G v S

On 20th September 2006 I handed down my reserved judgment at the conclusion of ancillary relief claims brought by the former wife (W), and made orders to implement its terms and in respect of costs. The judgment is reported as S v S (ancillary relief after lengthy separation) [2006] EWHC 2339 (Fam), [2007] 1 FLR 2120. Subject to any appeal by W (and there was none), and implementation by the former husband (H) of the terms imposed upon him to achieve a clean break, that might and ideally should have been the resolution for them both of the long drawn-out and emotionally draining process from their separation in March 1996 via decree absolute in September 2003 to the end of ancillary relief proceedings which W commenced in November 2003.

I now give judgment in relation to the subsequent application made by W on 14th May 2008 whereby she seeks to set aside the September 2006 order. I read and heard submissions and evidence between 27th and 30th April and on 6th May 2009. I then reserved judgment to await the outcome of an anticipated appeal to the Court Appeal which, it was thought, might offer further guidance in relation to some of the legal issues in the case. That appeal was, however, compromised without hearing. Meanwhile, however, I was referred by counsel for H (Miss Stone QC and Miss Phipps) to two recent Court of Appeal decisions which were arguably germane. In mid-August I received from counsel for H (Mr Singleton QC and Mr Nagpal) their further submissions in relation to those two cases.

W's application to set aside is put on three bases: misrepresentation/non-disclosure, mistake and/or a supervening Barder event. The principal areas of the case upon which enquiry has focused are the evidence at the hearing of the value of the company T Ltd ('the company') run by H, and its subsequent sale for very significantly more than the range postulated in the divergent evidence before me. Also subjected to scrutiny has been the refinancing package negotiated for the company prior to its sale; and its consequent ability to pay substantial arrears of preference share dividends owing to H, and to buy out the interest of a venture capital investor (ICG), plus the facility to pay H £4M to buy in his preference shares.

In order to succeed on either of the first two bases, as well as establishing misrepresentation/non-disclosure and/or mistake, W must satisfy the test that a substantially different order would have been made if the true facts had been disclosed or known. Thus in Livesey (formerly Jenkins) v Livesey [1984] UKHL 3, [1985] AC 424 Lord Brandon at 424 said:

I would end with an emphatic word of warning. It is not
every failure of frank and full disclosure which would justify a
court in setting aside an order of the kind concerned in this
appeal. On the contrary, it will only be in cases when the
absence of full and frank disclosure has led to the court making,
either in contested proceedings or by consent, an order which is
substantially different from the order which it would have made if
such disclosure had taken place that a case for setting aside can
possibly be made good.

In order to succeed on the basis of an event held, in the Barder sense, to be supervening W must demonstrate a high prospect of success in securing a materially different outcome. As put by Lord Brandon in his speech in the very case, Barder v Barder (Caluori intervening) [1988] AC 20 at 43:

A court may properly exercise its discretion to grant leave to appeal out of time from an order for financial provision or property transfer made after a divorce on the ground of new events, provided that certain conditions are satisfied. The first condition is that new events have occurred since the making of the order which invalidate the basis, or fundamental assumption, upon which the order was made, so that, if leave to appeal out of time were to be given, the appeal would be certain, or very likely, to succeed.

More recently in Shaw v Shaw [2002] EWCA Civ 1290, [2002] 2 FLR 1204 Thorpe LJ at [44] commented:

The residual right to reopen litigation is clearly established by the decisions in Livesey v Jenkins and Barder v Caluori. But the number of cases that properly fall into either category is exceptionally small. The public interest in finality of litigation in this field must always be emphasised.

The September 2006 order

The hearing which culminated in that order was protracted. I heard evidence and submissions at the end of April and beginning of May 2006. The decision of the House of Lords in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 1 FLR 1186 was awaited and plainly might have affected the outcome. In mid-July 2006 I heard further submissions in the light of it, and (having circulated my judgment in draft for comment on 11th September) gave judgment on 20th September 2006.

The order provided for a deferred clean break. The former matrimonial home (LM House) was to be transferred to W and H was to redeem the mortgage of just under £300,000 by 20th December 2006. He was to pay her a lump sum of £1.1M in two instalments: £200,000 by the 20th December 2006, and £900,000 by 20th December 2007. There was an agreed security arrangement in relation to the second instalment, until payment of which H was to make periodical payments to W at the rate of £75,000 p.a. W was by a pension sharing order to receive 50 per cent of the pension rights built up by H to that point. Finally, in relation to costs, I ordered W to pay £275,000 towards those incurred by H because Calderbank correspondence disclosed that she had consistently refused offers made by H which were more favourable to her than was my determination and had made counter-offers very significantly in excess of it. In the event, however, she did not pay those costs as H offered not to enforce the costs order unless she applied to the Court of Appeal for permission to appeal the substantive order.

Unavoidably I must incorporate significant citations from the earlier judgment. But reduced to its essentials my route to the decision which gave W 100 per cent and more of the liquid non-company assets (and half of H's pension provision), but denied her aspiration to participate in the proceeds of any realisation of the company, while leaving the company untrammelled in H's hands, is accurately summarised in the following extract from the Family Law Reports headnote:

(3)

As the years had passed since the separation, it had become less and less fair that the wife should be entitled to ask for a share in the potential of the husband's company. The wife could have instituted proceedings earlier, and the fact that the husband could also have done so did not improve the wife's position (see para [86]).

(4)

It was a significant factor that if the company were to be sold, it would be by dint of the husband's considerable future endeavours over a number of years, unmatched by a contribution by the wife (see paras [88], [98], [100]).

(5)

This was not a case for any traditional proportional division of the husband's income. It was not unfair for the husband to retain a significantly larger proportion of his income than was given to the wife: the husband was working without a domestic or other contribution from the wife; he had a lot of debt to sustain; and he was left with only the intangible and risk-laden capital tied up indefinitely in his company shares (see para [79]).

(6)

In this case the value of the husband's shares was more akin to non-matrimonial property, as the growth in the company was not the financial fruit of the marriage partnership. However, the shares had been given weight in the balancing exercise by having regard both to the approximate value of the husband's separation-date holding of shares and to his contribution to the generation of wealth unmatched by the wife. Regard had also been paid to passive economic growth and to the underlying business conducted by the husband (see paras [111]-[113]).

An outline of subsequent events

(a) On the 25th September 2006 T Ltd received an encouraging initial response from HSBC to a refinancing exercise initiated on its behalf by Close Brothers (CB) in June 2006. The refinancing deal with HSBC was finally struck in December 2006.

At [65] I summarised the case in this way:

... the case has always centred on what has proved to be the non-negotiable issue whether W should at some future date participate in what may be realised from H's shares…

but I concluded that an outcome which gave W a stake in the company, and in the risk and potentially the reward such stake might carry, would be unfair. I took that view for a number of reasons.

First, the developments since the 1996 separation in the structure and nature and scale of H's business through the company were such that W was not entitled to, nor should she in fairness receive, a share:

[3] … on any view of the matter their physical separation took place 10 years ago, and during the intervening period it is the fact (and in no sense a recrimination) that H has developed his business without any form of support or contribution from W. She however argues that as he has not until now had to deal with her capital claims he has in effect had the use of money or assets which should be regarded as hers, and thus that her contribution has continued.

...

[69] H's case is that T Ltd's business has no historical base in pre-separation YD [the predecessor company referred to more extensively in the full judgment] and that they are different animals. The genesis of T Ltd's public service business is clearly discernible in the closing years before the 1999 demerger, and to a smaller extent before the 1996 separation of the parties, and so I do not entirely accept his view. Since 1999 however the nature and scale of the business has evolved dramatically. Just one other illustration of that is that the average number of T Ltd's employees doubled from 1,467 in the 18-month period to June 2000 to 3,053 in the year ended June 2005.

...

[111] ... I regard the value which the T Ltd shares now represent as more akin to non-matrimonial property. But I have given the shares weight in the balancing exercise to what I regard as an appropriately constrained extent by having regard both to the approximate value of H's separation-date holding of YD shares, and to the fact that in my view what he has since built on the back of that asset has involved only incidental use of those shares and the business then conducted by that company which have been unmatched by any contribution on the part of W since the effective end of the marriage. I have also paid regard to what is described as the 'passive economic growth' which might have been added over the relevant 10 years to those shares and to the underlying business conducted by H by reference to two published measures of economic growth in prices and share valuations.

[112] I have not as such quarantined or excluded from analysis or distribution the increase in the value of the T Ltd shares, but have concluded in this case that no proportional future distribution would be fair. I have offset the impact of that growth by awarding W an overall sum which represents all the current 'hard' assets and more, and have left H (as he requests, although on more onerous terms than he suggested) with the risk.

[113] My award in my view fairly compensates W for the relatively small historical contribution made to T Ltd's present position by YD's business and H's 40% shareholding in that company. I find myself unable fairly to categorise the growth that has occurred as a financial fruit of the marriage partnership.

Moreover, this was not a case (I decided) where it would be either practical or fair to attempt to achieve any proportional resolution:

[85] I reject the proposition that in this case a fair solution can be devised by fixing, it would need to be arbitrarily, upon a proportion of the value which may one day be released from these shares. I find myself unable to find a formula which would fairly reflect the fact that H is prepared to cede to W their current tangible wealth, and to enhance her pension fund so as to achieve equality, while at the same time taking the whole of the risk which in my assessment is not slight. In the special circumstances which here exist it does not seem to me to be unfair that in return he should retain, if he can steer the company to a successful outcome, the whole of the reward which if it is great will be so largely as a result of his post-separation endeavours. W for her part does indeed wish to retain LM House and thus the bulk of the current tangible wealth which carries no appreciable risk.

[86] At any time after the separation if W had instituted divorce proceedings she would have been entitled to invite the court dealing with her ancillary relief claims to take into account the value and to some degree the potential of H's shareholding in YD and subsequently T Ltd. But as the years have passed since then it seems to me that it has become less and less fair that she should be entitled to ask for a share in that potential having regard to what she will receive in tangible assets. That H could himself have taken the initiative earlier but chose not to do so does not make such an entitlement any fairer.

...

[98] I have already referred to and will elaborate upon the distinguishing features which persuade me that any attempt at equal (or other proportional) division of the value inherent in the T Ltd shares would be unfair in this case: to identify but two, the transformation in the size and scope of the company's business and the bracket of likely value of the shares, and the length and potential duration of the period when H's contributions will have been unmatched.

Next, W wished to have the former matrimonial home transferred to her, and H in effect supported that aspiration. But that property (even before the £300,000 mortgage was redeemed) represented far and away the bulk of the non-company non-pension assets available for distribution. This imposed restraints on the feasible pattern of the solution:

[13] Another striking feature of the case is what I regard as [H's] continuing sense of regret that the marriage did not continue (a sentiment shared by W). This finds expression in his oft-repeated determination to ensure that LM House should be hers free of mortgage, and that she should have the means to continue living there. I repeat that to live there long-term has been her long-held expectation and remains her aspiration but these are aims which, if (as I would hope to do) I am to find a solution which achieves them, seriously limit the fair options available having regard to the quantum and structure of the parties' wealth and the balance between solid and realisable assets and those which are currently unrealisable and carry risk.

...

[36] Mr Cusworth [counsel then representing W] suggested that these first three elements (house, pension, £lm lump sum) would amount to … A perhaps more refined analysis is to point out that W would receive in the house and mortgage and the lump sum a capital award some £400,000 in excess of 100% of the current value attributable to the non-pension non-T Ltd assets, even treating the presently uncollectable arrears of dividends as though they were cash. In addition W's pension funds would be equalised with a share from H which can be regarded as very largely the product of his endeavours since 1999. Furthermore, subject to their net proceeds exceeding £2m, [Mr Cusworth] at the outset of the hearing argued that W should receive an unquantifiable but uncapped further tranche of capital on realisation of the T Ltd shares, if and when that takes place.

...

[74] ... it is difficult to sustain an argument to disprove the proposition that (subject always to H paying off the LM House mortgage and paying W £200,000) she would receive value equivalent to more than the totality of the assets available to the parties which can be described as copper-bottomed.

[75] In addition W will, via the agreed pension share provision, receive some considerable return on H's post-separation endeavours which in due course can secure for her additional capital (if she chooses) and an income for life.

...

[117] I have taken into account all the statutory factors contained in s 25(2) of the Matrimonial Causes Act 1973 as amended to the extent that they are referable to this case, and all other relevant circumstances as upon my evidential findings I perceive them to be. The provision for W which this order requires deals fully with her needs in terms of accommodation and her ability to maintain her lifestyle while living at LM House, and indeed for her lifetime. Having arrived at the determination that she should not share proportionately as and when it may materialise in the liquidity which may be released from the T Ltd shares, I consider that the overall provision H is to make for her goes beyond those needs (taking the Duxbury calculation simply as a guide to the size of the income-producing element) to the extent of £250,000 or thereabouts, and that this is a fair result bearing in mind the burden of debt the order will impose on him over a number of years. These arrangements strike a fair balance between the obligations and entitlements flowing from this marriage and its aftermath, and achieve the parties' shared objective of securing W in LM House. I believe that this is not only a fair outcome for W but one which should obviate and protect her from the risk that T Ltd will never be brought to market, which if her final proposal were adopted would leave her with a continuing mortgage liability of £300,000 to repay but without the resources to do so otherwise than by the sale of LM House. That is an outcome which she wishes so strongly to avoid.

In this connection I also refer again to [85] and [86] above.

In the light of these conclusions and this approach, the value to be attributed to H's shares as at the time of the 2006 hearing ceased to be a relevant factor, notwithstanding the time and expense devoted by the forensic accountants. The valuation range at which they finally polarised was between broadly £4M and £27M, but importantly they did agree that the state of the company was such that neither it nor H's shares were realisable, and that there was no scope for extracting cash from the company with which to make provision for W. Thus on this topic I commented:

[30] The comments in paragraph one of [an accountants' joint report dated July 2004] … record the accountants' agreement 'that there is insufficient liquidity in the company to assist in providing cash towards a clean break settlement of this matter', but that they were 'not aware of any bar to the husband transferring a proportion of his shares (equity or otherwise) to the wife, should the parties so agree or the court in its discretion so order'.

[31] Notwithstanding the clear common sense of those observations [which, in 2009 I interpolate, remained valid on the evidence in the spring of 2006] the valuation exercise has proceeded apace throwing up what have been, in effect, increasingly divergent figures, based upon extrapolations from information which for the most part relate to year-to-date figures for the current year, and what can only be a best guess at budgeted turnover and other results hoped for in the year to come. It is inevitable (particularly in a business where turnover may surge towards the year-end as local authorities strive not to under-spend the budgets grudgingly accorded them by central government) that forecasts however conscientiously prepared, will prove wrong. Indeed in the 2 years since accountants first offered valuation opinions upon H's shares in T Ltd this has proved to be the case.

...

[44] It is of large significance that neither party's outcome suggestion depends on a finding as to the shares' current value. Both parties' counsel acknowledge this. That did not, however, prevent vituperative contention between Mr Lobbenberg and Mr Nedas over many aspects of their respective approach to the exercise.

...

[46] Emphasising as I do that in the event any adjudication by me of this [share valuation] dispute does not affect the outcome of the case,

Fundamental to the judgment and the award therefore was my decision that the fair result would be for W to receive solid assets in the form of LM House free of mortgage, a lump sum with which to meet her liabilities and from which to live, and pension provision from which she would commence to benefit after nine years: but that she should not participate in the future success or failure of the company, if and when either materialised.

This application is categorically not an appeal against my decision. Success in it for W depends upon her establishing that we were misled, we were mistaken, or there was some subsequent unforeseen and unforeseeable development (a Barder event) of such significance as to invalidate the reasoning and judgment. Moreover she needs must demonstrate that if the true situation had been known or were the subsequent event to have been foreseen, then it is likely the outcome would have been materially different.

I heard a substantial amount of evidence as to the state of the company and its recent track record during the course of the 2006 hearing. I concluded:

[21]... Although there was talk about the possibility of flotation in 2002 that soon evaporated. Neither accountant suggests that the company is ripe either for a trade sale or flotation in current circumstances, or in reasonably imminent circumstances which can be said to be more likely than not to eventuate. Whether such a time will ever come must be speculative. If it does then it will most likely have been achieved in large measure by dint of H's energy and acumen, not only past but prospective, as well as more favourable market forces than exist at present when (I am satisfied on the evidence) there is some stagnation in the company's development. There is no other avenue whereby H could release capital from his shareholding, neither does either accountant suggest how he might do so.

...

[51] ... neither accountant asserts that [disposal] is either imminent or likely to be achieved in the short to mid-term. It is agreed that prerequisites are a period of sustained growth and profitability. Anyone's predictions can prove right as well as wrong, but I do not believe that flotation for this company or (as seems less likely to H) a trade sale will by any means necessarily prove viable within any specified timescale.

[52] This is in part because I accept the burden of H's assertion that the company is currently languishing in doldrums, notwithstanding an anticipated return to not insubstantial profit for the year to June 2006. Debate ranged about the veracity of H's assertion that there had been a significant slowdown in the number and potential value of new contracts, exacerbated by the loss of some regarded as key to T Ltd's activities and turnover. His prediction is that in the year to June 2007 the company's results are likely to revert as a result of these factors to something nearer the less healthy 2005 year picture.

[53] I accept the broad thrust of H's explanations about this and that the company is at present fighting to survive. Moreover I recognise that the nature of the relationship between the company and the local authorities it serves is volatile in terms of profitability: as already pointed out budgets can be reduced and projects cancelled, yet T Ltd to be in a position to cater for the potential volume of work must keep its staff and equipment paid, purchased and maintained.

[54] I also accept that in this industry the bidding and contractual process is expensive, time-consuming and highly technical and long drawn-out in its processes. Significant expenditure of time and effort in all but a few instances lead nowhere. Over about the last 2 years only 3 out of 169 bids have proved successful. Even quite confident predictions (including public statements) do not guarantee that a deal is clinched. A number may not generate profits for a year or more because of significant start-up costs both in terms of taking on existing public-service staff and acquiring plant and equipment.

[55] Some commentators have recently taken a bullish view of the sector's prospects, but I do not consider H to be insincere in his much more cautious view of the state of and prospects for T Ltd. The scale of W's inquiry on these issues has been fuelled by a belief that H has been adept to down-play and indeed to misrepresent major aspects of the company's profile, past present and prospective. This led to Mr Cusworth's submission that aspects of H's evidence which he criticised should lead me to conclude that the picture of decline in T Ltd which H presented cannot have been genuine. Although Mr Cusworth and Mr Lobbenberg in terms accepted that there had indeed been a decline, I was invited to take the view that H's gloomy and risk-laden forecast concealed a degree of optimism, and that this in turn must mean that he had covered up some salient factors which, however, despite their best efforts, W's advisers had not managed to unearth.

[56] It cannot be controverted that T Ltd is going through a difficult patch. Its future fortunes are indeed highly speculative and emergence from this depression cannot be guaranteed. The company, H told me, is his life and he clearly has a sense of vocation about the contribution it can make to the efficiency and quality of the local authority functions it performs. He is very highly motivated. But he is not blind to the risks and future uncertainties.

...

[67] My conclusion is that H is essentially a conscientious individual and that (irrespective of what may be the present or prospective value of his shares) I can rely on the overall trend of his evidence and of the picture that he presents of T Ltd's position. I do not accept that it has become established that there is some nugget of concealed information which, if uncovered, would transform that picture.

It is of course trite law that the parties to an ancillary relief application have a duty of full and frank disclosure which extends until judgment is given: Livesey (formerly Jenkins) v Livesey from 436g, and Vernon v Bosley (No 2) [1999] QB 18 at 37d and 38f. For the reasons I have explained the evidence and prime submissions were completed in May 2006, but judgment was deferred until 20th September 2006. W relies on the fact that the husband was obliged to disclose voluntarily during that interim anything which might materially affect the judgment in course of preparation. His advisers accept that as the correct position, whether or not (and he says not) H understood that he was obliged to keep them posted about significant developments. Whether or not he understood that does not relieve him of the obligation to maintain his disclosure current and correct. In terms of the consequences of material non-disclosure, the vitiating effect is the same whether the non-disclosure (in the broadest sense) is innocent, deceptive or the result of mistake. But it must be material, in the sense that appropriate disclosure, if made, might have led to a materially different outcome.

The case based on non-disclosure and mistake advanced for W relies upon what are said, at best, to have been failures to disclose and at worst positive deception on the part of H prior to judgment. Of the topics said to be subject to this charge the prime, and that first concentrated upon exclusively by W's advisers, was the process whereby T Ltd was put on the market for sale by March 2007 (just over five months post-judgment) and sold by September 2007 (a year after judgment).

The evidence of H and of both accountants at the spring 2006 hearing was that the company was then unsaleable (whether by outright trade sale or flotation) in the state in which it then was, and would remain so for an indeterminate period. Thus I recorded in the judgment and (at the risk of some repetition) collect together relevant extracts:

[21] ... Although there was talk about the possibility of flotation in 2002 that soon evaporated. Neither accountant suggests that the company is ripe either for a trade sale or flotation in current circumstances, or in reasonably imminent circumstances which can be said to be more likely than not to eventuate. Whether such a time will ever come must be speculative. If it does then it will most likely have been achieved in large measure by dint of H's energy and acumen, not only past but prospective, as well as more favourable market forces than exist at present when (I am satisfied on the evidence) there is some stagnation in the company's development. There is no other avenue whereby H could release capital from his shareholding, neither does either accountant suggest how he might do so.

...

[34] … In this case, as I shall explain, H's shares will only have a tangible value if and when their value can be extracted from them in the event of flotation or trade sale. That of course is true in every unquoted share valuation exercise. But in this case for either of those events to happen T Ltd will first have to have established a record of increasing size and profitability which sadly it now lacks. It will not then be a company of the same scale as it is now, and if this outcome is achievable at all then (as I have already indicated) it is likely to be in large part as a result of H's continuing endeavours stretching from now into the future and therefore from a point commencing a full 10 years since the parties' separation. In the particular circumstances of this case I regard that as a highly significant factor which cannot be sufficiently satisfactorily offset whether by limiting the proportion of the value payable in the future to W, nor by putting an arbitrary cap of £8m upon what she might receive as was Mr Cusworth's final proposition.

...

[51] Mr Cusworth submits that realisation of the shares is inevitable and points out that in 10 years H will be approaching normal retirement age at 63. But neither accountant asserts that such an event is either imminent or likely to be achieved in the short to mid-term. It is agreed that prerequisites are a period of sustained growth and profitability. Anyone's predictions can prove right as well as wrong, but I do not believe that flotation for this company or (as seems less likely to H) a trade sale will by any means necessarily prove viable within any specified timescale.

…

[56] It cannot be controverted that T Ltd is going through a difficult patch. Its future fortunes are indeed highly speculative and emergence from this depression cannot be guaranteed. The company, H told me, is his life and he clearly has a sense of vocation about the contribution it can make to the efficiency and quality of the local authority functions it performs. He is very highly motivated. But he is not blind to the risks and future uncertainties.

A theme of H's evidence in 2006 was his commitment to the underlying ethic of the company's relationship with its employees, and to the future of the company which he said was his life. He discounted the possibility that he would be prepared to allow the company to be taken over, envisaging a flotation in preference. Yet by the end of the following February CB were being instructed to secured the trade sale which six months later ensued.

There is no hint in the considerable volume of documentation digested by the end of the 2009 hearing to support the inference which W invites me to draw: that when giving his evidence in April 2006, or by the crystallising date of the judgment that September, H was concealing a true and contrary intention to sell out as soon as he could; or to show that if he had that hidden hope he would be able to effect it so imminently.

Between September 2006 and March 2007 transforming events had happened. Not only had the company secured far more beneficial and generous funding from HSBC than it enjoyed (or rather laboured beneath) from its previous bankers, but new contracts had come rolling in bucking the previous years' trend. On the personal front a number of events had occurred in H's life. As emerged late in his evidence (extracted by a side wind in cross-examination, rather than volunteered) this very private individual (for so I regard H) had become engaged to remarry in February 2007. He had been worried, unnecessarily as fortunately it transpired, about his health that winter. His older brother (whose affidavit evidence W chose not to subject to cross-examination) urged him to let the company go because he was looking tired and unwell. His advice, from one point of view, was well-timed and rather than brush it aside (as I believe H earlier might well have done) he followed it up forthwith. At no notice at all he arranged to meet Mr Davies of CB at a café the very next day. He asked him in general terms about the possibility of disposing of the company. The response of Mr Davies was extremely encouraging. Not only had the newly-won contracts transformed the prospects for increased turnover and profitability, but the acquisitions and mergers market was awash with money. Financial institutions were falling over themselves to lend fortunes. The result (as in 2008 became all too clear) was that rash and inflated purchase prices, often based on borrowed money, were competing for businesses to acquire. Mr Davies gave as an off the top of his head indication an estimate that the company might fetch about £120M. In the event that was significantly exceeded, but even the price achieved was less than another competitor, not in the event favoured by H, had offered during what was I believe fairly described as a feeding frenzy.

In his evidence to me H expressed some regrets about having disposed of company. I do not believe he was insincere about this, but the reality is that he did. Nor do I disbelieve his account of the events which led to his precipitate decision to sell. His evidence that there had been no earlier specific plan to sell was corroborated by the two closest of his associates over a number of years in the management of the company, Mr F-P and Mr S, respectively Chief Executive and Chief Financial Officer.

During the course of his evidence in 2006 I made observations underlining the obvious unpredictability of future developments and the inevitable uncertainty of any time-frame. In discussion about the artificiality of trying to establish a value for the company in circumstances where the accountants agreed that it was not readily saleable, I said:

What the accountants, both of them, do seem to be agreed about is that no-one in their right minds would buy this company at the moment, there is no realistic prospect of turning it into cash, and there is no liquidity in it, and it is, frankly, not looking too good, and hopefully that is just temporary.

and:

... in any event, [it] is not as though it is going to be sold tomorrow, if it is going to be sold at all. It is a year or several years down the line. I mean, by definition it will look healthier, otherwise it will not happen.

Once therefore H is acquitted (as him I do) of bad faith in his 2006 presentation of the prospects for sale the fact that disposal was achieved unexpectedly early in 2007 rather than 2017, and for the fine price of £137M for his shares rather than £27M, is no ground to set aside.

The evidence at the 2006 hearing was that in 2005 and (it was clear) 2006 the company's bankers since incorporation, RBS, would not sanction payments due to ICG of £1.33M in each of those years. The company would thus be obliged to repay £4M in respect of ICG's preference shares in the summer of 2007. To achieve that would require refinancing. The company appointed CB to advise and act for it in securing offers. That seems to have been in June 2006, and by 4th September it was tolerably clear that a total facility of £35M might be available from HSBC on terms far more favourable than were available from RBS (with whom the company's directors had become increasingly dissatisfied and disillusioned, and who were not in any event prepared to advance more than £27M), or indeed from the other banks prepared to offer terms of business to the company. Of this £15M was earmarked as a term loan, to be drawn within one year from finalisation of the deal in December 2006, and to be used for specific purposes (including the £4M payment to ICG and £5M to plug a deficit in pension funds). The balance of £20M available on overdraft was twice the level until then enjoyed, and meant the company would be in a position to fund expansion if (as transpired) additional contracts were secured.

W's team were ultimately able to see all correspondence, board minutes and internal memoranda relevant to this exercise, including those available from CB's files and records. From the detailed timetable this enabled them to prepare it appears that significant dates in relation to the refinancing and sale, and to other issues will which I will deal below, were:

The complaint made in relation to H's evidence at the 2006 hearing is that he painted an unrealistically gloomy picture, exaggerating the difficulties of what, orchestrated by CB, was a significantly successful operation. H's evidence was that would not be an easy nor necessarily a successful venture, but that it had to be achieved if the company was to survive. In 2009 he confirmed that it had been a very complicated and long process involving an awful lot of work, and that although after the event it all seemed very easy actually that had not been the case, and that the position might have been very different in the autumn of 2006 and thereafter if HSBC had not shown enormous keenness to do business with the company. The evidence of Mr S was to like effect: early on in 2006 he was very uncertain about the prospects of obtaining a £35M to £40M facility.

In those circumstances I am unable to ascribe to H any lack of frankness in his oral evidence about the refinancing project which had not then commenced, although plainly it was in contemplation. The fact that he did not mention the scale at which the application would be pitched I regard as irrelevant. The evidence had not focused, so far as I recall, to any significant extent upon the borrowing limits the company had with RBS. The pressing need was expressed to be, and was, to find a bank prepared put up the £4M for ICG. HSBC's offer was by far the most attractive.

Next, complaint is made that H failed to discharge the ongoing duty of full and frank disclosure during the period between his evidence in May and the judgment in September. Given that the existing RBS facility was approaching expiry, to obtain replacement facilities was a necessary part of the company's ordinary business. The new facilities were helpful to the company's progress, but did not of themselves obviously affect its value, which in the event I disregarded as a relevant factor in the outcome which I imposed.

I do not regard the position here as analogous to that with which the Court of Appeal dealt when overruling the first instance decision of Charles J in Bokor-Ingram v Bokor-Ingram [2009] EWCA Civ 412. The success of the refinancing process was not guaranteed at the date of the judgment, but awaiting its successful outcome would not have affected the decision.

Linked but separate criticism is made of the fact that one of the ingredients of the £15M term loan negotiated with HSBC was the facility for the company within the first year of the loan to redeem the £4M of preference shares H held, mirroring the holding of ICG. The redemption of the shares was a feature of H's financial landscape which, at the hearing in May 2006, had seemed unpredictably far-off in the future: see [21] cited above. It is true that that feature had by 20th September 2006 disappeared as an obstacle if (but only if) the HSBC deal progressed to a conclusion, as indeed it did. I feel confident that had I then been informed that H might achieve the ability via anticipated refinancing to redeem his preference shares, I would not have regarded it as necessary to adjourn to await the outcome of the funding application: for my judgment proceeded on the basis that W should not share in fruits borne to H from the company. Increased personal liquidity derived from the company would not have undermined or cast doubt in my mind as to the validity of that outcome. The discussion about H's time for payment of the total of £1.4M imposed upon him would have taken a different course: but in the event H paid in full and more promptly than ordained.

The fact is that H made no attempt to draw down this facility. His evidence was that it would have been contrary to the company's interests for him to do so, for it would have converted equity debt to a term loan and thus would have reduced its freedom of manoeuvre or 'headroom'. Both Mr S and Mr F-P were clear that H would have discussed this with them rather than just make arrangements to be repaid, and that had he done so they would have been reluctant to agree for much the same reasons as H expressed. But they would have regarded it ultimately as a decision that he as in effect the owner of the company could take unilaterally. They were however very clear that he never had discussed actually utilising the facility, and did not do so prior to the sale of the company when, in effect, he received £4M for these shares from the purchasers.

That might well prompt the question, why in those circumstances seek that extra tranche of term loan? I suspect his two colleagues shrewdly and correctly surmised that H would regard it as a question of principle, as his preference shares were in identical terms to those of ICG, that if they were to be paid he should have the same option. He did not exercise it. His failure to clarify the developing (but still unconcluded) position prior to 20th September 2006 therefore had no material effect on the composition or quantum of my award. The potential (if it materialised) to transform his personal finances which the facility to redeem his preference shares, and indeed the payment to H of the outstanding dividends (to which I next turn), would clearly have affected the time allowed for payment of the lump sum.

Another imponderable during the course of the 2006 hearing was when it might be feasible for H to receive payment from the company of the arrears built up since 2002 in dividends upon his preference shares. H stated with certainty that there could be no question of him receiving payment before the critical £4M payment to ICG due at the end of June 2007 had been made, which was his and his colleagues' prime preoccupation at that point. In the event, as I have set out, he took this pre-tax £1.1M in October and November 2006 and utilised it almost immediately towards payment of the fall amount due to W. Not only did he receive this money before the ICG payment was made, but also before the HSBC banking arrangement had been finalised. It may be that by the date of these payments the HSBC facility was a foregone conclusion, subject only to the application for clearance made to the Pension Regulator which may itself have been seen as a formality.

It is possible that by 20th September 2006 H had a reasonable expectation that he would be able to draw these arrears in the context of the bank refinancing. Again, proceeding upon the basis that this should have been disclosed prior to a hearing when liquidity and time for payment were to be in issue, the question is whether the substantive order I would have made would have been likely to be materially different.

In two passages in the judgment I had considered the impact of the arrears upon the shape and amount of the award:

[36] Mr Cusworth suggested that these first three elements (house, pension, £lm lump sum) would amount to … A perhaps more refined analysis is to point out that W would receive in the house and mortgage and the lump sum a capital award some £400,000 in excess of 100% of the current value attributable to the non-pension non-T Ltd assets, even treating the presently uncollectable arrears of dividends as though they were cash. In addition W's pension funds would be equalised with a share from H which can be regarded as very largely the product of his endeavours since 1999. Furthermore, subject to their net proceeds exceeding £2m, [Mr Cusworth] at the outset of the hearing argued that W should receive an unquantifiable but uncapped further tranche of capital on realisation of the T Ltd shares, if and when that takes place.

...

[72] Assuming for the purpose of this analysis that H paid off the £300,000 LM House mortgage now (rather than within 3 years as he has offered) and raised the £200,000 first instalment of lump sum which W seeks within a short period to deal with her own costs and other liabilities, I allow for the fact that H has to pay or borrow his own unpaid costs of £50,000 (likely now to be more), owes his brother £50,000 (which he says he is honour bound to repay while acknowledging that he will not be put under time-pressure to do so), and has a £14,000 deficit of liabilities over current assets. These items total £614,000. Taking the equity of his home at £400,000 (and thus disregarding for this purpose notional costs of sale and a liability of £70,000 suggested for latent capital gains tax), then his position would be that he would be in overall deficit to the tune of over £210,000. He would be left with his future income from T Ltd, and the deferred preference share dividends if and when paid, plus the future value if and when realisable of his T Ltd shareholding.

[73] I am not prepared to bring the preference share dividends into this calculation because there is at the end of the day no suggestion that H has deliberately held up their payment, nor any clarity as to when he may be allowed to draw them. If he were able to receive them now in the sum of £719,000 net (the higher figure which his advisers suggest as their net after tax product) he would still only have net assets of about £550,000 as contrasted with W's net capital of about £l.3m (represented by LM House free of mortgage and after paying off her debts and outstanding costs). I do not regard W as entitled to share in these dividends per se but treat them rather as unpaid income which H has earned as part of his overall remuneration from T Ltd, notwithstanding that they represent a return on capital and that when paid they can be used by him to meet capital requirements.

[74] I appreciate that other formulations could be adopted, but it is difficult to sustain an argument to disprove the proposition that (subject always to H paying off the LM House mortgage and paying W £200,000) she would receive value equivalent to more than the totality of the assets available to the parties which can be described as copper-bottomed.

In fact of course H was required to pay a lump sum of £1.1M rather than the £200,000 under consideration at this part of the judgment.

True it is that the payment of the arrears materialised sooner than anyone anticipated in June 2006, and sooner than anyone other than H might have considered likely in September 2006. Having seen and heard H over some considerable time my view is that he drew these arrears in part because he wanted to put the ancillary relief hearing, for him as for W an emotional and upsetting experience, behind him by finalising the clean break as soon as he could. That is consistent with his evidence, which I accept, that he had made inquiries about a private bank loan to enable him to do just that but that he took instead his brother's offer of a loan to facilitate early payment. By the time of the company sale, if I have calculated correctly, H's total indebtedness to his brother had reached £950,000.

The bottom line is, as I wrote at [117] of the judgment, that I 'arrived at the determination that [W] should not share proportionately as and when it may materialise in the liquidity which may be released from the T Ltd shares.'

W asserts that during the period prior to the September 2006 judgment H deliberately withheld (or at least should have disclosed) the information that a parallel valuation exercise was being conducted by CB, but that it was based on a higher EBITA multiplicand and produced a larger result than the £30M at which Mr Lobbenberg had valued H's shares in the run-up to the April 2006 hearing. This most clearly appears from extracts from succeeding drafts of documents CB prepared to assist the company in its twin negotiations with ICG to buy out their 4%, and with the banks to secure refinancing offers.

Clearly H was aware of those calculations and the range of Enterprise Value figures which they threw up: from between £50M to £70M in a document produced on 21st July, revised to £49.8M to £61.9M five days later.

In this context, whereas I accept that the basis upon which Mr Nedas reached his dispiriting conclusion was inconsistent with the parallel CB valuation, and might indeed (and of course I have not heard what he might have to say in response to this suggestion) be based upon mistake or misunderstanding, the question for me at this stage is whether the outcome would have been materially different if evidence was available to show that his low valuation was demonstrably inaccurate, and that (on the ingredients employed by CB) Mr Lobbenberg might himself have arrived at a valuation in the £50M range. Let me again test the impact of this fresh information upon the conclusions I reached in 2006, upon the assumption that this valuation exercise had been brought to the attention of W's advisers before judgment was handed down and the form of the ancillary relief order finalised.

A number of observations can be made. The first is that the bracketed range of the CB valuations - up to a top figure £20M, or 40%, more than the lower figure - sheds stark light upon the tentative nature of the exercise, and is a further example of the inherent fluidity - not to say unrealistic unreliability - of unquoted company valuations. The CB number-crunchers took a different and higher EBITA multiplicand (£7.2M rather than £4.5M) which was however itself to some extent an estimated forecast.For the purposes of their valuations they assumed that some new contracts would materialise (although in fact none was to do so for some months). They were bound, professionally and to maintain CB's good reputation (as Mr Davies made clear in his evidence), to put forward an intellectually sustainable set of figures. But inevitably their approach would be coloured by the nature of the job in hand (so far as the banks were concerned) of presenting the company as a safe and promising repository for very significant cash advances.

Another observation is to point to the fact that although the top of their range of values was broadly twice that calculated by Mr Lobbenberg, it was in fact and in turn a mere third of what was achieved in the market a year later. This may serve simply to underline what seem to me to be the explanations for the increase: that the very grant of the generous HSBC facility, and (maybe most significantly) the potential profitability opened up by the new contracts, changed the profile of the company from one in the doldrums to one cresting a wave in a very liquid merger and acquisitions market.

I do not believe that H foresaw all of this in the months prior to judgment. I am satisfied that in his mind a date for flotation or sale remained indefinable.

My conclusion on this topic also is that if disclosure of this higher range of valuations had been made the substantive outcome would not have been materially different: in fact it would have been the same, for it does not impinge upon my decision that W was not entitled to participate in the company. The company would have remained 'invaluable' in the sense that no sensible judicial decision could alight on the right figure between the bottom of the experts' range and the top, whether that was from zero to £30M or from £27M to £60M. As I reiterated in the judgment:

[33] I said something about the difficulties which confront the parties and the judge in such a situation in my first instance decision in the case now revealed as Miller: M v M (Short Marriage: Clean Break) [2005] EWHC 528 (Fam), [2005] 2 FLR 533 at [59] to [61], from which I forbear to quote in this judgment. There the valuation differential was between £12m and £18m, a mere 50% of the lower figure, whereas here the £23.47m difference between £3.73m and £27.2m is 630% of the lower figure.

[34] It is true, as Mr Nedas who was one of the Miller accountants reminded me, that relatively shortly after that judgment they were proved wrong and I was in a sense proved right when the value of Mr Miller's shares became much more readily ascertainable in the market which put a tag of around £60m upon them. Thus the substratum for any assessment of my order against equality's yardstick would have been invalidated wherever within the accountants' parameters I had alighted.

The source from which H paid W's lump sum

It is now clear how H, with largely borrowed money, financed the total payment of £1.4M which he made in October and November 2006. The first payment of preference share dividend arrears went to reduce his personal overdraft (running close to its £850,000 maximum). With the regenerated latitude within his overdraft which this permitted him he immediately discharged the £300,000 mortgage on the former matrimonial home. Having received the second tranche and borrowed £700,000 from his brother he promptly paid the totality of the lump sum award.

In his initial presentation about these transactions H stated that he made the lump sum payment entirely with money borrowed from his brother. When he swore a corrective affidavit his explanation was that he had been in the middle of changing his personal bankers and had relied upon his faulty memory. His mistake meant that he failed promptly within the set-aside proceedings to disclose his accelerated receipt of the arrears of preference share dividends. I am far from satisfied with this lapse of memory wrought by the passage of time compounded by the absence of documents. For on 20th November 2006, the same week the £1.1M was paid, H's solicitors wrote that he 'was only able to raise the lump sum because of the help given to him by his brother.' That was only half the help he had, and his decision (for such it must have been) not to mention the dividend arrears must have been deliberate.

W and her advisers have latched on to this untruth or misrepresentation and ask me to proceed from that to view cynically all those factors I have so far considered, and conclude that H is an untrustworthy manipulator of the facts whose bona fides I should not accept.

It is undoubtedly the case that, when the solicitors for W sought information relating to the company's sale and its timing (for that was their initial focus) H was chary in the provision of information. He must have hoped the problem W presented would go away and he certainly resented the prospect of renewed litigation.

The explanation which H gave in his 'corrective' affidavit is one I therefore do not accept. But it remains the case that I would not be prepared to work backwards from this to re-evaluate all or any of those elements which I have enumerated in this judgment so far, so as to conclude that if he misled about them all or any of them then the judgment should be set aside. I stand by my primary finding that W should not, for the reasons I gave as to its history and transformation during the years of separation, participate in the company.

Because in my retrospective view of it the pre-judgment developments concerning the bank financing, and subject to finalisation of the HSBC arrangements the prospective ability for H to receive the dividend arrears, and the facility for him to dispose for £4M of his preference shares do not impinge on the fairness of my conclusion that W should not participate in the fortunes of the company, I will deal but very briefly with the considerable research and analysis invested by counsel in their submissions. The failure of W's application to set aside is entirely fact-specific, in my opinion. This renders it unnecessary for me to delve into the intricacies, fully exposed in counsel's detailed submissions, of the more than 25 authorities cited to me. I appreciate that in thus cutting to the core I have left unanswered the questions they posed.

When though I consider the massive differential between the top of the valuation range suggested by Mr Lobbenberg in the spring of 2006, and the sale price achieved in autumn 2007 I must decide whether the sale at that date and for that amount retrospectively invalidate the judgment and my decision.

I repeat that key among the factors which led to that sale then and at that price were the surge of new contracts achieved from December 2006 on, and the fresh and comparatively unpressured financial atmosphere within which the company could operate and develop its business under the new HSBC régime. I also accept that the availability of finance for acquisitions was at its peak.

Thus although the transformation from the lacklustre state of the company to a viably disposable entity took less long than seemed likely at the time of hearing and judgment, it was most certainly not outside the range of the foreseeable.

I anticipated that H would continue to make unmatched contributions for some time to come, to be measured in years rather than months. But the fact that contract wins and market conditions facilitated the 2007 sale does not invalidate my conclusion that, in the 10 years since separation and however much longer it might take until a disposal might take place, this asset had been developed and transformed by H and should not be regarded as a matrimonial asset in which W was entitled to share. This was a more potent consideration, indeed the dominant factor, rather than the perceived illiquidity and current unsaleability of T Ltd, or the burden of long-term debt which the order would impose on H.

I therefore regard this case as akin to Judge v Judge [2008] EWCA Civ 1458, [2009] 1 FLR 1287, where the wife failed to reopen an order made on the basis that a lurking liability assessed by the first instance judge, Coleridge J, at £14M might fall to be met by the husband and that she should be immunised from the risk attaching to it, once it had in fact crystallised at £600,000. Insofar as my assessment of these subordinate considerations has been invalidated by the turn of events, and thus by a mistake about their duration and effect, I adopt the reasoning of Coleridge J, as approved at [42] of the judgment in the Court of Appeal of Wilson LJ, as to the bounce of the ball:

[42]   The crux of the reasoning of Coleridge J for rejecting the assertion that his award to the wife had been vitiated by a substantial mistake is set out in the following paragraphs of his judgment under appeal:

'[55] The court proceeded on the basis that the probability was that a very significant sum would have to be paid to one, other or both agencies. This was the probable outcome. However the court was fully alive to the possibility that the payment would end up being very much larger or very much smaller. These were the possible outcomes. As far as I was concerned both possible outcomes were on the spectrum of outcomes, albeit at their outer edges, and the chances of either of them occurring was, in my judgment, the same. No one could say with any degree of confidence where the eventual outcome would fall on the spectrum and until the inquiry was concluded. The unlikely but not the impossible occurred.

…

[57] The court (and the parties) were, in the circumstances, especially anxious to ensure that the wife’s position was as bomb-proof from later attack as possible hence the broadly drawn indemnity backed up by the indemnity fund (opposed by the husband). The whole risk arising from the liability was entirely to be assumed by the husband and the quid pro quo for that was that the husband might indeed do significantly better than the court predicted. Protecting the wife was my especial pre-occupation and concern.

…

[63] In this case the ball has bounced the wrong way for this wife … It might just as easily have bounced the wrong way for the husband in which event it would have had a catastrophic effect on his finances. She was completely secure, he was most insecure. That is precisely how I intended it to be.'

In other respects this case is the obverse of Myerson v Myerson [2009] EWCA Civ 282, [2009] 2 FLR [2009] 147, where Thorpe LJ commended the formulation of Hale J (as she then was in Cornick v Cornick (No 1) [1994] 2 FLR 530, FD where at 536 she said:

On analysis, therefore, there are three possible causes of a difference in the value of assets taken into account at the hearing, each coinciding with one of the three situations mentioned earlier: 

(1)

An asset which was taken into account and correctly valued at the date of the hearing changes value within a relatively short time owing to natural processes of price fluctuation. The court should not then manipulate the power to grant leave to appeal out of time to provide a disguised power of variation which Parliament has quite obviously and deliberately declined to enact.

(2)

A wrong value was put upon that asset at the hearing, which had it been known about at the time would have led to a different order. Provided that it is not the fault of the person alleging the mistake, it is open to the court to give leave for the matter to be reopened. Although falling within the Barder principle it is more akin to the misrepresentation or non-disclosure cases than to Barder itself.

(3)

Something unforeseen and unforeseeable had happened since the date of the hearing which has altered the value of the assets so dramatically as to bring about a substantial change in the balance of assets brought about by the order. Then, provided that the other three conditions are fulfilled, the Barder principle may apply. However, the circumstances in which this can happen are very few and far between. The case-law, taken as a whole, does not suggest that the natural processes of price fluctuation, whether in houses, shares or any other property, and however dramatic, fall within this principle.

In my judgment this case clearly falls within the first category. There was no misvaluation or mistake at the trial. Nothing has happened since then other than a natural albeit dramatic change in the value of the husband’s shareholding. The wife’s case amounts in effect to saying that it is all terribly unfair. 

In Myerson the husband sought to reopen an order reflecting a negotiated settlement where the value of the quoted shares he retained had plummeted catastrophically. In refusing his appeal Thorpe LJ commented at [39]:

… There may be many who are contemplating an attempt to reopen an existing ancillary relief order on the grounds of subsequently encountered financial eclipse. All in that situation should ponder Hale J’s analytical characterisation and ask themselves whether the events upon which they intend to rely can be brought within either the second or the third category. Even then they would be well advised to heed the warning that very few successful applications have been reported. I echo the words of Hale J that the natural processes of price fluctuation, whether in houses, shares, or any other property, and however dramatic, do not satisfy the Barder test.

In my view, and specifically on the dominant facts which led me to the 2006 judgment, this case falls within the first category. Notwithstanding misvaluation or mistake at the trial and prior to the judgment, the dramatic change in the value of the husband’s shareholding and its sale arose from natural changes in the company's circumstances combined with unusual market forces. These latter were happenings, developments or occurrences none of which it is possible to categorise as unforeseen and unforeseeable. From the wife’s perspective this does seem all terribly unfair (as Hale J observed in Cornick), especially as her case throughout was that she was prepared to take risk on board in the hope of participating in whatever might be the reward. But there must be an end to litigation, and in my opinion that in this case should now have been reached.