SP v AL

Mr James Finch (Counsel instructed on a Direct Access basis) appeared on behalf of the wife.

Ms Laura Moys (Counsel instructed by Jones Nickolds, Solicitors) appeared on behalf of the husband.

Ms Victoria Francis (Counsel instructed by Keystone Law, Solicitors) appeared on behalf of the intervenors.

A collection of applications and court orders.

Material from the wife including her Form E dated 9^th November 2022, her answers to questionnaire dated February 2023, her pleadings dated 13^th December 2023 and 5^th February 2024 and her statements dated 17^th March 2023, 24^th January 2024 and 21^st February 2024.

Material from the husband including his Form E dated 15^th November 2022, his answers to questionnaire dated 5^th March 2023, his replies to a schedule of deficiencies dated 30^th October 2023, his pleadings dated 4^th December 2023 and his statements dated 21^st April 2023, 21^st January 2024 and 22^nd February 2024.

Material filed on behalf of the intervenors including FL’s statements dated 23^rd January 2024 and 23^rd February 2024 and her pleadings dated 21^st November 2023.

Material from various SJEs on valuation and pension issues.

Properly completed ES1 and ES2 documents.

Selected correspondence and disclosure material.

The husband is aged 57 (d.o.b. 3^rd March 1967). He is a Consultant Doctor, currently working in a Hospital in London. He was previously married to FL in 2003, but separated from her in 2012 and was formally divorced from her in 2014. The intervenors are children of that marriage. He is currently living in rented accommodation in South West London, where he has been since Summer 2023.

The wife is aged 50 (d.o.b. 1^st July 1973). She is a Consultant Clinical Psychologist, currently working for an NHS Trust. She has a now adult child from an earlier relationship, namely WP (now in her mid-twenties). She is currently occupying the family home in London W4, but will need to move somewhere else when its proposed sale completes, probably in late April 2024.

The husband and wife met via an online dating website in February 2013. At this time the wife was living in rented accommodation (although she owned and rented out a flat in London) and WP (then aged in her early teens) was at school in Buckinghamshire; whilst the husband was living and working in London and PL and CL (then aged 6 and 4 respectively) were at a private school in London.

The parties have different perceptions of what happened between 2013 and 2019. The wife says that the relationship quickly (by April 2013) developed into a settled and committed relationship of quasi-marriage, albeit that for quite a while they had to juggle their lives between London and Buckinghamshire to ensure their respective children’s schooling was not interrupted and albeit that the relationship was volatile and involved occasional short periods of breakdown followed by reconciliation. The husband says that, whilst there was a relationship for most of this time, they deliberately kept independent lives and the relationship did not become one of quasi-marriage until much later, possibly not even until 2019. I will need to resolve this issue, which I shall do below.

In any event they became engaged in July 2018 and they married on 31^st May 2019.

In the course of the period between 2013 and 2019 there were a number of real property transactions:-

The relationship between the wife and the husband did not produce any children. This is a source of unhappiness for the wife, who had miscarriages in 2014 and 2015 in what she says were intended and wished for pregnancies. The husband says that he never wanted more children and that the wife told him she was taking the contraceptive pill and that the pregnancies caused great tension in the relationship because he thought she had lied to him. It is common ground, however, that the husband’s two children (the intervenors) fall into the category of ‘children of the family’ within the meaning of Matrimonial Causes Act 1973.

Unfortunately, just as the pre-marital relationship had proved volatile, so did the marriage, and in 2022 (February according to the husband or June according to the wife) the marriage broke down. For a time the husband lived in the outbuilding on the premises at Property Two; but eventually this arrangement became too tense and he rented alternative accommodation elsewhere from Summer 2023. Sadly, these events have caused a rift between the two sides of the family and the previously good relations between the three children and between the wife and the husband’s two children have fractured, possibly irrecoverably (though the wife would wish otherwise).

Divorce proceedings were commenced on 15^th July 2022. Decree Nisi was ordered on 24^th January 2023. Decree Absolute awaits the outcome of the financial order proceedings and is not, in itself, controversial.

The wife issued Form A on 5^th September 2022.

Forms E were exchanged in November 2022.

A First Appointment was heard by Recorder Castle on 15^th December 2022.

Questionnaires were answered in February and March 2023.

A private FDR hearing took place on 25^th May 2023 before Mr Geoffrey Kingscote KC; but sadly no settlement was reached.

A post-pFDR directions hearing took place before HHJ Lewis on 11^th September 2023. On this occasion the intervenors were joined as parties.

I made a ‘paper’ directions order on 27^th October 2023 and held a Pre-Trial Review on 8^th February 2024.

Narrative section 25 statements were exchanged in February 2024.

A final hearing has taken place before me on 6^th, 7^th and 8^th March 2024.

It shall be the duty of the court in deciding whether to exercise its powers under section 23, 24, 24A or 24B above and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen.

As regards the exercise of the powers of the court under section 23(1)(a), (b) or (c), 24, 24A or 24B above in relation to a party to the marriage, the court shall in particular have regard to the following matters:-

The relevant law on this subject is (in characteristically clear and pithy terms) captured in the judgment of Peel J in VV v VV [EWFC] 41 when he said:-

I have read the parties’ respective statements and heard their oral evidence on this subject. As is sometimes the case with these arguments, there are pointers in each direction; but on balance overall I prefer the evidence of the wife on this subject and have reached the conclusion that (in the context of calculating the duration of the marriage, including the pre-marital relationship akin to marriage, against the legal tests referred to above) I should regard the period between April 2013 and the first half of 2022 as the relevant period – that is to say that the duration of the marriage is approximately nine years.

I have reached this conclusion by assessing all the factual matters put before me, but amongst the factors I found most persuasive were the following:-

I accept the wife’s evidence that the husband never showed her a copy of the Property One Trust document until it was disclosed in these financial remedies proceedings. Further, I accept her evidence that he did not tell her about it from 2013 to 2019 and the first time she was aware of its existence was in the context of the December 2019 conveyancing process for the purchase of Property Two. Further, I accept her evidence that she was unaware of the size of the interest (36%) until it had to be disclosed within these proceedings (although the October 2020 document ‘my property interests for your lawyers’, apparently produced in anger after a marital row, hints at a bigger size, it is vague and unclear and was not followed with any detailed explanation). Further, the evidence suggests that the husband deliberately misled both FL and the conveyancing solicitor about the size of the intervenors’ potential share, expressly saying to both of them that their interest was 10% (rather than 36%). I reject as a lie the husband’s explanation that when he sent an email to the conveyancing solicitor on 31^st October 2019 to the effect that “I transferred 10% of Property One into trust for PL and CL” this was the result of a typo and that it was meant to read “I transferred 18% of Property One into trust for PL and another 18% for CL”. I accept the wife’s evidence that when she raised the issue with the husband in the context of the 2019 conveyancing process he told her it was nothing to worry about. I accept her evidence that she took this to mean, and reasonably took it to mean, that any such obligation was modest and would be met from his share, and would not affect her half share (which she would be free to leave to her daughter in the event that she died).

These findings are bolstered by the contemporaneous correspondence between the conveyancing solicitors and the wife and the husband. The conveyancing solicitor’s attendance note dated 26^th November 2019 and his letters dated 26^th November 2019 and 29^th November 2019 are consistent with the wife’s understanding of the position. They are also bolstered by the contents of the TR1. If the husband wished the Property One Trust obligations to be a top slice on the proceeds of sale of Property Two (which would have meant that the wife did not have the unencumbered half share which she was led to believe, and did believe, that she had) then it was for him to say so before Property Two was purchased and ensure that the wife knew the position. I accept the wife’s evidence that, for whatever reason, he did not do so and first raised this possibility in the current proceedings.

During argument my attention was drawn to the decision of MacDonald J in HRH Tessy Princess of Luxembourg v HRH Louis Prince of Luxembourg [2018] EWFC 77 in support of the argument that the TR1 should be disregarded on the basis that “you cannot declare an express trust in a beneficial interest that is not yours...nemo dat quod non habet”. In my view that case can be distinguished from the present case and the conclusion is different here because the husband could validly declare the TR1 on the basis that his obligations to the intervenors were imposed upon and could be met from his half share.

During argument Ms Francis suggested that the fact that the wife did not give valuable consideration for her interest in Property Two may be relevant here in terms of trust law. I do not agree that it is relevant because the 2019 TR1 was a gift by the husband to the wife from his own assets which he was entitled to make. In any event I agree with Mr Finch that some consideration was given, i.e. the fact of the wife being on the mortgage and the fact of her making significant contributions to the mortgage.

The husband has a 1/6^th share in the freehold and two leasehold flats at 88 DF Road, London SW1. Their combined value is £895,916. After deduction of 3% sale costs the net equity is £869,038 of which the husband’s 1/6^th share is £144,839. From this has to be deducted CGT of £30,937, leaving the value of the husband’s share at £113,902.

The simplicity of this proposition has been challenged in two directions. First, the wife has asserted that the husband’s share is not 1/6^th but is instead 1/3^rd. The difficulty with her asserting this is that the 1/6^th portion was clearly asserted in the husband’s Form E as long ago as November 2022 and the challenge to that assertion was not made until the very last minute. There was no challenge pursued at First Appointment, post-FDR directions appointment or Pre-Trial Review. Neither the wife nor her lawyers made an entry to this effect on the ES2 until just before the start of the final hearing. At the outset of the case I made a determination that it was really too late for the wife to make this challenge since the husband would not have an adequate opportunity to respond to the challenge and gathering evidence to deal with the challenge might take time and involve quite a number of other people who were not necessarily available. I shall therefore use the 1/6^th portion for my schedule. Secondly, the husband asserted that there should be a 40% ‘minority discount’ from the figure because of the difficulty (or impossibility as he put it) of realising the asset. No mathematical or evidential basis was put forward for this 40% reduction and, whilst I recognise that minority discounts are sometimes appropriate in, for example, company valuations, my conclusion is that it is unusual and inappropriate to think about applying such a discount to a simple interest in real property. In determining the outcome of the case I shall be cognisant that this interest is not necessarily immediately available, but I do not propose to make any mathematical discount. Accordingly, I shall use the above figure in my schedule.

The husband has a 1/6^th share in real property at 38 EV Close, Beckenham. Its value is £286,667. After deduction of 3% sale costs the net equity is £278,066 of which the husband’s 1/6^th share is £46,344. From this has to be deducted CGT of £10,382, leaving the value of the husband’s share at £35,962.

All my comments in paragraph (ii) above apply equally to 38 EV Close and the conclusion is the same and I will use the above figure in my schedule.

The wife did own the Amersham Property; but this was sold in June 2021 for £550,000. After the deduction of sale costs plus a mortgage redemption figure of £301,912, the wife received £247,253. She invested this money in various bank accounts and used some of it to pay for her legal costs in these proceedings and has £183,849 left. This figure should appear in her column in my schedule.

I raise the fact that this money came from her property sale because it was part of the husband’s case that the wife had agreed, as a qui pro quo of his agreeing to give the wife a half share in Property Two, that when she sold her property she would pay the proceeds into the mortgage account on Property Two, thus increasing the equity in Property Two commensurately. He has complained that when she did sell her property she reneged on this promise and that this is not fair. The wife denied the existence of such a promise. On this subject I preferred the evidence of the husband. I accept his evidence that she had led him to believe that she would do this. Even if I am wrong about this, it would in my view meet the test of objective fairness to deal with the case on the basis that she should have done this and fair for me to exercise my redistributive property adjustment powers with this thought in mind.

In analysing this I remind myself of my own judgment in P v Q [2022] EWFC B9, where I said:-

In the context of the above legal tests I note that there is a written loan agreement and some record of the accounting between the husband and his father, but I also note that they are very close indeed and there is no evidence of a demand for repayment or even any timescale for repayment. Further, I note that in the unusual context of this case the husband’s father has been heavily involved in the transfer of large amounts of monies from the husband to his own children with a strong culture of passing assets down the generations so a demand for payment up a generation might be surprising. I note also that the husband’s father is aged 86, may be suffering some level of dementia and that the husband holds an enduring power of attorney. Whilst I note that the husband was clear that his father would be likely to want to treat his children equally, the possibility that this debt might be left over to be reconciled from the father’s estate after his death seemed to be a strong possibility. As ever, there are no guarantees of this, but my overall impression is that is unlikely that the husband’s father will ever pursue him for the debt, notwithstanding its size. Overall, I have been persuaded that I should treat this debt as a soft debt and not include it in the asset schedule and (in view of Mr Finch’s thoughts on this) I propose to treat the wife’s much smaller debt to her father as being in the same category.

I am not minded to accept the 60% minority discount figures for the husband’s various business interests and instead propose to include them at full value whilst recognising that they may be difficult to realise immediately.

I have heard what was said about the various discretionary trusts operated by the husband’s father, and the possibility that the husband might benefit from them, but am not minded to include any figure in my schedule. I have not been persuaded on a balance of probabilities that the husband can rely on these as a resource.

Although I propose to include in my schedule the husband’s ISA account containing £77,389, I am cognisant that certainly in the husband’s mind and, possibly, under the terms of the consent order in his first divorce, this account is earmarked to pay the children’s school fees and I am minded to respect this, despite the uncertainty about whether this is a formal obligation.

I propose to omit any references in my schedule to chattels and anticipate, as discussed at court, that the parties will be able to agree a division without the court’s input.

The husband is an NHS Consultant earning c. £157,000 per annum gross or c. £8,000 pcm net.

The wife is also an NHS Consultant earning c. £75,000 per annum gross or c. £4,800 pcm net.

Both parties are in reasonable health and have approached the case on the basis that they can reasonably be expected to work until state pension age, i.e. 67. The wife is aged 50 and the husband is aged 57, so (starting from now) the wife is likely to be working for seven years longer than the husband.

It is common ground that this case is suitable for an immediate clean break.

Both parties have a need for reasonably suitable housing in the context of the standard of living that the parties jointly enjoyed during the marriage, the ages of the parties, the duration of the marriage, the respective contributions of the parties.

The housing needs of the wife were considered in more detail at the hearing than those of the husband. The husband’s case was that a reasonably suitable two bedroom property could be purchased by her for c. £650,000, requiring a housing fund of c. £700,000 (including purchase costs). Ms Moys on his behalf drew my attention to the fact that she was now single with no dependents (WP being an adult in work) and that she had sold her own property in Amersham for £550,000 in 2021 and never had a more expensive property than that until the purchase of Property Two (in which she had lived for a relatively short time – December 2019 until now). Further, that her financial contributions were limited. The wife’s case was that such a figure did not properly reflect the standard of living enjoyed during the marriage (in both Property One and Property Two) and that a purchase price of c. £1,100,000, requiring a housing fund of c. £1,200,000, was more reasonable.

In my view the fair answer lies somewhere between these two propositions and that a housing fund of c. £850,000 is a reasonable figure for the wife to seek. In particular I would not attach as much weight to the standard of living during the marriage as the wife was inclined to do.

I have seen mortgage capacity evidence relating to the wife which suggests that a mortgage of up to £400,000 (or perhaps a little more) would be achievable for her. It does not follow that it would be reasonable to expect her to have to take such a mortgage, in particular if the calculations are done on the basis of her repaying that mortgage over 17 years, the remaining period of her working life. In my view a repayment mortgage of £300,000 is a more reasonable proposition for her and this might cost her c £2,250 pcm, which is affordable on her salary. In the end, of course, it is open to her to buy a better home with a bigger mortgage or a less good home with a smaller mortgage, but it is reasonable for me to work with these figures. If I use a mortgage figure of £300,000 and a reasonable housing fund of £850,000 then I can conclude that she has a reasonable need for capital of c. £550,000 if that is achievable in the context of a fair division of assets.

The housing needs of the husband, at least for as long as he has two dependent children, can properly be put at higher than those of the wife because of the children. It can also be said that he has made greater financial contributions than has the wife to the remaining assets. I would not particularly disagree with his own assessment of a reasonable need to purchase at a price of c. £1,000,000, requiring a housing fund of c. £1,100,000.

Assessing his need for a capital fund now to meet this housing need is rather more complicated. His share of the sale of Property Two, once the children’s claim is deducted, is modest. He has some other assets, but they may be difficult to realise quickly or fully, as he only has a portion of the assets and the other owners may not be ready to assist his wish to realise the assets straight away. He has a mortgage capacity, but this must be limited by his need to pay off any borrowings over the next ten years.

A big question here is what to make of the husband’s giving away to his children some £1,405,424 of his own assets, the major cause of his current and immediate future impecuniosity. I think there is strength in the argument put by Mr Finch that, by doing what he did, the husband has not done anything in the category of section 25(2)(g) conduct, but he been the author of his own misfortune and that it would be unfair to disadvantage the wife unduly heavily to relieve the husband from the consequence of his actions. In the course of his evidence he said to me in a poignant moment of distress: “I have screwed it up completely”. It may be the case that a dominant part of his motivation for giving away so much was an admirable wish to assist the next generation, but it is hard not to think that (in relation to the 2020 transaction at least) the motivation did not also involve in part a wish to favour his children over a wife with whom he had a volatile marriage – I note that he did not tell the wife about it at the time, indeed not until these proceedings started. It was not perhaps sufficiently obvious to cause the wife to feel confident in making a section 37 application, but to an extent the metaphor that he must now ‘lie on the bed he has made for himself’ seems apposite. Another aspect of this question is whether or not the court should assume that the use of all of this money is necessarily lost to him. He is the trustee of both trusts and therefore the effective controller of the destiny of all the money in question, at least for a period, and there is nothing to prevent him using the money (or some of it and presumably subject to a clear recognition of the trust portion of the ownership) to purchase a home for himself and the children. Indeed, he told me that he was already thinking of doing this. Whilst the intervenors might wish not to let their father have a penny of their money once they cease to be minors, it may be more likely that they will take a more humane view to their father (who voluntarily gave them all the money in the first place) and be content to permit him to retain the use of a home purchased by the trust money, or a portion of it, for a much longer period, perhaps even during his lifetime. It may be that he will not need any mortgage at all to meet his housing need, depending on all these imponderables. There are of course uncertainties in all of this, but in so far as there are, they are the product of what the husband has done of his own choice.

In my judgment in W v H (supra) I sought to answer that question by saying:-

In the present case a simple division by CE is unlikely to be fair because the pensions involved are mostly defined benefit schemes and the parties ages are seven years apart and in my view it was correct here to seek the assistance of a PODE report.

The PAG 2 Report goes on to give a steer as to what question the PODE report should be seeking to answer:-

The PAG 2 Report also endorses similar sentiments expressed in the Family Justice Council’s report “Guidance on Financial Needs on Divorce” (2018 edition) where it is stated:-

In my view it is clear in the present case, following the steer from the PAG 2 Report (which does not differ in this respect from the PAG 1 Report) that the fair division of the pensions was provided by the answer that produced an equal level of income on retirement from the relevant pensions, that is a pension sharing order at 9.2%.

I have noticed that it is not uncommon for PODEs to be asked to provide an answer not only based on equal incomes, but also alternatively based on an equal capital approach. Indeed, this happened in the present case. It may be that the reason this happens is because the specimen letter of instruction in the PAG Reports (page 106) includes both approaches in its text, but it should be remembered that these are options provided in the specimen letter and it is not necessary for both of them need to be included in the actual letter sent to the PODE. In the notes accompanying the specimen letter it is stated that “equalisation of benefits by reference to projected income will in most circumstances be the appropriate approach”. There may be cases where, for particular reasons, equality of capital is a suitable measure; but in my view these are uncommon and thought should be given to what is the appropriate question before the PODE report is commissioned, if necessary with the judge at the First Appointment determining the issue, and that in most cases the only question which needs to be asked is what level of pension sharing order will produce an equal level of income on retirement. Asking more questions than are necessary will certainly add to the cost of the exercise and almost inevitably lead, further on down the line, to each party advocating the figure most helpful to themselves (as happened in the present case) and making compromise less likely.