Susan Nancy Baker v Andrew Hartill Baker

In this judgment I shall refer to the applicant as ‘the wife’ and to the respondent as ‘the husband’. This is my judgment on the wife's claim for financial remedies following divorce.

The wife was at the time of the hearing 75 years of age and is American. The husband is 74 and is English.

The husband is in poor health physically and mentally. He is wheelchair-bound. A report of exceptionally high quality dated 26 January 2023 from Dr Marcus Rogers, Consultant Clinical Neuropsychologist, established that the husband lacked capacity to conduct these proceedings. My order of 27 February 2023 recorded that Mr Colin McPhee had agreed to act as, and was, his litigation friend in these proceedings, pursuant to FPR 15.3.

Dr Rogers’s report stated:

The parties were married in 1986. There are no children of the marriage. The husband says that they separated and the marriage was over by 2000. The wife says that it endured on an intermittent basis until 2013. The parties executed a separation agreement in New York in November 2015. The wife petitioned for divorce here in May 2021, and Decree Nisi was pronounced on 27 January 2022. It has not been made absolute. Her Form A seeking financial remedies following divorce was issued on 4 June 2021.

Attributing to the husband the value of the property in Somerset in which he lives, as well as the value of the property in Docklands (they were both paid for by him but the former is in his partner’s name and the latter in the joint names of him and his partner), the net value of his visible assets is about £5.6 million (Footnote: ¹). The net value of the wife’s assets is about £5.8 million.

These figures are after deducting all the costs of these proceedings, both paid and unpaid. The wife’s total costs amount to £1,377,827; the husband’s to £426,458. A total of about £1.8 million.

The wife seeks the award of a lump sum of £9.34 million. That is the sum she calculates is due to her under the separation agreement executed by the parties, following full legal advice, in New York in November 2015. The husband’s stance is that the parties’ mutual claims should all be dismissed, but that there should be no repayment to him of the maintenance pending suit paid by him.

Were such a lump sum to be awarded in favour of the wife, and were the husband to have no other assets, the result would be to leave him insolvent to the tune of £3.8m. But Mr Bishop KC says that such an award would not have that effect as the husband has at least $35 million secreted. Mr Bishop KC does not pull his punches. He does not argue that the husband should be “treated” as having $35 million (£27.4 million) which he has recklessly dissipated. While such a judicial add-back finding is not unknown, it is essentially fictive as it is not real money. Lady Justice King, when a puisne judge, once memorably referred to such money as “pixie money” – i.e. money that is at the bottom of the garden with the pixies.

Mr Bishop KC strenuously rejects any suggestion that the $35 million he says should be brought into account is pixie money. He asks the court to find that it definitely exists. Where it is held, and by whom, in what shape and in what currency, may be unknown, but, he says, it definitely exists.

If that be so, then the total assets would be £39 million and the award to the wife would leave her with £15.2 million or 39% of the total, which is fair enough, argues Mr Bishop KC.

There are no real issues of law in this case. The wife’s case stands and falls on the primary issue of fact, namely whether the husband has squirrelled away at least $35 million. If he has not, then the issue is simply what award should justly be made to the wife from the husband’s visible assets having regard to the terms of the separation agreement. That is a very straightforward exercise, and I did not hear much evidence or argument about it. The evidence and argument almost entirely revolved around the primary issue of fact. This judgment is dominated by my findings of fact on the primary issue.

The evidence supporting the wife’s case includes some contemporaneous documents, extracted compulsorily from third parties both here and in the USA, which are at variance with the husband’s case about what assets he held, and at what values, at various historical points in time. In addition, the wife can rely on the abysmal quality of the husband’s written and oral evidence which was a combination of bluster, avoidance and dishonesty. Further, she can rely on the failure by the husband to call a key witness, Mr Neal Rotenberg, who acted as the husband’s accountant for years. If there were skeletons buried, he would have known where they were.

As against that, the husband relies on the extensive, very carefully prepared, and highly credible sworn written and oral evidence of Mr Andrew Fink, which went to the very heart of the wife’s case of non-disclosure. Mr Fink is a qualified attorney but has worked for years as an investment financier. While I do not generally place much emphasis on the quality, in terms of demeanour, of oral evidence, Mr Fink’s testimony was not only forthright, but indignantly so. It was obvious that he has no allegiance to the husband. More importantly, Mr Fink, a qualified legal professional and practising financier, had absolutely no motive to lie and to expose himself to the consequences of perjury. His evidence is in a number of respects irreconcilable with some of the key contemporaneous documents, making the court’s task when determining the primary issue of fact less than straightforward.

In terms of demeanour the wife was by far the better witness. She answered questions directly and unemotionally. Her body language was not aggressive or avoidant. In contrast, the husband, in terms of demeanour, was an exceptionally poor witness. He was rude, argumentative, avoidant of direct questioning, truculent, and capped his testimony with a highly offensive and inflammatory remark.

In Cazalet v Abu-Zalaf [2022] EWFC 119 I stated:

What I was trying to say was that, in common with Lord Bingham (Footnote: ²) and Lord Leggatt (Footnote: ³), I consider demeanour to be a highly unreliable method of judging veracity. The court has to decide the case on the evidence, and the evidence comprises the documentary material and the spoken words of the witnesses. I cannot accept that, in any material way, the evidence includes the thespian performance with which witnesses speak the words of their oral testimony. Thus, in Cazalet v Abu-Zalaf, although that wife was by far the better witness in terms of demeanour, I found on the evidence of both parties that (a) the court had correctly found that the wife could not reasonably be expected to live with the husband and had therefore rightly pronounced decree nisi on her behaviour petition, and (b) the fact that over a year later they chose to resume their dismal, toxic, cohabitation did not undermine in the slightest the objective judgment enshrined in the decree that they could not reasonably be expected to live together.

There is another very important reason why a trial court must be on its guard against the influence of demeanour. If the court is not on its guard, the influence of demeanour may insinuate itself into a trial judge’s subconscious and contribute to the formation of an adverse perception of the witness as an unworthy person who does not deserve to succeed in the litigation. The formation of such a perception would be a form of bias. It is for this reason that I constantly remind myself when, in terms of demeanour, a witness is giving oral evidence very poorly, to put thoughts of annoyance and irritation out of my mind.

I shall approach the evidence in this case in the same way. I must examine the actual evidence and, in order to avoid the formation of bias, put my irritation, indeed affront, at the shocking, grossly offensive way in which the husband gave his evidence to one side.

The wife’s case is that the hidden money derives from one of two sources, which I shall call respectively Envigo and Lediba. Mr Bishop KC argues that the husband has hidden away somewhere at least $25 million deriving from Envigo, and at least $10 million deriving from Lediba.

In January 2002 the husband became Chairman and Chief Executive Officer of Life Science Research Inc (‘LSR’), a Nasdaq publicly-listed company. It is an agreed fact that in November 2009 the husband held 2,326,116 out of 14,862,935 issued shares in LSR which were at that time trading at $8.50 meaning that his shares were worth nearly $20 million.

On 23 November 2009 the company was returned to private ownership by means of a leveraged buy-out. The purchaser was a Delaware company formed for that purpose called LAB Holdings LLC. The price was $197 million of which $114 million was equity provided by LAB Holdings.

LAB Holdings was equally owned by Savanna Holdings LLC (a Delaware Company) and Jermyn Street Associates LLC (a Nevada Company) (“JSA”). The buy-out was an elaborate and protracted transaction requiring the expenditure of much time and expertise by Mr Fink and an associate called Mr Cragg.

Unsurprisingly, private equity was in on the act. P2 Capital Partners, a US-based strategic equity investor, participated in the buy-out. Savanna Holdings was an entity formed by P2 to enable their participation. There is no evidence to suggest that the husband had any interest in Savanna.

JSA was the entity formed by the husband, Mr Fink and Mr Cragg to enable their participation. Mr Fink and Mr Cragg did so through another company called Jermyn Street Capital (“JSC”).

The buy-out resulted in the issued shares being reduced in number to 14,505,768. Of these 6,628,808 shares were acquired by investors through JSA for $56.3 million at $8.50 per share. 5,882,353 shares were acquired by Savanna for $50 million. About 2.1 million shares were acquired by management or warrant holders. Other than 55,500 shares which were the subject of options in favour of the husband, it was not suggested that any of these latter shares were acquired by him.

The shares acquired by JSA of course included the 2,326,116 shares held by the husband. The balance, 4,302,692 shares, were acquired by a number of investors who duly executed subscription agreements, which were produced by Mr Fink. Mr Fink was asked a series of questions in writing to which he gave replies as follows:

Under cross-examination by Mr Bishop KC these answers were put to Mr Fink and this exchange ensued:

Mr Fink’s clear evidence was that on the same day as the buy-out the husband transferred 1,046,752 shares (45% of his shareholding) to JSC as a fee for the extensive advice and assistance given by Mr Fink and Mr Cragg in organising the whole transaction. The consequence of the transfer, according to Mr Fink, was that the husband’s shareholding reduced to 1,279,364 shares.

Mr Fink’s clear evidence was that on that same day, the husband also paid off a $5 million margin loan from Raymond James. In his affidavit Mr Fink stated:

In answer to a subpoena in New York Mr Fink on 18 May 2023 produced a document entitled “Project Lion Capitalization Tables: Members Schedule” (pages 973 and 977 of the bundle – they are identical – “the Fink version”) which appears to be contemporaneous. This shows the husband as having 689,823 shares, which does corroborate Mr Fink’s evidence that 589,541 shares were sold to pay off the Raymond James $5 million margin loan.

With his affidavit of 25 April 2023 Mr Fink produced the JSA subscription agreement. This had showed at Schedule 1 that the husband held 443,826 shares at 24 November 2009 (page 949). This was obviously incorrect as his shareholding did not fall to that level until 29 April 2014 (see below); the correct version showing the husband’s shareholding at 689,823 shares as at 24 November 2009 was not produced until 18 May 2023 (page 970). Under cross-examination it was put to Mr Fink that these documents could not be seen as contemporaneous but must have been retrospectively created. He replied:

In answer to further questions Mr Fink stated on 5 July 2023:

Under cross-examination Mr Fink gave this emphatic answer:

At $8.50 per share the husband’s shareholding was valued at $5.8 million at the end of 23 November 2009; a sizeable loss compared to its $20 million value a few hours earlier. However, the husband did receive on the buy-out $4 million in respect of his LTIP and as a severance payment. That payment is discussed under “Lediba” below. No doubt the husband was content to shoulder this loss, anticipating a substantial increase in the value of the shares (which duly happened – see para 45 below).

Mr Bishop KC is deeply sceptical about the authenticity of these transactions. Mr Fink had produced at least one contemporaneous document showing that the husband’s shareholding had shrunk to 689,823 shares (page 977; page 970 cannot be seen to be contemporaneous, for the reason I have given above). However, Mr Rotenberg’s file obtained in the USA under subpoena had a document in it which also had the hallmark of being contemporaneous (page 1047). It is also entitled Project Lion Capitalization Tables, Members Schedule and shows the husband having 1,279,364 shares (“the Rotenberg version”). As explained above in para 29, that is the exact number of shares that the husband had after he paid the “fee” to Mr Fink and Mr Cragg but before he paid off the loan from Mr James by selling 589,541 shares. The Rotenberg version also says that the total number of LSR shares held by JSA was 7,218,350, which is difficult to understand as the number was always 6,628,809.

The Rotenberg version showed that an entity called Duncanson BV (presumably a private limited company (besloten vennootschap) in the Netherlands Antilles) held 722,400 shares. Mr Bishop KC is highly suspicious of this entity as its name and its holding were highlighted in the document, presumably by Mr Rotenberg or someone in his office. He postulates that Duncanson BV held these 722,400 shares on behalf of the husband.

This holding by Duncanson BV would not have come as a surprise to the wife’s advisers as the Fink version itself refers to it.

Mr Fink was clear in his evidence that Duncanson BV was not a nominee for the husband, and he would have known because those shares were sold to Birch Grove Capital of which he was an owner.

Mr Fink had no explanation for the Rotenberg version in Mr Rotenberg’s files, either what it was doing there or what it meant. Mr Bojarski suggests that it must have been a draft or preparatory document. That may be true, but the highlighting by Mr Rotenberg of 722,400 shares held by Duncanson BV gives grounds for concern.

Mr Bojarski rightly submitted that there would be no point of nomineeship of these shares where the Rotenberg version proclaims direct ownership by the husband of 1,279,364 shares (and the Fink version of 689,823 shares). I agree, and I note that the Rotenberg version itself suggests otherwise (as does the Fink version). It shows that the remaining LSR shares acquired by JSA were paid for by investors in three family groups: the Stephens Group, the Knafel Group and the Kaufman Group. One of the investors within the Stephens Group was Andrew Stafford-Deitsch. Duncanson was listed under the heading “ASD Affiliates” along with a number of other investors. ASD is a cipher for Andrew Stafford-Deitsch. This does not suggest that Duncanson BV was a nominee for the husband. In his re-examination Mr Fink explained:

And he concluded his evidence with this exchange with me:

Another document in Mr Rotenberg’s files was an organogram of the Lediba Foundation structure, which I deal with below. That document showed that the Lediba Foundation held a BVI company called Pipadini Group Ltd which in turn held a USA company called Life Science Research Ltd. LSR’s name is Life Science Research Inc.

The husband’s evidence was that he knew nothing about Pipadini and had nothing to do with it. This is unlikely to be true. Much more relevantly, Mr Fink had never heard of Pipadini.

Mr Fink then went on to explain that on 22 December 2010 the husband sold 195,122 LSR shares held for him by JSA for $3.3m to put towards a sale-and-leaseback transaction between LSR and an entity formed by the husband called Science Park Development. Accordingly, the number of shares in LSR held by JSA for the husband fell to 494,701. This is 3.4% of LSR. At that time, shares were trading at $17 so his holding would have then been worth $8.4 million.

According to Mr Fink the husband’s 3.4% shareholding in LSR held for him by JSA had not altered by February 2014.

One of the documents obtained from Mr Rotenberg’s file was an application by the husband dated 26 February 2014 to Coutts to obtain further borrowing on his home in Somerset. In its attendance note, Coutts record that the husband stated he owned 20% of LSR and that his net wealth was £55 million. The application was later supported by an email from Mr Rotenberg dated 11 March 2014 which stated that the husband owned a 9.9% interest in LSR. Mr Rotenberg repeated this identically on 19 March 2014 to the Bank of Montreal, another possible lender.

These figures of 20% and 9.9% are perplexing, because none of the husband’s shareholdings, which I have described above, correspond to either percentage ever having been held by him. The percentages held by him in LSR have been as follows:

Not one of the transactions described by Mr Fink has ever left the husband with 20% or 9.9% of the shares in LSR. In February 2014, 20% would have amounted to 2,972,587 shares; 9.9% would have amounted to 1,471,431. As he had at that time 494,701 visible shares he would have to have hidden somewhere 976,730 (at 9.9%) or 2,477,886 (at 20%) shares. Where? In my judgment it is inconceivable that if there were some kind of nominee arrangement involving that many shares, Mr Fink would not have known about it. And I believe Mr Fink when he says he did not know of any such arrangement.

Accompanying Mr Rotenberg’s email of 11 March 2014 was a schedule which put the value of the husband’s shares in LSR at $70 million. At that time the share price was $20.50, so this amounted to a representation that the husband had about 3.4 million shares, which again is baffling, as he had never held that many.

In his skeleton Mr Bishop KC says:

On 29 April 2014, according to Mr Fink, LSR purchased Harlan Laboratories from Genstar Capital. The transaction was funded with $40m of equity ($20m from Savanna and $20m from Harlan). For this purpose the husband sold 50,875 shares for $1,042,946 at $20.50 per share. In consequence his shareholding of LSR shares reduced to 443,826, or to 6.7% of the LSR shares held by JSA. Mr Fink has produced the members’ schedule at page 975 of the bundle which shows the husband holding 443,826 shares. The documents provided by Mr Fink back up his account of the progressive reduction of the size of the husband’s shareholding.

On 25 June 2015 LSR was rebranded as Envigo.

As mentioned above, on 5 November 2015 the parties executed a separation agreement. Appended to the agreement as Exhibit A is the husband’s schedule of disclosure. Mr Bishop KC is withering in his description of this document. He says:

One would think that the very precise figure for the husband’s percentage ownership of JSA, given to four decimal places, of 17.5997% on 5 November 2015 is unlikely to be a mistake. But following the transactions detailed above his percentage ownership of the LSR shares in his name held within JSA (stated by me to four decimal places) was as follows:

The file contains a yet further email again to Mike Wilson dated 25 April 2016 which states:

I did not hear oral evidence or submissions about these latter two emails so I merely observe that at no point did the husband own 9.4249% of the LSR shares held in JSA; that the number of LSR shares held by JSA was 6,628,808 not 6,970,272; and that the name of the company was Life Science Research Inc not Lion Holdings Inc.

I would however further observe that the email of 25 April 2016 is (mirabile dictu) correct when it says that the husband held 6.7% of the LSR shares held by JSA – see para 52 above. It would seem that for all his pretence of numeric precision, Mr Rotenberg’s accuracy is most charitably described as sporadic.

On 3 June 2019, according to Mr Fink, Envigo sold its services business to Labcorp and acquired Labcorp’s products business. The total consideration was $595 million from which was deducted $514m of debt, expenses, working capital adjustments and escrow payments resulting in $24m of proceeds going to shareholders. According to Mr Fink, the husband received $534,735 for his share of the cash proceeds. By this stage his percentage shareholding of the issued Envigo shares was 2.32%. Mr Bishop KC did not dispute that if the husband had only 443,826 Envigo shares then $534,735 is an approximately correct figure for his share of the proceeds (2.32% of $24 million is $557,778).

In June and July 2019 the husband sought further borrowing from Coutts in relation to his Somerset and London properties. In their “Credit Fact Find Internal” documents Coutts record that the husband stated that he held “10% of Envigo Inc (previously Life Science Research)”. An email from Mr Rotenberg had been provided in May 2019 but unlike his previous letter this one (perhaps wisely) did not vouchsafe a percentage figure for the husband’s shareholding in Envigo.

The representation by the husband that he owned 10% of Envigo is completely at variance with his visible share of Envigo which at that time was 2.32% (see above). If true, he must have secreted 7.68%. At that time Envigo had 19,096,891 issued shares and so he must have hidden somewhere 1,466,641 shares. Again, where? It is again inconceivable that if this is true Mr Fink would not have known about it.

In his skeleton Mr Bishop KC states:

On 5 November 2021, according to Mr Fink’s careful evidence, Envigo was sold to Inotiv (NOTV) for $485m consisting of $210m of cash and $275m of NOTV equity (i.e. Envigo shares converted to NOTV shares). $112m cash was made available to shareholders after payment of debt, expenses and escrow. The husband received $2,296,164 in cash and 177,695 NOTV shares in place of his 443,826 Envigo shares (40.037% being the Envigo to NOTV share exchange ratio). Mr Bishop KC does not challenge the mathematics, and the figures are all a matter of public record.

If the husband held 9.9% or 10% of Envigo when it was purchased by Inotiv then he would have been obliged to have made a 13D declaration to the SEC to that effect, on pain of dire penalties in the event of breach. He made no such declaration.

The NOTV share price at closing on that day was $54.72 per share. The husband’s 177,695 NOTV shares were therefore worth just under $10 million. Unfortunately since then the share price has collapsed – they are trading today at $4.92, making the husband’s 177,695 shares worth a little under $680,000.

I agree with Mr Bishop KC that the husband’s evidence was appalling. He submitted:

It is clear to me that the husband’s personality is a toxic mixture of arrogance and dishonesty. He is an inveterate liar. He lied to the wife in the negotiations for the separation agreement. I find that he has lied to Coutts for the purposes of obtaining credit. He has lied systematically to this court during these proceedings. His initial disclosure was an absolute disgrace. As Mr Bishop KC says, he seems to regard these proceedings as an impertinence and a joke.

I make allowance for the fact that his mental difficulties so eloquently explained in Dr Rogers’s reports on his capacity, have probably aggravated these traits.

The law is not so mono-dimensional as to conclude automatically that if a party has lied to the court, then the fact in issue about which the lie was told must be decided adversely to that party. Mr Bojarski rightly stated:

In that case I stated:

The wife’s case as presented by Mr Bishop KC is that the husband somehow held 9.9% of LSR as stated by Mr Rotenberg in his emails respectively to Coutts on 11 March 2014, and to BMO on 19 March 2014. Mr Bishop KC stated in his closing submissions:

Mr Bishop KC tabulated his case as follows:

The key documents in support of this case have been set out by me above and are summarised in Mr Bishop KC’s submissions which I have quoted at para 71 above. Items (a), (e) and (f) are representations made by the husband to his bankers for the purposes of gaining credit. In my opinion, given that he is an inveterate liar, very little, if any, weight should be attributed to such representations. The court sometimes has to find in relation to evidence from a dishonest witness, that nothing will be accepted from that witness unless it is corroborated by other evidence. That is the case here and I would extend that caution to anything that the husband has said about his means to anybody unless it is absolutely clear that he would have no motive to lie whatsoever. I placed no weight at all on his supposed admission to Mr Bishop KC that his representation to Coutts of owning 9.9% of Invigo was correct. This was a classic “if you say so” answer given by a witness who had no interest in speaking the truth about anything. It was meaningless.

Obviously, when it comes to seeking to obtain the financial advantage of credit from moneylenders, a dishonest person has every motive to remain true to form.

It is my finding that the evidence does not come close to establishing that the husband has used either Duncanson BV or Pipadini Group Ltd as repositories for secret holdings of LSR shares.

In his closing submissions Mr Bishop KC referred to some oral evidence given by the husband as follows:

Therefore, the critical material on which I am invited to find that the husband has secreted $25 million boils down to two emails in March 2014 from Mr Rotenberg (items (b), (c) and (d) in Mr Bishop KC’s submissions quoted by me at para 71 above).

The problem with Mr Bishop KC’s case is that it requires me not only to give decisive weight to those two emails but further to disbelieve the evidence of Mr Fink. Mr Bishop KC n'a pas hésité à appeler un chat un chat. He stated that if I had any lingering suspicion that Mr Fink might be telling the truth then that would be done away with by the contents of Mr Rotenberg’s file extracted under subpoena. Without mincing words, to agree with Mr Bishop KC would require me to find Mr Fink guilty of perjury.

I do not agree with Mr Bishop KC. In my judgment Mr Fink’s evidence was exhaustive, careful and obviously truthful. In contrast, for the reasons set out above, Mr Rotenberg is to be regarded as highly unreliable.

Further, if Mr Bishop KC were right and the husband had at that time tens of millions of pounds stashed away he would not have been needing to have gone to Coutts or to other moneylenders for credit.

It has been said that Roger Casement was hanged on a comma (Footnote: ⁵), and it is my opinion that if I were to accede to Mr Bishop KC’s submissions this would be the matrimonial finance equivalent.

I have no idea why Mr Rotenberg, a qualified accountant subject to professional standards, allowed himself to be drawn into the husband’s lies to Coutts and other moneylenders to obtain credit. I also have no idea why Mr Rotenberg on behalf of the husband gave such a strangely precise figure of a 17.5997% holding of the LSR shares held by JSA, although my initial concern as regards its ostensible precision has faded with my growing realisation of just how unreliable Mr Rotenberg is.

It is not disputed that at the beginning of the story the husband’s interest in LSR comprised 2,326,116 quoted shares. In my judgment Mr Fink has in his extensive written and oral evidence comprehensively demonstrated what happened to those shares. I am completely satisfied that at no point did the husband ever have any more shares in LSR or Envigo than those recorded by Mr Fink and summarised by me in this judgment. I therefore do not find proved on the balance of probability that the husband has secreted somewhere, whether in Duncanson BV, Pipadini Group Ltd, or elsewhere cash or other assets referable to the sale of LSR/Envigo in the sum of $25 million or any other sum.

In this case principle No. (ii) in NG v SG is to the fore. As to the wife’s case on the husband’s LSR/Envigo shares I am not satisfied, on an assessment of the evidence, that the husband has got hidden funds. It would therefore be wrong to draw inferences that he has any such funds based simply on his dishonesty. Further, for the avoidance of doubt, I do not attribute in this regard pixie money to the husband in the sum of $25 million, or any other sum.

In 2005 the husband set up a Liechtenstein foundation called Lediba. One of the documents extracted from Mr Rotenberg was an organogram which showed that Lediba as parent or grandparent owned 23 offshore companies and other entities in all the usual places: BVI, Gibraltar, Guernsey, Bahamas, Panama and the USA. Obviously, you would not go to the trouble of setting up such an elaborate structure for it to hold a paltry sum.

In his cross-examination the husband stated:

Mr Bishop KC has tabulated this limb of the wife’s claim thus:

It can be seen that the biggest element in the calculation is the estimate of the cost to the husband of running his life over these 14 years. An annual figure of $1 million has been taken as an estimate. It can further be seen that the figure of $12,527,000 has been “rounded down” by 20.2% to give the figure of $10 million which Mr Bishop KC seeks me to find, on the balance of probability, the husband has secreted somewhere.

Mr Bishop KC argues this limb of the wife’s case thus:

Mr Bojarski submits that a number of these figures are either too old or are obviously mere balance sheet numbers without any objective existence. His response to Mr Bishop KC’s case can be expressed thus:

Mr Bojarski plausibly demonstrates that it may well be the case that there is in fact no surplus. For the purposes of my decision I do not need to make specific findings about the rival contentions, as I am satisfied by reference to other evidence that there is no surplus money secreted in Lediba. I am also not satisfied that this crude metric is a sufficiently sound evidential basis for me to conclude that this vast sum of $10 million surplus actually exists.

The husband’s litigation friend has introduced correspondence with Mr Nesensohn. It was not explained to me why he was not produced to give oral evidence even by video. However, the evidence is plainly admissible. Mr Nesensohn explained that Lediba had been wound up in 2018 and the funds distributed to the husband. He wrote on 13 July 2023:

And on 15 July 2023:

Mr Bishop KC is asking me to find the husband guilty of fraud based on his audit of receipts and expenses over a 14 year period from 2009 to date. I have to say that even when applying the lower civil standard of proof than that applicable in the criminal courts, a far more rigorous and exacting forensic exercise is surely going to be needed before the court could say that it is more likely than not that the husband has squirrelled away $10 million in cash or assets. I cannot say that I am satisfied on the balance of probability that this allegation has been proved.

I therefore find the net assets to be as follows:

It is sobering to note that if the parties had not litigated and spent £1.8 million in costs they would have respectively £6 million (husband) and £7.2 million (wife).

In Radmacher v Granatino [2011] 1 AC 534, Lord Phillips for the majority stated at [64] – [65]:

Where a party makes a financial remedy application the object of which is to enforce a separation agreement which contains income terms as well as capital terms the approach of the court when weighing that agreement in the discretionary exercise should be, in my judgment, to treat it in much the same way as an application to vary a consent order. It would be odd if there were a markedly different approach to the treatment of an agreement incorporated in a consent order and to an agreement incorporated in a separation deed.

The capital terms of a consent order would not be variable unless they amounted to a lump sum payable by instalments, and even then they would only be variable as to quantum if the Barder standard was met (see BT v CU [2021] EWFC 87 at [97]). By contrast, the income terms of a consent order would be readily variable. Some of the authorities even suggest that on a variation application the court should reassess the income terms de novo, but the better view is that the court looks for a change of circumstances.

Although this agreement was made in New York the wife must be taken to have embraced the English approach to variation of maintenance obligations when she decided to litigate here for financial relief against the husband.

Her objective has always been to implement the agreement. In his skeleton argument Mr Bishop KC stated:

The agreement provides for the following capital payments:

As for income the agreement provided:

Other terms included:

The wife calculates the value of her claims under the agreement as follows:

it includes a figure of $905,000 for the loss that the wife suffered on the sale of the property in California, notwithstanding that the agreement contains no such provision to this effect;

it includes every last penny of arrears both of maintenance and the Schedule A payments. It does not even confine the arrears to the 12 months preceding the date of the application in line with s.32 Matrimonial Causes Act 1973;

it includes the bringing forward and capitalising of all maintenance payments due after the husband’s death and payable by his estate but only if the wife was alive at that point;

it includes the bringing forward of the capital payments payable in the future after the husband’s death by his estate but only if the wife is alive at that point; and

it includes the husband paying all of the wife’s costs, notwithstanding that she has not complied with the agreement which required her to institute any proceedings for enforcement in New York.

In my judgment, all the arrears of maintenance which have arisen under Article IV of the agreement should be remitted. Section 32 provides a powerful steer for confining the enforcement of arrears of maintenance only to those sums which are close in time to the proceedings for enforcement. The idea is that maintenance should be used for immediate expenditure and if it is not paid, and if the default is not enforced promptly, then the entitlement lapses, as the accumulation of arrears is not to be seen as a type of savings plan.

On 4 February 2022 I ordered the husband to pay the wife maintenance pending suit of $6,500 a month. That has been paid. That regime should be seen as having superseded the maintenance regime in the agreement. Given the respective financial positions of the parties I am not satisfied that it would be just for any of the arrears of maintenance under the agreement to be enforced. However, any arrears arising under my maintenance pending suit order shall certainly be enforced.

Even though the wife is better off than the husband, it would in my judgment be fair and just to require him to discharge the capital payments which he promised in the agreement would be made by him or by his estate. I can discern no change in the circumstances in the light of which the capital terms were made, which would make those terms manifestly unjust. On the contrary, it is my clear finding that it would be manifestly just for those capital terms to be enforced now, including those terms which provide for capital to be paid by the husband’s estate upon him predeceasing the wife. This is because I have no confidence that the husband will make arrangements for his estate to discharge those obligations or that, in that event, the wife would find it easy to enforce them.

A discounting factor needs to be calculated by me to reflect two elements: (a) the likelihood of the wife predeceasing the husband (in which event those capital payments would lapse) and (b) that the payments will be made earlier than the agreement provided.

The Life Tables in At a Glance Cloud state that the husband’s life expectancy is 12 years and 3 months, while the wife’s life expectancy is 12 years and 11 months. I can therefore calculate that the probability or likelihood that the wife will outlive the husband is 51.3% (Footnote: ⁶). That is the first element of the discount. The second element is the factor referable to early payment. The Duxbury real rate of return is 3.75%. Using that as the discounting factor over 12 years and 3 months means that any sum payable in the future has to be reduced to 63.7% of its nominal value to reflect early payment (Footnote: ⁷). The combination of the two factors means that sums that the husband is obliged to pay in the future should be reduced to 32.7% (Footnote: ⁸) of their nominal value.

This leads to a calculation of the capital sum due as follows:

The term requiring the husband to pay all of the wife’s reasonable costs, irrespective of the merits, is in my judgment contrary to public policy in this jurisdiction and should not be implemented. Costs should be dealt with in accordance with our own lights. Although the wife has not succeeded in her claim for £9.4 million, or even come close to it, it would not be just having regard to the husband’s conduct for her to have to bear any of his costs. On the contrary, the terms of FPR 28.3(6) require me specifically to consider the conduct of the parties. I cannot say that the wife’s litigation conduct was unreasonable. In my opinion, even when she had received Mr Fink’s affidavit it was not unreasonable in the light of the husband’s persistent delinquency for her to carry on making further forensic investigation. I am of the clear view that the point at which the landscape became sufficiently clear for her to have to realise that her forensic investigation was running up a cul-de-sac, was when Mr Fink gave his extremely impressive evidence. By then, of course, all the costs had been incurred.

The husband’s litigation conduct was abysmal. As I have said, he treated the entire litigation as if it was an impertinence and a joke. His initial disclosure was deliberately false, and he persisted in misrepresentation and lies up to the very end, as I have set out in detail above. It would be a travesty of justice if he were not required to pay a substantial sum as a penalty for his delinquent behaviour, notwithstanding that I have approached this case on a net-of-costs basis.

In my judgment the husband should pay £200,000 towards the wife’s costs to reflect both his estimated liability under a clutch of interlocutory orders and the court’s very strong condemnation of his delinquency. Thus, the lump sum that the husband will pay to the wife is £1,614,000. The effect of that payment will be that the husband’s deemed net worth reduces to £3,941,565 (or 35%) while the wife’s increases to £7,458,895 (65%). The result of this titanic litigation has been to decrease the husband’s net worth by £2,040,458. Of this, £1,804,285 has gone, or will go, to the lawyers and £236,173 will go to the wife.

Given the respective financial positions of the parties, as set out above, it would not be fair or just, in my judgment, to require the husband to make any further payments of maintenance in the future either by him while alive or by his estate once he is dead. There will be no further adjustment referable to these terms. The husband will resume receipt of his US state pension payments once the lump sum has been paid in full.

I stand back and have in mind all the relevant factors mentioned in s. 25 Matrimonial Causes Act 1973 and assess this to be a perfectly fair, just and reasonable result.

There will have to be a process of liquidation of assets by the husband in order to pay this sum and so I give him four months in which to pay it. The maintenance pending suit order will continue until the sum is paid in full. The freezing order will continue in force until the sum is paid in full but will be varied to allow the husband to liquidate assets in order to pay the sum due.

Once the sum has been paid in full there will be a clean break.

The wife’s case was always going to stand or fall with the decision on the Envigo issue. The Lediba theory was always very unlikely to work. The preparation by an auditor of an accurate cash-flow statement for a business over an accounting year is hard enough, but at least that exercise is done with the benefit of comprehensive documentation, leaving nothing to subjective guesswork. In contrast, the Lediba theory uses an audit period of 14 years (although many items of data do not cover that exact term); there are for many data items an absence of any documentation; and for the larger items the figures advanced are pure subjective guesswork. The technique, the data and the process of proof are all so crude and arbitrary that I was never going to conclude, on the balance of probability, the husband had $10 million squirrelled away which derived from the activities of Lediba.

The wife appeared to have a good arguable case on Envigo until Mr Fink swore his affidavit with its timeline. Unfortunately for her, it became completely untenable when Mr Fink gave his evidence. In judging that evidence to be compellingly and decisively truthful I am not, of course, placing any material weight on the way he gave his evidence. His indignation at the suggestion that he was not merely wrong, but was deliberately and knowingly purveying false evidence, had all the hallmarks of being authentic and honest; but, for all I know, Mr Fink may be a very good actor. What I am placing decisive weight on, is the clarity of his account, its internal consistency, and the absence of any motive by Mr Fink to tell lies on oath. The quality of that evidence, in that sense, was very powerful, and as it progressed I could see the wife’s case dissolving before my very eyes.

Both limbs of the non-disclosure case having failed, I am left with only limited assets to allocate between the parties. In my judgment it is not manifestly unjust to uphold and implement the capital terms of the separation agreement. But beyond that I will not go.

Following the distribution of this judgment in draft both Mr Bishop KC and Mr Bojarski have requested clarification of, and permission to appeal, a number of issues.

My rulings on Mr Bishop’s issues must be seen in the context of the outcome set out at para 114 above. The effect of my disposition is that the husband’s assets (including the proprietary interests held by his partner in the two properties) will fall to £3,941,565 (or 35%) while the wife’s will become £7,458,895 (65%). The result of the case is broadly that the wife ends up with twice the net worth of the husband. Unless the court is to adopt a modern matrimonial finance equivalent of Albion’s Fatal Tree (Footnote: ⁹) there is very little, if any, scope for further adjustment in favour of the wife.

Mr Bishop KC refers to the fact that in the draft judgment at para 103(iii) I omitted to refer to the mortgage repayments on CPW as an income obligation. He argues that my omission was entirely correct as the obligation is properly to be treated as being of a capital nature entitling the wife to an additional $1.6 million. It was for this reason that, in the table at para 105 above (which sets out the wife’s calculation of what she says is due to her under the separation agreement) she includes in the Duxbury capitalisation the sums payable under Schedule A, which in turn includes the CPW mortgage payments. Accordingly, Mr Bishop KC seeks that I “clarify” my draft judgment to include an augmentation to the lump sum of $1.6 million, and should I refuse to do so, to grant the wife permission to appeal that decision.

I firmly reject this submission. The omission in para 103(iii) of an explicit reference to the CPW mortgage payments in Schedule A was an oversight by me. Those mortgage payments are spelled out as an obligation in Schedule A, and the husband’s obligation to make the Schedule A payments is found in Article IV which is headed “Maintenance”. This obligation was therefore plainly agreed between the parties to be a constituent of the wife’s maintenance. Further, the agreement stated that if the wife should sell CPW, and buy another property as her primary residence, the husband would make the payments on a new mortgage up to $2.3 million (which he would guarantee, if that were required) as well as meeting the outgoings on the new property. The agreement did not require him at any point during his lifetime to pay off the CPW mortgage. In contrast, the agreement stated that if the Carmel property were sold while the husband was still living he “shall satisfy 100% of the remaining Carmel Mortgage, not to exceed $550,000.00, upon the sale of the Carmel Property.”

Accordingly, I reject Mr Bishop KC’s argument that the husband’s inter vivos obligations in respect of the CPW mortgage are to be seen as of a capital nature. If that were so, the parties would not have included the obligation as a maintenance obligation under Article IV of, and Schedule A to, the agreement, but would presumably have included it under Article III: Division of Property and Equitable Distribution.

Mr Bishop KC seeks a back-dated adjustment to the maintenance pending suit award of an additional $6,423 per month for the five months April – August 2023 inclusive and a future equivalent adjustment for the four months I have given the husband to pay the lump sum. Under this head he seeks an augmentation to the lump sum of $57,827.

Mr Bishop KC relies on the terms of my judgment when refusing a variation to the maintenance pending suit award on 27 February 2023. That judgment was, by its nature, founded on a provisional assessment of likely assets, liabilities and outcome. At that point I perceived the wife as having a good arguable case that the husband had a large sum of undisclosed assets, and that therefore the husband would struggle to resist the variation at trial. In the event, my findings are far more conservative than I anticipated then. In such circumstances I decline to award any variation of the maintenance pending suit award. I note that at trial I received no argument or oral evidence about this issue and that the sum of $57,827 is not included as a constituent of the lump sum claimed by the wife in her table which I have reproduced at para 105 above.

Mr Bishop KC implicitly seeks clarification as to whether my draft judgment is to be taken to remit arrears under the maintenance pending suit award for June – August 2023 inclusive amounting to $19,500 or £15,333. I confirm that those arrears are not remitted. That figure of £15,333 will be added to the lump sum.

Mr Bishop KC seeks permission to appeal my decision not to enforce all other arrears arising under the separation agreement. He argues:

I affirm my decision not to enforce the arrears of maintenance which have arisen under the separation agreement for the reasons given at paras 106 and 107 above. I refuse permission to appeal this decision as I do not consider that there is a real prospect of the wife successfully appealing it.

As to costs, I agree that the husband must be responsible for 50% of Dr Rogers’s fees, in the sum of £4,462 and the lump sum will be further augmented by that amount. The total lump sum is therefore £1,614,000 + £15,333 + £4,462 = £1,633,795.

Otherwise I affirm my award of costs which is intended to cover all actual and potential liabilities, including any costs reserved. Specifically the award covers the following costs orders already made against the husband:

Mr Bishop KC argues:

My approach to the costs not covered by the orders set out above (including the costs of the freezing order application before Francis J on 2 November 2021), is to take the no-order starting point in FPR 28.3(5) and to ask whether any adjustment should be made either way. The husband plainly can argue (at any rate theoretically) that he should receive some costs, as the wife essentially lost the main non-disclosure issue. But, against that, is to be set the husband’s disgraceful litigation misconduct which I have outlined. An order of £150,000 to reflect such misconduct represents a significant sanction.

The fact that the wife incurred such huge costs of £1.4 million getting to the bottom of the story does not mean that she is entitled to have all, or even a large part, of those costs reimbursed. On the contrary, the main message of FPR 28.3(5) is that parties will not get their costs reimbursed, even if they are very high and are reasonably incurred.

Where the Court imposes a sanction to reflect misconduct by a party under FPR 28.3(6) and (7) the court will naturally have in mind the costs incurred by the other party in dealing with that misconduct. But the sanction must nonetheless be objectively reasonable, and while it may be severe in order to reflect the scale of the delinquency, it must not be unduly severe.

I am required by FPR 28.3(7)(f) to consider the financial effect on the parties of a costs order. I am quite sure that the figure I have alighted on is very fair to the wife, and is at the top level of severity, but I am equally sure that any further award would be unduly severe, having regard to the parties’ respective outcomes as set out at para 123 above.

I therefore refuse the wife permission to appeal my costs decision as I do not consider that there is a real prospect of her successfully appealing it.

Mr Bojarski seeks permission to appeal on three grounds. First he says that it was wrong for me to treat the husband’s partner’s interests in Keepier Wharf and Parish’s House as part of his resources when the wife had not sought to allege that the husband was the full beneficial owner and where the partner had not been given notice that the court would ignore her beneficial interests in the two properties.

It is surely clear that in para 95 above I was not making a Tebbutt v Haynes [1981] 2 All ER 238 binding formal declaration as between the husband and his partner that he has formal beneficial ownership of both properties under resulting trusts. I was merely deploying the familiar technique of looking at the scope of the husband’s true resources in order to appraise the impact of the lump sum award on him. The use of that technique did not require any notice to be given to the partner, as my findings are not binding on her.

Second, Mr Bojarski says that I was wrong to treat the New York agreement as if it were an order to which the variation powers pursuant to s.31 of the Matrimonial Causes Act 1973 applied, rather than treating it as a factor within the s.25 exercise of discretion. He says the agreement was a factor to be weighed among all the other s.25 factors, and a factor which ought to have been given limited weight in view of the deterioration in the husband’s financial position since the agreement had been entered into.

I agree that formally the agreement falls to be weighed as one of the circumstances of the case under s25(1) of the Matrimonial Causes Act 1973. However, having regard to the test for weighing separation agreements approved by the Supreme Court in Radmacher v Granatino at [64] – [65], which I have set out above, an obvious comparison, in my judgment, is an application to vary an order under s. 31. Obviously, s. 31 does not apply literally, but the way the court would approach an agreement incorporated in a consent order is, in seems to me, an obvious analogue for an agreement incorporated in a separation deed.

Third, Mr Bojarski says that the court failed to carry out an assessment of the respective needs and financial responsibilities of the husband and the wife, and in particular to take into account the husband’s responsibilities to his two dependent sons, resulting in a division of the assets which provided an unfairly large share of the assets to the wife and an unfairly small one to the husband.

Although Mr Bojarski touched on the husband’s needs in his opening skeleton I heard no oral evidence or argument about them. It was obvious to me that with resources of a little under £4 million the husband and his partner would not suffer undue hardship, and it would therefore not be manifestly unjust, were the capital terms of the solemnly made agreement to be enforced.

I therefore refuse the husband permission to appeal on each of these three grounds as I do not consider that there is a real prospect of him successfully appealing them.

I will extend both parties’ time to file an appeal notice until 16:00 on 15 September 2023.

I end by applauding the skill, assiduity, and diligence of all the lawyers involved in this complex case. The written and oral work from the Bar has been of the highest quality. The attention to detail from counsel has been outstanding. Mr and Mrs Baker should understand that their interests were represented fearlessly by counsel and that no stone was left unturned in their representation. It was a pleasure to conclude my judicial career with the receipt of such skilful advocacy.