by reference only to the nature of the husband’s investment [Wilson LJ’s italics].”
Arden LJ agreed that an allowance should be made there (Jones) for passive growth even though the asset was a private company, the business of which had been greatly developed by the husband during the marriage. She noted that:
“... it may be difficult to compute growth on such an asset, as opposed to an asset such as a painting or a vintage car or a portfolio of investments that has always been kept separate and distinct.”
In the remainder of her judgment she highlighted other conceptual difficulties in this area reverting to the “cross check of overall fairness” as the failsafe which had led her to concur in the result. She considered the first instance decision awarding Mrs Jones only 21.6% of the current overall assets (viz. £5.4 million out of £25 million) to be ‘clearly wrong’ (paragraph 64). Sir Nicholas Wall P deferring to the expertise of Wilson LJ expressed relief that the Court of Appeal award corresponded nearly enough to “... an old fashioned third.”[75]The experience of this case has amply confirmed these observations of the Court of Appeal about the difficulty of disentangling passive growth from the fruits of active management. Done properly it requires an accountancy retrospective over practically every transaction from the 1990s to date so as to try to distinguish the cause of each component of gain. The issue is further complicated here by the existence of matrimonial homes, three over time, and by the fact that most of the proceeds of sale of The London House went into H Ltd in 1997.[76]Some of the most straight forward methods of approaching the problem were highlighted by Ms Wallace-Walker in her first report when, by way of illustration, she applied to the husband’s 1997 wealth(a) the RPI;(b) the indexed rise in house prices and(c) the increase in value from notionally having placed the 1997 wealth into a bank account and having left it there. Broadly such an exercise would bring the husband’s 1997 wealth up to between £19.3 million and £23 million, depending on the precise approach used. That alone, she pointed out, would show the marital acquest to be minimal. Both accountants go on to explore other Indices and other methods of trying to assist the court. They do so necessarily with a number of caveats, assumptions and broad-brush discounts. Ms Wallace-Walker makes the point that to do the job properly would require “... an economist to identify macro-economic variables and to apply statistical techniques and econometric modelling.” Mr Lane says that it would be necessary to find “... clear dominant and reliably objective data identifiable as affecting H Ltd’s performance,” which would require “... an economist to identify significant statistical correlations that have a causal impact on the company.” Such expertise would obviously be wholly disproportionate when the underlying task is essentially discretionary.[77]Be that as it may, I have come to the conclusion that I should be guided by the work of the accountants. Their illustrative range for the worth of the husband’s active management of H Ltd, The London House and The Big House is between Ms Wallace-Walker’s £3.6 million and Mr Lane’s £6.3 million. For the reason at paragraph 64 above, it is unnecessary to decide between them. Erring in the wife’s favour, I will take a round sum of £6 million to represent the matrimonial property. Sharing that equally would give the wife £3 million. The husband accepts that this would be insufficient to meet her needs and I agree.[78]Before considering those needs in more detail under heading H below, I need to deal with Mr Southgate’s argument for a straight application of the sharing principle, leading to an award of 33% to 40%. I have paid particular regard to his arguments cogently marshalled at paragraphs 83.1 to 83.14 of his Skeleton Argument. However, given the sum of which I am about to assess the wife’s needs I have not been persuaded that an enhancement of my intended award is necessary or would be fair based on sharing. As already noted in paragraphs 69 to 71 above, this has not been done before where all or the bulk of the wealth has been brought in by just one of the parties to the marriage. Like Moylan J in re A R, I can see no particular basis here for fairness to require such sharing. The husband is aged 71. The wealth which he brought into the marriage is effectively the product of his life’s work, even bearing in mind the collapse of J Ltd. He does not have a wide range of opportunities and choices before him, except as to the date of his retirement. At the age of 47 comparatively more of the wife’s life is self-evidently ahead of her and she still has opportunities; but she will have them in addition to the fact that by virtue of her needs based award, she will be very comfortably provided for during the entirety of that life. Moreover, her award will be by way of a lump sum or sums (unless perforce some part of the award is by way of shares); whereas the husband will be left with the risk of being in property for so long as he is able and willing to continue in business. He may do better or worse than expected; but that goes with the territory. In contrast, the wife’s position with ‘cash’ will be certain and secure. In addition, whilst liquidity has not been profoundly investigated at this hearing, I must pay some regard to the accountants’ agreement that liquidity is scarce within H Ltd. Although the husband’s Form E shows that he has contemplated retirement, he spoke to me in terms of continuing to work so as to honour his commitments. My ‘needs based’ order is inevitably going to require sales and/or other re-financing within the companies. If it were augmented by ‘sharing’ up to an award of some £8.7 million as sought by the wife, I do not consider that the impact on the businesses would in the overall circumstances be fair or justified. In the result, I accept Ms Bangay’s submission that I should treat this as a needs’ case. H: CONCLUSION[79]The wife’s needs are as contentious as everything else. I have reviewed and reflected on all the evidence which I have read and heard. My findings as to her needs in the overall context are as follows.(a) A home around the country town. The husband’s case is that a maximum of £1.3 million should be allowed; however, his suggested properties can readily be seen from the estate agents’ particulars and from the wife’s subsequent researches to be too modestly priced. One such property is next door to a takeaway; one is adjacent to a block of characterless flats; another has railings outside the front door to protect those leaving it from a busy road. None are of a sufficient quality against the background of The Big House, a most elegant six bedroomed Georgian Grade 2 property of almost 7000 square feet with extensive gardens, a swimming pool, a lake and woodland, having a gross value of about £3.3 million. The photographs of it in the papers show it to be, as the wife says, an exceptional property. Her proposed properties are, however, over-aspirational. There are many beautiful properties around the country town to be purchased for significantly less, bearing in mind that she will be single. She, herself, spoke in cross-examination of seeking a property with a master bedroom and two to three further bedrooms, although that may have been said in an unconsidered moment. Such a modest sized property is certainly not what she has been seeking and I accept that she has a large family whom she would like to have to stay with her on occasions. She specifically seeks gardens but not additional land. The task of the court, after considering the illustrative property particulars, is to determine a reasonable figure in all the circumstances of the case. That figure, in my judgment, is £1,750,000. Under the new rules since 3rd December 2014, I calculate the stamp duty as being some £124,000 and I shall allow a sum of about £8000 for moving in and settling in expenses. The wife will need to furnish her new property. She has accepted that the husband will retain the lion’s share of the valuable contents of The Big House and the contents of The Seaside House. She has not put in any evidence as to the likely cost of new furnishings, merely seeking £300,000 (for both the homes she seeks) by reference in some way to the contents of The Big House. In the absence of evidence I propose to allow a sum of £180,000.(b) A London flat. This is vigorously opposed by the husband who says that there is absolutely no need for it. The wife’s written case was that the parties always had a flat in London after The London House was sold. I accept that this was not literally correct (see Part C above); however, she asserted at paragraph 9.3 of her statement at C100 and reiterated in her oral evidence that a London flat was always planned from 2009 onwards, but took a long time to materialise. That is a suggestion which I do not think the husband challenged and I observe that at C128, where he deals with other aspects of the wife’s paragraph 9.3, he does not gainsay that particular assertion of hers. The question is whether such a flat can be characterised as a need. The wife’s proposed prices are from about £1.2 million to about £1.5 million for two bedroomed accommodation in SW10. I have regard to the fact that for most of the parties’ relationship they had the advantage of three properties, The London House in London, The Big House near the country town and The Seaside House. As it is, the husband will be retaining the two remaining homes, The Big House and The Seaside House, a six bedroomed cliffside holiday home with swimming pool and pool house, having a gross value of some £990,000. That he should do so is reasonable given the background and of course he is free to transfer The Seaside House to B and C if he so wishes. But is it fair and reasonable that the wife should be limited to one home in or around the country town as the husband seeks? I have concluded that it is not. She lived in London for 16 years from 1993 to 2009 when The London House was sold and she still has friends here. I shall allow a figure of £750,000 together with stamp duty, which I calculate at some £28,000, and estimated costs of moving and settling in of £5000. Although the wife is going to have the contents of the property in Chelsea, it is probable that she will need other furnishings, equipment and bits and pieces which I assess broadly in the sum of £20,000.(c) As regards a car. The husband’s case is that the wife can continue quite adequately with her seven year old vehicle. I do not accept that. He has just purchased a brand new vehicle for some £79,000. That the wife wishes to start her independent living with a decent new car is not unreasonable. I find a fair sum for this purpose to be £65,000.(d) Funds for income. I refer back to the husband’s letter of 31st October 2006 (paragraph 59(c) above) which gives some idea of the sort of expenditure to which the wife has been accustomed. Circumstances are different now, since both parties were then sharing one household. They no longer do so, nor will again. Nevertheless, I consider that a budget for the wife of around £100,000 per year would be reasonable. An alternative would be to assess a larger amount at the start with a step down in, say, 15 years’ time; but I propose to take a simple flat line approach. The relevant Duxbury figure as per At a Glance for a little over £100,000 net per annum for the wife’s probable lifetime is £2,500,000.(e) Costs. The wife owes her lawyers costs (for which she has a costs loan) in the sum of roughly £410,000. These need to be accounted for in considering her net position as she moves on into financial independence from the husband.(f) Expeditions. I do not propose to accede to the wife’s request for specific funding for expeditions. She herself seeks some £37,000 per annum although in Mr Southgate’s opening presentation the sum shown is a single capital sum of only £100,000. Her expeditions [mountain ranges named] only happened after April 2010 and by the end they were a source of tension between the parties. I do not consider that they represent a need. If the wife does wish to go on future expeditions, she has the wherewithal to do so by managing her finances accordingly. She will have the rental from the flat in Oxford of some £12,000 to £14,000 per annum (or she can sell it) on top of her investment income under (d) above and she can, as I have said, probably find some employment if she is minded to do so.[80]The total of these various items at (a) to (e) above is some £5,840,000. It is agreed that the wife will continue to own the flat in Oxford valued net at around £240,000. Deducting the value of the flat in Oxford from the wife’s assessed need figure of £5,840,000 gives £5,600,000. That is the lump sum which, following the necessary crosscheck referred to below, I have decided to award, with The Small House to be transferred by the wife to the husband. It will be on a clean break basis. Timing of payment will require consideration once the husband has had a chance to take accountancy and other professional advice as to how this sum can best be raised. I urge the parties as strongly as I can to agree timing and mode of payment and they must use their very best endeavours to do so. In default, there will be liberty to apply as to timing and implementation, reserved to myself if available. I do not think CGT on the proposed transfer of The Small House from the wife to the husband has been taken into account. Assuming it has not already been covered, I struggle to see why it should be borne solely by the wife. It is in the interests of both parties to tidy up The Small House’s ownership by uniting it with The Big House, avoiding further disagreements. In such circumstances I propose that any CGT on the transfer of The Small House should be shared equally.[81]As an integral part of coming to my conclusion of the above figure I have followed the approach in Jones by considering it as a percentage of the overall assets in the case, which I calculate to be some 22%. The real question is not whether this matches some conventional or intuitive percentage of the total, for example “about a third”, but whether it is fair as between the parties in all the circumstances. These include, amongst other things, their ages; the wife’s contributions in the home and by supporting the husband generally; by her accepting that £4.2 million from the proceeds of sale of The London House should go into H Ltd and by her accepting The Big House as being theoretically ‘put at risk’ by the refinancing of P Ltd; and by the husband’s working within his businesses and making his contribution of wealth at the outset. It is true that part of this wealth was comprised in homes and that certainly the main home is conventionally seen as ‘a matrimonial asset’; also that the wealth represented by the companies was used by the husband during the marriage to provide the family’s standard of living. So there is force in the wife’s submission that the introduced wealth became part of the ‘fabric’ or ‘backbone’ of family life (although it was not ‘mingled’ in the strict sense of being transferred at any stage from the husband’s sole name into joint names). Giving full weight to that submission, however, it is an inescapable fact that the introduced wealth represented a huge contribution to the welfare of this family. It was a ‘magnetic factor’ which must be substantially reflected in the outcome. I recognise that the wife will regard my award to her as far too low to meet her aspirations and that the husband will regard it as far too high. That said, when I stand back to review it in the overall context and ask myself the core question, ‘is this fair by both parties?’, my answer is yes. ---ooo000ooo---

Cited in 1 later judgment