FG v MBW

The Applicant (who I shall refer to as the mother) makes a claim under Schedule 1 of the Children Act 1989 against the Respondent (who I shall refer to as the father) in respect of, and for the benefit of, their son, Luc. He was born in January 2000 and is therefore now 11 years old. The parties began their relationship in about 1998 and they separated shortly after Luc's birth.

This is the third time that an application by the mother under Schedule 1 has been before the court. The first time was in 2002. This application was withdrawn following the father having been made redundant. The second was as a result of an application made in 2004. After a number of hearings, the 2004 application resulted in an order by consent dated 30 September 2005, when Luc was 5 years old. The mother has made an application to set aside that order on the basis of non-disclosure and her present application under Schedule 1 is dated 4 March 2010. On advice, the mother does not pursue her application to set aside the order dated 30 September 2005 because it provided only for maintenance, which can be varied pursuant to her present application and she does not seek back dating to an earlier date than 4 March 2010.

Non disclosure issues however remain as issues relating to credibility and costs.

The father accepts that this is a “top up” case. There is a dispute as to the father’s current income and income prospects, and the likelihood of him making significant capital gains. But, the approach taken by the CSA to the income return on capital, as the father accepts, means that this is clearly a “top up” case. However, his position is that, on any view, this is not a “big money case” and the maximum CSA award is relevant because his income is not greatly in excess of the maximum used by the CSA.

She seeks periodical payments at the rate of £4,000 per month (£48,000 per annum), back dated to 4^th March 2010, school fees and extras to cover private education at a London day school to age 13 and then at a boarding school, provision for tertiary education, a lump sum payment of £34,500 plus her costs and an adjournment of her claim for a housing fund.

I was not provided with a calculation of the back payments. In round terms they would total (up to 4^th July 2011 and so 16 months) £35,000.

She was born in 1965 and is now 46. Luc is her only child and they live together in rented accommodation in West London. She is not working and she and Luc depend and live on state benefits (from her Form E these include child benefit, child tax credit and income support) and payments from the father. She also receives housing benefit paid directly to her landlord at the rate of £1,200 per month.

During her evidence she also told me, and for the first time her solicitors, that her income support had been stopped in October 2010, that she had applied for ESA and was awaiting a medical to see whether it would be paid. She was unclear when that medical would be and her evidence was to the effect that she was waiting for an appointment. This caused problems relating to her funding by the LSC but this was continued for the hearing. That leaves, from her Form E, £80 a month child benefit and £207 in child tax credit (so £287 a month or £3,444 per annum) and the housing benefit of £1,200 a month.

The mother used to work in the film industry as a production manager. She has also worked as a PA. Following her separation from the father she moved with Luc to Los Angeles, and worked there as a production manager on terms that were attractive in terms of remuneration and generally. Initially, she was provided with accommodation by her employer, and later she rented a home there. In, I think 2006, she moved back to this country and moved in with her parents and then to rented accommodation. After her return, she and Luc spent holidays in the USA at the house she had rented, which she kept on the basis that sub lets for the periods she was not there slightly exceeded its cost. She told me that she had to give up her lease because she was told by her landlord that she could not sub let for more than 6 months a year. This property is therefore no longer available for holidays.

On 4 May 2006, she was involved in a car accident when her car was hit from behind at high speed by a van. She was thrown forward and hit her head against the windscreen and then was thrown back into the headrest. She suffered a depressed fracture to her skull and a neck injury. Her longer term symptoms came on gradually, or developed over time.

The mother worked for a short time after her return with Luc to this country, but she told me that she found this very difficult as a result of the consequences of her accident and, in particular, its effect, together with that of her medication, on her short term memory.

A medical report obtained in 2009, contains a prognosis that the mother is likely to continue to suffer significant pain for several years, or through her life, unless she gets intensive and prolonged treatment from a good quality pain management unit. Additionally, the prognosis in that report in respect of her “post-head injury syndrome” was (a) that her memory deficit and psychological problems, and intellectual damage, will be likely to continue for the rest of her life, unless she has intensive and prolonged treatment, which may ameliorate them, and also (b) that her post-traumatic migraine will remain for the foreseeable future, unless targeted and specialised treatment is given to the mother.

On 19^th November 2010, Moylan J made an order that the mother may file and serve a medical report setting out her current prognosis and the consequences of her road traffic accident, and that such a report was a reasonable and necessary disbursement on her public funding certificate.

Notwithstanding this direction, the updating medical evidence provided by the mother is thin. It consists of a report, dated 11 April 2011, by a consultant neurologist who had treated her. But it is clear from this report that she was last seen in his clinic on 15 October 2009. He confirms that her symptoms were consistent with the effects of post-concussion syndrome and a whiplash injury both complicated by secondary psychological difficulties, including low mood. He adds that, should she still be experiencing these problems, further advice about their management from a neurologist with a particular interest in headaches would be appropriate, as would clinical psychology input to advise on management of her low mood, as well as any residual cognitive difficulties, with a view to further ameliorating her ongoing difficulties. He also says that following an injury of this sort associated only with very brief post-traumatic amnesia, and no obvious injury on imaging to the brain, that the risk of post-traumatic epilepsy is not thought to be significantly increased.

Importantly, for present purposes, he says that the implications that the mother's symptoms have in relation to employment is not clarified by the available information (which would now include the fact that she is awaiting a medical in connection with her application for ESA).

During the hearing, the mother produced a letter from her GP dated 18 April 2011. This states that on 12 July 2010 the comment was made that she was seeing both a physiotherapist and a specialist, and that she was having trouble with sorting her memory and sequencing events; a possibility of frontal lobe brain damage was entertained by the doctor who saw her and a certificate for two months was provided as she was considered unfit to work in her job as a book editor. This letter contains no other information as to whether or not the mother was considered, at other times, to be unfit for work but it indicates that she was seen in respect of complaints of dizziness in October 2010 and February 2011, and that she was prescribed tablets to assist this, and was given painkillers for her head and neck pain. She told me that since May 2010 she has suffered from labyrinthitis which causes vertigo, dizziness and sickness.

The mother's position was that the after-effects of her road traffic accident, and, if it is not one of them, her labyrinthitis, and so in particular her auditory memory problems, her short term memory problems, horrific pain, problems with her balance and side effects from medication, have meant that she has been, and continues to be, unable to work. In her oral evidence, she qualified this by saying that she was unable to do the work she used to do. She told me that she had edited a year book to assist learning at Luc’s school, for which she was paid about £3,000, and that she has started work on another similar book for which she may receive some payment, but that she has no contractual entitlement to any such payment. This might explain the reference to her being a book editor in the certificate her GP’s letter refers to, but why she needed such a certificate for her self employed work on a book is unexplained.

The mother also told me, and I accept, that after a long wait she has had a considerable amount of physiotherapy, which has been helpful, she is still waiting to receive cognitive therapy and that the delay on this has been added to by funding disputes between PCTs.

The father told me, and I accept, that the first time he was provided with the first of the medical reports I have referred to was last week. The other reports came this week.

The mother told me that she has not brought, and that so far as she knew her insurers had not brought, proceedings against the driver of the van or his employers for damages for personal injury. She said that in respect to her insurance claim an issue had arisen as to whether she was wearing a seat belt.

It has not been in dispute that the mother had the car accident and that this has caused her long lasting and continuing problems. But the father does not accept that these problems prevent her from working and, on the evidence, neither do I.

I am not a doctor, but as the medical evidence produced does not provide an informed medical opinion on the mother’s ability to work, I consider that I should take into account my observation of her as a witness. In my view, the mother demonstrated in giving her evidence that she is an intelligent and determined woman, an excellent recall of the events of this litigation and no unusual difficulty in understanding, retaining and answering questions. A similar performance in many work places (albeit that it would have to last over a longer but less stressful period) would make her good at her job there.

I do not accept that she has made any real effort to obtain, or to assess her ability to obtain, employment although I acknowledge that in the current climate, her period out of work and her lack of up to date computer skills will cause her problems in finding work.

Her evidence that if she does obtain work she will lose state benefits was advanced only as a generalisation and confirmed that she has not seriously pursued the possibility of her obtaining employment and the cost/benefit analysis of this relating to her care of Luc and its impact on her state benefits. I shall return to the impact of her employment on her benefits and record that I was provided with additional information about this from both parties after the end of the hearing.

The father was born in 1962 and is now 49. Following his separation from the mother he married in July 2001. There is a son of that marriage, Jack, who was born in 2002 and is now eight. That marriage ended in divorce and a final and clean break order (apart from periodical payments for the benefit of Jack) under the Matrimonial Causes Act 1973 was made by consent in April 2009.

Jack lives with his mother and has fairly frequent contact with his father.

The father has a new partner and another son, Harry who is now five months old. He lives with his new partner and their son in a rented five bedroomed house near Reading.

When the parties were living together the father was the CEO of a company (ICo). As I understand it, this was an investment company or vehicle. He had shares in that company.

In November 2002, with three others, the father founded an investment company, CCC Ltd. It specialised in investments in companies and ventures that promoted environmentally friendly projects or aims. In 2008, when the husband told me he and his wife had just separated, some of the founder shares, which were in the name of his wife, were sold for about £3m gross. The father resigned in 2009 from CCC Ltd.

In March 2010, the father set up a company called T Ltd which is a vehicle through which he offers his services as a consultant. Since then he has entered into arrangements pursuant to which (a) he is entitled to an income stream through T Ltd based on consultancy fees and/or success fees, and (b) he has personal opportunities for capital growth, through discounted share purchases, warrants or options. He is working in the same general field as he was when he was with CCC Ltd.

His aim and hope, as with both ICo and CCC Ltd, is that opportunities will arise when significant capital gain can be made from the sale of shares he has acquired in private companies.

They were both earning; she around £30,000 per annum and he around £100,000 per annum. They lived in a pleasant and large rented apartment in Bayswater and enjoyed a good lifestyle, commensurate with their combined earning power, which included many breaks abroad, often associated with or following work trips by the father. As I have mentioned, they separated shortly after Luc’s birth.

For his early years Luc lived in California and, until the mother gave up her rented property there, he had holidays in California. The mother described him as a typical American boy and told me that he is keen to continue with his life saving courses. He has a number of other interests. Since his return to England he has been at private day schools in London and the father has paid the fees.

Recently, he has suffered chest pains and has been seen by a cardiologist and a respiratory consultant. He is undergoing further tests and observations but as yet no definitive diagnosis or prognosis has been given. He has had some stress at school, the cause of which has now been addressed and it is hoped that this will assist. It is also hoped, and the present medical advice is in line with the view that, his chest pains are not a sign of significant long term medical problems.

This order recited that it was made on the basis that the parties intended that Luc would attend a private London Day School from September 2006, and that the father expected that his salary from CCC Ltd would increase to £150,000 gross per annum with effect from January 2006 in accordance with the terms of his service agreement. It then provided that:

with effect from 1 November 2005, the father was to pay to the mother for Luc's benefit periodical payments at the rate of £12,000 (with RPI increases) per annum until he attained the age of 17 years, or completed full-time secondary education,

the father was to pay the following additional sums for Luc's benefit by way of periodical payments, namely £350 per calendar month commencing on the 1 November 2005 and payable until either (a) such time as his obligation to pay school fees should commence, or (b) [an alternative that was not said to be relevant] and that, provided the father's gross income was not less than £150,000 per annum in any given year, such sums as represented the school fees and reasonable extras appearing on the school bill at whichever school Luc should from time to time attend on the basis of the parties’ mutual agreement.

It is apparent from that order that it was made against a projection that the father would earn £150,000 gross or more per annum.

It is also clear, and effective common ground, that:

the father’s case was that it was his wife who owned the founder shares in CCC Ltd and that he owned a much smaller percentage of its shares, and

the mother knew that founder shares were registered in the name of the father’s wife, and would have liked provision to be made for Luc which had regard to or from the shares in CCC Ltd registered in both the names of the father and his wife.

At around the time that she issued her present application the mother became aware that the father was, or may be, making assertions in his divorce proceedings relating to the ownership of the shares in CCC Ltd registered in the name of his wife that might indicate that he owned them, and therefore that he had not been giving a truthful account as to their ownership to the mother and the court in her application on behalf of Luc.

The mother made an unsuccessful application to be joined to those ancillary relief proceedings but a successful one for disclosure of the father’s Form E therein.

The account given as to the formation of CCC Ltd by the father in his Form E in his ancillary relief proceedings, was that:

Each of the founders paid £5,000 for 25% of the business which resulted in the issue of 500,000 1p shares to each of them, but his shares were put in his wife's name "to ensure that they were protected from a litigious ex-girlfriend".

Later, in 2002, an angel investor subscribed £25,000 for 10% of the business at 11p a share and, in August 2003, an external friends and family round was conducted raising some £832,000 with each ordinary share valued at 30p.

A follow up round, with the same shareholder group, followed some nine months later at 60p per share. Later, in 2005, an A round was carried out with three institutional investors raising £6.5 million, at around £3 per share, and three years later (i.e. in 2008) a B round was carried out raising around £15 million at a price equivalent to £11.50 per share. The B round, in 2008, was implemented using a NewCo to purchase the assets of CCC Ltd.

As part of the B round, the father's wife sold 282,000 of the founder shares held in her name for £3.175 million gross.

Over the years, there had been some other share issues (some by way of bonus payments to the father) and following the B round, and the sale of the founder shares in the name of the father's wife, the position was that (a) 1,947,980 shares in NewCo were held in the name of the father's wife, and (b) 329,591 NewCo shares were held in the father's name and 901,654 NewCo shares were held in an EBT on behalf of the father (a total of 3,180,225 shares of which 1,232,245 shares were in the name of the father and the EBT and the balance were in the name of his wife).

The B round proceeded on the basis that the shares in NewCo had a value of £1 each and, as following it there were 102 million issued shares in the company, the B round gave NewCo an effective value of £102 million. The father explained that that valuation was based on an aggressive growth trajectory by reference to raising new investment funds over the period from 2008 to 2012 that would take the total assets under management to around US$10 billion, with revenues of £120 million, and profits before tax of some £35 million. But this expectation was not achieved, having regard to the general financial and economic climate, and the father said that the current view of the board and senior management was that NewCo had a value of around £40 million, and therefore the share price was around 40p. But he went on to point out that, as the company was a private company, it was unlikely that, even if the shares could be sold, they would have a realisable value of much more than 25p per share and he therefore valued the shares held by his wife, himself and the EBT at around £800-£900,000 as at June 2009.

So, by his Form E in those ancillary relief proceedings the father was asserting that all of the shares in the name of his wife were his shares, indeed the Form E contains that assertion in the introduction to the explanation relating to the acquisition of further shares and disposals of some of them by asserting that:

That Form E account also refers to two dispositions of shares that the father told me, and I accept, were in the name of his wife. One in 2004 at 1p a share to a new chairman, and one in 2005 of 25,000 shares at £3.05 a share (£76,250). In his oral evidence to me, the father said that he thought that this sale was in 2007. I have no other evidence as to the date of this sale, or to whom it was made, or the circumstances in which it was made.

In his oral evidence to me, the father asserted that the account he had given in respect of the founder shares in the name of his wife in these proceedings was the true one. This was on the basis that he was and is asserting that in law his wife was the owner of the shares in her name. He sought to explain the account set out in the Form E on the basis that it was something he had put forward in the ancillary relief proceedings to found the proposition that all of the shares in CCC Ltd were family assets, and to refute a claim made by his wife that they had been bought with money she brought to the marriage, and therefore should be treated as her pre-acquired assets. The first thing to note is that this explanation does not fit easily with the language used in the Form E.

In giving that account the father effectively confirmed that at least one of the reasons for the £5,000 for the founder shares being provided by his wife, and them being put into her name, was to seek to exclude them from being taken into account if the mother made further claims against the father on behalf of Luc. In giving his oral account, the father indicated that this reason and purpose was something that his wife suggested and / or supported and, as the Form E confirms, his oral evidence indicated that they were both aware that it was a real possibility that the mother would make such a claim.

The father was consistent in asserting that the £5,000 was his wife's money, and that he did not have the money to subscribe for the founder shares, but at one stage he said that his wife had put up the money and at another stage that she had lent the money. I pause to comment that, although this was not investigated with him, it seems surprising that the father did not have £5,000, or could not have obtained it from another source if he had wanted to do so.

The disclosure of the Form E put the father in a difficult, and in many senses a "Catch-22", situation because his two accounts in the two sets of proceedings are inconsistent and self-serving in each of the proceedings. I did not find his oral evidence convincing and therefore do not accept that, as he asserted, the account he has given in the proceedings relating to Luc is an accurate and truthful one, or the more accurate and truthful one.

However, without hearing from his ex-wife, or indeed having any account of her position save through the father, I am not prepared to make a finding as to which of them was the true beneficial owner of the founder shares. As I understand it, and this would seem likely, the position of the wife was and is that she provided the £5,000 for the shares on the basis that they would be an investment by her and so they represent assets which she brought to the marriage. Even if, the purpose or one of the purposes, behind the shares being taken in her name was to shield them from a claim made on behalf of Luc it does not mean that the agreement or understanding between the father and the wife was that she would hold the shares for the father. Indeed, it is perfectly possible to seek to achieve that purpose through an arrangement or understanding that the wife was to be the true beneficial owner. So, it seems to me, that to establish that the father was the beneficial owner of the founder shares in the wife’s name, the mother would have to provide evidence to demonstrate that the court should conclude that the underlying agreement or arrangement between the father and his ex-wife was that the wife would not present the true position as to ownership to the outside world, and in particular to the mother and the court in any proceedings the mother brought on behalf of Luc. This would involve a finding of dishonesty against the wife, which in my view it would be inappropriate for me to make without giving her the opportunity to be heard. Additionally, in the context of the resolution of the issue of the beneficial ownership of the founder shares it seems likely that discovery as to the sale of the 25,000 shares in 2005 or 2007 would be relevant.

Therefore, in my judgment the clear fact that the husband has given divergent and self-serving accounts in two sets of proceedings, and my non-acceptance of his oral explanation of the differences, goes, and goes only to credit.

In that context, and in respect of other credibility findings relating to both parties , I have naturally given myself a Lucas direction.

So far as the wife was concerned this was a clean break order. By it (a) the wife paid the father a lump sum of £350,000 and transferred to him 450,000 shares in NewCo, and (b) the father transferred to the wife his interest in the matrimonial home subject to the mortgage. So far as the child of the marriage was concerned, Jack, the order made provision by way of agreement and undertaking to the court and orders for periodical payments. By way of undertaking the father agreed and undertook to the court that:

he would, until Jack completed his secondary education, reimburse the wife all costs of extracurricular tuition,

he would meet all university tuition fees incurred by Jack,

he would pay, or cause to be paid, to the wife or to Jack, Jack’s reasonable living expenses from the completion of his secondary education until he completed his first degree (including for a gap year of not more than 16 months), and

in the event that he made any application to C-MEC, or a successor body, resulting in a reduction of the level of maintenance due to Jack under the order he would, until the third anniversary of the order, nonetheless continue to make all payments that would otherwise fall due pursuant to the undertakings, and the terms of the order, unless specifically released by the court from the terms of the undertaking.

pay periodical payments to the wife for the benefit of Jack at the rate of £20,000 per annum, with annual RPI increases, until Jack reached 18 years or ceased full-time secondary education or further order, and

pay further periodical payments to the wife for the benefit of Jack in the sum of the private school fees, and all reasonable extras specified on the school bills incurred by Jack, at named schools and at such other schools he attended by agreement between the parties.

As is not unusual, the father was remunerated by way of salary and bonus payments in cash and shares. An EBT was also set up, bonuses and carries were paid to it and he received loans from it.

A table was provided by the father of his total remuneration from the companies for the years 2004 to 2009 made up of salary (in cash), as I understood the table and the evidence, general bonus and carry bonus (in cash) and a share bonus. The mother accepted and asserted that the general, carry and share bonuses were all paid to the EBT and the salary was paid direct to the father. The father received the benefit of loans from the EBT. I was not told the amounts or dates of those loans. Also, I have not found a history of the shareholding of the EBT in CCC Ltd and NewCo, from time to time, and thus of any sales of such shares by the EBT. There is however a letter from the trustees of the EBT dated 2^nd December 2010 which indicates (a) that the assets of the EBT held for the father are made up of cash (a total of £227,576.46 capital and £2,970 income) and outstanding loans to him of £342,720, and (b) that as the loans equal 60% of the trust’s total value the trustee is not prepared to make any further loans to the father. I add that there was no suggestion that he was at any real risk of having to re-pay those outstanding loans.

The father now has 1.96 million shares in NewCo.

It is therefore clear that through salary, and loans from his EBT, the father’s remuneration package from CCC Ltd exceeded the £150,000 per annum upon which the 2005 consent order made by DJ Bowman was based. His salary reached that figure in 2006 and was then £200,000 for 2008 and £221,000 for 2009. The highest total gross annual remuneration package in the table is £742,540 for 2008, but when considering that figure it must be remembered that apart from the salary (£200,000) the benefit the father actually received from it came by way of loans through the EBT, which it seems from the letter dated 2^nd December 2010, totalled approximately £342,720.

It is common ground that the father did not tell the mother of this considerable income and capital success through CCC Ltd. The father points out that she could have discovered this through accounts at Companies House and that this possibility would certainly have been known to the mother’s father (who is a financial journalist who has helped his daughter throughout the litigation). The timing of any such possible discovery would, of course, depend on when the relevant accounts were filed, which would be some time after the relevant year ends.

The father also pointed out that on a voluntary basis (a) in 2007, he increased his payments to the mother for the benefit of Luc to £1,250 per month, and then (b) in 2008, he further increased them by £636 per month in respect of rent (to enable the mother and Luc to move to a larger flat) and thus to a total of £1,886 per month or £22,632 per annum (which approaches double the 2005 Order).

The capital gain on the sale of founder shares in the name of the father’s ex-wife in CCC Ltd / NewCo (and possibly other shares by the EBT) and income through salary and loans from the EBT, is now a matter of history because the father no longer works for NewCo and his only remaining prospect of income from that company is through a “carbon carry bonus”. But, it is easy to understand why the discovery by the mother of the father’s conflicting presentation in the two sets of proceedings of the position relating to the ownership of the founder shares in CCC Ltd, and the considerable income and capital return from CCC Ltd and NewCo enjoyed by him and his ex-wife:

has infuriated the mother, because if she had applied for a variation of the payments for the benefit of Luc, in say 2008, she might have been awarded much more than the father volunteered in 2007 and 2008, and which she accepted by reference to what she then knew of his financial position, and

has fuelled her mistrust of the father’s disclosure and her assertion that at present he is a high earner in both income and capital growth terms.

It is sensibly common ground that there is no effective market at present for his 1.96 million shares in NewCo.

The wife was transferred the matrimonial home (subject to its mortgage) and after making the payment of £350,000 to the father and transferring to him 450,000 of the shares in NewCo in her name, and which she claimed were hers, she retained all the other assets in her name. This left her with, a substantial holding of NewCo shares. The father confirmed that his ex-wife retained, and still has, a substantial shareholding in NewCo and the precise size of it is not relevant for present purposes.

Whatever the position concerning the beneficial ownership of the founder shares prior to the consent order on the divorce, the position after that order was made is as above. Further, and whatever the beneficial ownership of the shares in CCC Ltd and NewCo was, both the father and his ex-wife knew that:

the opportunity to acquire the founder shares arose because the father was one of the founders,

the father worked in the business, and therefore was one of the persons responsible for its success,

the increase in the value of the shares to their value in 2008, which the father told me was also the year of separation, occurred during the marriage,

the wife retained the balance of the significant capital sum (around £3 million gross) derived from that opportunity, work and market forces,

both the father and the wife retained shares in NewCo and, in 2008, notwithstanding the point that the success of the company has not matched expectations, there was a prospect, confirmed by the father in his oral evidence to me, that at some time in the future an opportunity would arise to sell the remaining shares for a significant sum,

the father would have continuing liabilities to Jack by way of undertaking and order, both of which could be varied by the court,

the father also would have continuing liabilities under court order to Luc, which could also be varied by the court, and as to that prospect:

the mother’s oral evidence to me was that, from her conversations with her, the wife was aware that the mother might well seek further orders on behalf of Luc, but I do not know what the wife would say as to this, and

the reasons why the founder shares were in the wife’s name and who owned them beneficially is relevant,

the father would also have continuing liabilities to others, who now include his new partner and their son,

the wife took more capital than the husband having regard it seems to their respective earning potentials, and

the father's ability to meet his continuing liabilities was dependent upon his success in the future (and any income or capital of a new partner).

The obvious effect of this on the two boys, Luc and Jack, is that:

the father took the risk that he would be able to make the payments for their maintenance and education from the income and capital gains he was able to generate in the future, which would include the proceeds of any sale of his shares in NewCo as and when an opportunity to sell them at a good price arose. The father told me, and I accept, that this was not the first time in his life that he had been prepared to take a risk based on his view as to his future financial prospects, but

Jack had the safety net arising from the retention by his mother of the remaining balance of the significant capital that had been realised from the sale of some of the founder shares in CCC Ltd and her retention of a significant shareholding in NewCo which, if and when an opportunity arose to realise it, would provide further capital which she could utilise for the benefit of Jack if the father could not afford to meet his liabilities to Jack under the order, whereas

Luc had no such safety net and in that sense the father took the risk, and therefore passed that risk on to Luc, that he would be able to meet payments for both Jack and Luc’s maintenance and education from his future earnings.

In my view, on any application by the father to vary the payments he is obliged to make to Jack these risk factors and the safety net available to Jack but not to Luc would be taken into account by the court whether it was the wife (Jack’s mother) or the father who owned the founder shares.

Also, in my view, the factors set out under this heading found the conclusion, which I reach, that for present purposes the father’s liabilities to Jack should not be treated as fixed or ones that cannot be reduced and thus, as between those two boys and as matters strand, the father cannot rely on his liabilities to Jack to reduce the provision he should make to Luc. In reaching that conclusion, I have not forgotten that Jack is the child of a marriage, or that the father sees Jack, but not Luc, regularly.

At this stage these matters go to credibility and in particular to the assertions by the parties concerning their respective financial positions and prospects.

As appears later, in respect of both of them there are uncertainties concerning this that are not capable of precise assessment.

However, having regard to my conclusions:

set out under this heading, and

as to the disclosure by the father in these proceedings,

Hostility. Sadly, it is clear that there is considerable hostility between the parties. It seems that this has arisen for a number of reasons including the circumstances relating to the breakdown of their relationship, problems concerning contact with Luc and in respect of these proceedings. As I understand it, for much of the proceedings the mother has acted in person. At the hearing before me, the position was reversed and it was the father who was acting in person and the mother who was represented.

This antagonism and hostility has led them both to mistrust and doubt the word of the other. Also, they both made allegations of dishonesty against the other, for example:

in respect of the termination of the mother’s employment in America, and the acquisition by the mother of her car, and

in respect of the termination of the father’s employment by ICo and the father's dealings with the CSA.

An aspect of that approach was that they both gave partisan evidence. Also, and although they both expected the other to accept what they asserted in the absence of available corroboration, they both doubted the word of the other particularly when it was self serving and not supported by available independent evidence.

The duty of disclosure. In his oral evidence the father, unsurprisingly given the history of the litigation, gave a correct explanation of his duty of disclosure. That duty is to give a full and clear account of relevant issues, and of any relevant changes in them. The mother was not asked an equivalent question but I am confident, given the history of the litigation and her complaints against the father for non-disclosure, that she is well aware that she has a mirror duty.

Complaints against the mother. Complaint is made against her that:

she has failed to make proper disclosure concerning her health,

she has failed to provide full and up to date information on her receipt of benefits and the impact thereon of her gaining paid employment,

she has failed to comply with orders and, as a result thereof has provided information late, and

she has made repeated applications in the proceedings, which were unnecessary and have caused the father unnecessary expense.

As appears above, the complaint relating to disclosure of information on her health, and thus her ability to work, was made good. Additionally, as I have mentioned, prior to the hearing the mother had not made any real attempts to look for work or to calculate the impact on her benefits of her gaining paid employment. Her stance on these important matters mirrors her complaint against the father that the information he has advanced on his income and prospects is general and unsupported by third party material. During final submissions, I called for further information on the position relating to benefits and this was provided after the hearing, by both parties.

The mother was very late in serving her evidence for the final hearing. It was due on 17^th December 2010, but was only served a few days before the hearing. Her solicitors correctly shouldered much of the blame for that and also for the very late identification of the detail of the amount of her claim. This late provision of material plainly put unnecessary and potentially unfair pressure on the father. Indeed, it might have rendered proper preparation of the case by him impossible if he had still been represented because then he would not have been drafting his response himself. This approach by the mother was therefore potentially unfair. But, in my judgment, the father was able to respond appropriately and gaps caused by the mother’s approach to benefits, and her likely income, have now been addressed.

At this stage, I am not in a position to make findings on her earlier applications in the proceedings because, in my view correctly, they were not gone into in any detail before me, albeit that I was directed to a document prepared by the father, which he maintained showed that he had throughout complied with his duty of disclosure. But the mother’s interjections as the hearing progressed, and her very late attempt to introduce further material, provided clear evidence that she regarded it as appropriate for her (a) to conduct herself in ways that she would have justifiably and strenuously have complained about if the father had done the same, and (b) to introduce material as and when she wanted to. As to the latter, the hearing was adjourned over the Easter holiday and on the first day of the next term the mother by-passed her representatives and sent directly to me a further statement based on information received from her father and some further material about Luc. I excluded the latter and would also have excluded the former if the father had not indicated that he was happy to deal with it. In my view, this approach to the provision of this information (even if, as the mother explained, her father had been away and not in a position to assist her earlier) was a clear demonstration that the mother was prepared to take an approach to this litigation that she would, with justification, have complained about in terms that it was unfair and showed a lack openness if the father had taken a similar approach.

On examination the additional information allowed in was in large measure a bringing together of material already in, or absent from, the papers relating to disclosure concerning ICo. So in many ways the new statement was unnecessary. After the father and the mother had been questioned further on this topic, and a short adjournment, the mother through counsel, to my mind correctly, reverted to the stance taken in final written submissions prepared by counsel for the mother, namely that the mother was not in a position to seek findings against the father concerning his disclosure in the 2004 proceedings relating to his shares in ICo, their value and sale.

Complaints against the father. Complaint is made that he has sought to hide assets and income sources and has given inadequate disclosure of his income capital and prospects. These complaints related to the 2004 proceedings and to these proceedings.

In respect of the 2004 proceedings, as I have already mentioned, the assertion relating to ICo was not pursued. I however record, that on their face the father’s explanations appeared reasonable and correct albeit that both sides would have liked to vouch their stances by reference to further material. I also record that in my view even if the mother’s claims relating to disclosure concerning ICo are right they are now old and add effectively nothing to the assessment of the issues before me.

Much more important, are the mother’s points relating to the divergent accounts given by the father in these proceedings and in his divorce proceedings concerning the ownership of the founder shares in CCC Ltd. I have commented on, and made findings as to this, earlier in this judgment. Leaving aside questions on whether the account given by the father in the Form E found allegations that the value placed on the CCC Ltd shares in the 2004 proceedings was misleading (and, in my view correctly, I was not asked to make findings in this) my findings on the divergent accounts as to the ownership of the founder shares, and the father’s explanation of them, are strong factors in favour of the conclusion I have reached, namely that his evidence on his financial position and prospects that is not supported by convincing disclosure should be approached with caution.

The mother also complains about the father’s disclosure in the present proceedings. I shall deal with these complaints under the next heading.

The mother asserts that the father is a high earner and has good prospects, which he has sought to hide and minimise in these proceedings (and earlier ones). In her statement, she relied on the table of income and bonus from CCC Ltd (and NewCo) I have referred to. The level of that personal and corporate success is relied on (a) as an indicator of his future prospects, and (b) to demonstrate that his voluntary increases of maintenance were not as generous as they might have been.

On the mother’s behalf, her counsel estimated the father’s income as follows:

£514,810 per annum in her opening position statement,

£579,810 per annum in an amendment to that opening estimate to take account of matters set out in the father’s additional statement served very shortly before the hearing, and

£312,000 per annum for 2011, and £457,000 for 2012 in her closing submissions.

The mother’s position was therefore that the father was and remains a high flyer, and the presentation of his financial position in both income and capital terms was significantly understated, with the consequence that her claim was affordable.

As is shown by the significant decrease from the mother’s opening positions to her closing submissions the father was able to demonstrate convincingly (a) that the initial income estimates significantly overstated his position on the basis of the information he had provided, and (b) that it seemed that they were based on a misreading or misinterpretation of that information. So the mother was thrown back on her assertions that I should infer that the father has hidden income and capital and has underestimated his prospects.

As recognised, the estimates put forward by counsel for the mother were gross figures, and account has to be taken of the point that the father earns his consultancy fees through T Ltd, and therefore its reasonable expenses, reasonable pension contributions and the tax to be paid on the father’s income from T Ltd, must be taken into account before arriving at a figure that is available for him to fund payments to the mother for the benefit of Luc. Absent these qualifications the gross figures in the estimates are misleading.

An overview is that:

the father now acts as a consultant, his clients pay T Ltd (his consultancy company) and he personally acquires through warrants, options or purchases shares in those clients which he hopes to realise at significant capital gains,

recently, as part of his business plans, he has made three investments each of £50,000 in respect of three clients of T Ltd and asserts that T Ltd has four clients namely (a) SDK, (b) HS, (c) CGTL and (d) WP,

T Ltd has charged for other “one off” pieces of consultancy work carried out by the father, and

the consultancy fees to T Ltd are and can be made up of remuneration based on an hourly or daily rate or retainer and success or placement fees.

A problem for me and the mother is that in November 2010 Moylan J refused an order for disclosure of T Ltd’s bank statements and they have not been disclosed on a voluntary basis. So they are not available to us to check the receipts and outgoings of T Ltd. Rather, in accordance with Moylan J’s order we are limited to management accounts and invoices, which (subject to only reasonably small alterations relating to expenses) unsurprisingly match with what the father is, and has been, saying. I record that, at the beginning of the hearing, I indicated that the lack of these bank statements might lead to inferences being drawn against the father but, having been informed of Moylan J’s order in respect of the disclosure of information relating to the income of T Ltd, and the nature and effect of the father’s compliance with that order, in my view it would be unfair and wrong for me to do so. Further, and in any event, the information we have (in particular the invoices) confirms:

the fee income of T Ltd in respect of SDK, HS and WP, and receipts from CGTL at the level asserted by the father,

shows “one off” invoices of T Ltd,

supports the father’s assertion, which in any event is reasonable, that T Ltd has annual expenses of around £50,000 (including a PA) albeit that he acknowledged that some entries in the management accounts he produced, in compliance with Moylan J’s order, should not have been included, and

that the father may receive directly further carry payments from the CCC Carbon Fund.

The mother, complains that:

the management accounts of T Ltd did not show a fully accurate picture as to its expenses, and the father accepted this,

the father failed to disclose his service agreement with WP, or his partnership interest in that company, until the mother discovered that he had such interests, and

the father failed to disclose his service agreement with CGTL, and incorrectly asserted, in response to a letter dated 22^nd March 2010, that the position in respect of CGTL was as set out in a letter written in December 2010 from its CEO, that was provided in compliance with Moylan J’s order made in November 2010.

In my judgment, there is some validity in these complaints but they are over stated by the mother and she seeks to gain too much from them.

In my judgment, submissions to the effect that, if the hearing had taken place in November 2010, the court would not have been informed by the father of his relationship with WP, or of the details of his agreements with CGTL, involve inappropriate speculation, particularly in the light of the exchange of information in the lead up to the April 2011 hearing, and the very late production of the mother’s updating evidence.

The disclosure issues are complicated by the orders and directions made by the court in an understandable attempt to set a proportionate approach to the litigation. I have already mentioned the absence of the bank accounts of T Ltd. Further, I do not accept that the admitted inaccuracies in respect of the expenses shown in the management accounts of T Ltd found an inference that the receipts recorded therein are also inaccurate, not least because, and albeit unsurprisingly, they are supported by the invoices provided in accordance with the order made by Moylan J. However, the absence of an explanation from the father, when he provided the management accounts that they do not reflect a full and proper allocation of expenses is an example of the father failing to comply fully with his duty to give full and clear disclosure, and supports the view that his figures and projections should be approached with caution.

Also, I have concluded that the father’s explanations for the timing of his disclosure relating to WP and CGTL, namely that he did not disclose the terms of his engagement / arrangements with them because agreements had not been signed was unconvincing because, as he made clear, in respect of other arrangements he and those with whom he made them relied on trust and, on that basis, the relevant arrangements with WP and CGTL were in place from earlier dates than the signing of the relevant agreements. Further, in the case of CGTL they were acted on and, as I understood it, made some changes to the position set out in the December letter from the CEO of CGTL. The father seemed to accept this by also asserting that the changes were shown by the invoices he had disclosed and so they were disclosed and he did not have to provide any further information because by sending the invoices he had complied with Moylan J’s order. I accept that in part this approach flowed from his annoyance with the mother because of her approach to the litigation and her constant general theme that he was hiding assets and information. But, and even though he complied with Moylan J’s order, this stance by reference to the signing of agreements and the ability of the mother to discover changes from an analysis of invoices is a failure to give clear disclosure of relevant changes and thus of new information.

But, taken alone and together with the history of the proceedings and the divergent accounts relating to the ownership of the founder shares in CCC Ltd, these complaints and my findings on them do not cause me to conclude that at present the father has additional sources of income or other financial resources to those he has disclosed.

So, the mother has failed to establish her serious allegations of deliberate and thus dishonest disclosure and so her platform for an inference that there are hidden assets and financial resources.

The father’s presentation is attractively simple in that he asserts that his going rate, and likely maximum daily retainer for consultancy, is around £50,000 for one day’s work a week, and that if there are success or placement fees credit will often have to be given for his retainer. On the basis of a five day week, he therefore says that a fee income of £250,000 per annum for T Ltd is a reasonable one based on him winning and retaining the necessary level of work.

The £50,000 a day, is supported by T Ltd’s invoices, and I accept that it represents his present, and a negotiated arms length, charge out rate. This was not challenged. But, for the reasons given, I treat with caution the assertion that it represents the likely available maximum for the short to medium term future and that he will not have sufficient time to fit in one off commissions from time to time. The 6 months of invoices provided pursuant to Moylan J’s order indicate that these commissions have totalled around £50,000. I accept that with five regular clients the father may not be able to keep up that rate of one off jobs, but in my view an estimate of £50,000 per annum gross from such work would be reasonable. Also, there is inevitably some uncertainty in respect of success and placement fees both as to whether they will be achieved at all, and also in some cases as to their maximum or likely amount and what credit will have to be given for regular hourly / daily rates of remuneration. There is the prospect, recognised by the father in his final submissions, that they might produce a higher return than a retainer set at £50,000 a year, whether or not credit for such retainer has to be given in respect of such fees.

In his final submissions, the father asserted that:

his gross earnings from T Ltd for the financial year to April 2011, were approximately £135,000. This is in line with, if not wholly based on, the management accounts from 1 April to 10 January (approx 9 months). An extrapolation of them indicates gross annual receipts of around £220,000 and annual expenses of around £54,000 (which the father accepted were too high, and for future years he has taken them at £50,000 and a pension contribution at £24,000). A deduction of £74,000 from the extrapolated gross income of £220,000 gives £146,000 available for payment as salary to the father. It would be reasonable for him not to take all of that as salary to provide cover for contingencies. So the father’s estimate of his income from April 2010 and 2011 of £135,000 gross (£78,000 net) is reasonable on the evidence and my finding that he is not hiding sources of income, and I accept it,

both sides included the possibility of a payment of the carbon carry from the CCC Carbon Fund of about £45,000, as one that now arose from March 2012 (after a suspension). As I understand it, this carry would be paid to the father directly as it is separate from the bonus that is no longer due to him as chairman of the CCC Carbon Fund Investment Committee, which might have been paid to T Ltd,

the estimates advanced by the mother’s counsel were, as I understood it, for calendar and not tax years, so the closest comparison is between her 2011 figure (which does not include the carbon carry) and the father’s estimate for the tax year from April 2011 to April 2012,

the father’s estimate for that is based on receipts for T Ltd of £250,000. He acknowledged that if the maximum success and placement fees were earned (and retainers were not reduced) this fee income could increase by £40,000 to £50,000, and so to around £300,000 per annum. He takes no account of one off retainers,

this estimate of the receipts of T Ltd is in line with the estimate of counsel for the mother for 2011 (which was £312,000) and an approach based on the points made in paragraph 95 hereof because it adds around £60,000 to cover one off retainers and success and profit fees over and above a retainer income of £250,000. Also, it reflects an approach that father took the view when agreeing his divorce settlement, that there was a reasonable prospect that he would generate annual income receipts of that order,

drawing these points together, for the tax year April 2011 to April 2012, I estimate the likely gross income of the father from T Ltd at around £230,000 (based on expenses and pension contribution of £74,000 and a retention of £10,000, and thus gross fee income (including one off, success and placement fees) of around £314,000),

greater uncertainties and problems arise for later years but, in my view, the optimism indicated by the divorce settlement, the father’s own estimated increase for this tax year, the possibility of increases in retainer rates and success and placement fees and the need to approach the father’s evidence with some caution warrants an approach based on an increase of the father’s gross salary from T Ltd for the next tax year (i.e. April 2012 to 2013) to £260,000. This excludes the CCC Carbon carry of £45,000 (see sub-paragraph (ii) above) and although there is a risk that it will not be paid (and it depends on the efforts and results of others) I consider that it is fair to include it. That gives an estimate for gross income of around £300,000 which equates to a net income that matches the father’s present budget (around £160,000, see below) which, in my view, carries with it a fair inference that he hopes and expects to be able to meet that level of expenditure from regular income.

Naturally, I acknowledge that these estimates are far from certain because they are vulnerable to commercial factors outside the control of the father. I also acknowledge that they are based on his hard work and the development of his reputation to assist in him winning further work.

It must be remembered, that these estimates leave out of account an important element of the father’s business planning and investment, namely the realisation from to time to time of significant capital gains from his recent investments in companies he works for (which investments total £150,000) and the warrants and share options he has acquired and hopes to acquire. It is very difficult to estimate the return from these assets both as to total amount and as to when such gains might be made. No doubt the father hopes for a similar success to that which arose from the investment in CCC Ltd, but he points out and I accept that this is the only major such success of his working life and the economic climate is now very different.

In my view, it is more likely that any such capital gains will be realised in the medium to long term rather than the short term (by which I mean the period of my income estimates and thus to April 2013).

The father also hopes that at some time in the future he will be able to sell his shares in NewCo for a significant capital sum (and if and when he does his ex-wife may well be able to do the same). This too is at present such a medium to long term prospect.

In my judgment, this has to be assessed in the light of:

the estimates of income I have made to April 2013,

the prospect in the medium term (as defined) from time to time of irregular capital payments,

the father’s existing available capital, and

the point made by the father, that I accept, that it would be fair to attribute significant parts of any increases of income above the estimated levels and capital gains to the re-establishment of his financial position and base, his purchase of a home and investment in other ventures.

The cash at bank in T Ltd is allocated and is taken into account in the income estimates. I therefore reject the attempt by the mother to treat it as existing and available capital. The available cash is therefore at Lloyd’s Bank, a loan by the father to his parents and the balance of the moneys due from his wife which have been frozen (£50,000) (which total on his schedule dated 18 April 2011 about £130,000). He has some investments apart from shares in NewCo and recent investments in companies he works for as a consultant and the trustees of the EBT still hold funds but have asserted that will retain them. In his final submissions the father put a figure of £130,000 on his readily available cash or cash equivalents and I accept that figure because any reasonable and fair (as between the parties) realisation of his other assets are likely to be in the medium term.

The following are powerful factors in favour of there being a review of resources and thus of affordability and periodical payments:

the uncertainties in respect of the estimates of the father’s and the mother’s respective financial positions,

the nature of the father’s income and capital prospects and thus of the risks involved as to his income levels and the prospects of significant but irregular capital receipts, and

the history of there having been a significant improvement of the father’s income and capital positions (whether or not his wife was the beneficial owner of the founder shares in CCC Ltd), which he did not volunteer to the mother.

Absent such a review (by agreement or by the court) and some interim relief to inform the mother of the up to date position the balance of fairness on issues relating to changes based on affordability is in favour of the father in that he can always make an application for reduction on an informed basis if his position does not match the estimates but the mother cannot make an application for an increase absent voluntary disclosure.

It is clear that both parties have envisaged that Luc will be educated in the private system and that, subject to agreement or order as to what would best promote his welfare, this could be at a boarding school or a day school (including the American school).

Any assessment and debate on schooling includes issues relating to affordability and welfare (in which I include Luc’s prospects of passing the exams for various schools). I am not in a position to decide welfare issues and so any provision for school fees that I make must be subject to the proviso that if the school is not agreed it will have to be decided by the court applying the paramountcy test as between the practically available (and thus then affordable) options.

Luc is now 11 and so the main issue at present is as to where he will go at 13 in September 2013. It was effectively common ground that in the meantime he should remain in the private sector and that the father would continue to pay his fees. (I return to the points on extras).

So, in many ways the issue of what school fees should be paid is a future one and it seems to me that I have to decide whether on affordability grounds the more expensive option of boarding school should be ruled out now, or as the father at one stage argued the mother should elect now for more maintenance and lower school fees.

I have concluded that the more expensive option should not be ruled out now and the mother should not be put to that election because:

in my judgment, on the present evidence, it is not warranted on pure affordability grounds given my estimates of the father’s potential income and capital returns, and

further, if affordability issues arise in respect of Luc, for the reasons I have given, Jack’s position and the father’s continuing liabilities in respect of his education would be relevant.

Prudent planning to promote Luc’s welfare clearly involves ensuring that registration fees are paid and other steps are taken to seek to ensure that he is entered for an appropriate range of schools and his education is directed to maximising his chances of being offered places across the range.

It is of course very tempting to try and reach final conclusions now on schooling but, absent a welfare decision this is not possible. And, in any event, it seems to me that it is also not possible to achieve finality on financial / affordability grounds because inevitably any present view is based on estimates and the financial position may be significantly different in two years time.

The schooling issues therefore support a conclusion that there should be a review in 2013.

It is correctly common ground that the father is not at present in a position to fund the purchase of a home for Luc (and the mother). The father asks that this application be dismissed. The mother reserved her position as to whether or not this would prevent her making a further application for the purchase of a home, but her primary position was that this application should be adjourned. A factor in that approach by the mother was that the adjournment would provide a vehicle for the continuation of interim relief which would prevent the sale of shares in NewCo (or other shares or assets) and the application of the proceeds without (a) her knowledge, and (b) either her consent or that of the court.

That knowledge would enable the mother to decide whether to pursue an adjourned application for the purchase of a home for Luc and of course to seek to vary the periodical payments. The father is anxious to avoid any interim relief that inhibits his commercial decisions and activities.

I acknowledge that there are strong arguments that even if the father made substantial capital gains Luc and the mother should remain in rented accommodation but, in my view, it cannot be said that whatever the gain the arguments in favour of a home for Luc being bought could not succeed. Accordingly, in my view the appropriate course is for me to adjourn the application that the father do buy a home for Luc and the mother. (I return to the issue of interim relief).

As indicated earlier I received further information after the hearing from both sides concerning the impact of the mother gaining employment on her receipt of benefits (and in particular housing benefit). The information provided confirms the general assertion that if the mother worked her benefits would reduce.

In my view, the approach of both sides that, if the mother was able to find employment, her earnings would be of the order of £20,000 to £25,000 is reasonable. On that basis, it is common ground that her benefits payments would reduce.

The father presently pays £626 a month to cover the difference between the mother’s actual rent and her housing benefit. It seems to me that this rental element is primarily or exclusively directed to housing Luc appropriately and that therefore in the short term, if the mother works, it should remain as an element of the periodical payments to be made by the father.

On this approach to the top up payment to cover rent, at income levels of up to £25,000 (and leaving aside the periodical payments made by the father) the issue whether overall the mother’s income (from all sources) would increase or decrease depends to a significant extent on the figure included for additional child care costs caused by her return to work. In the mother’s estimates (provided by the DWP) this is included at £200 a week (£10,400 a year) and no account is taken of the periodical payments made for Luc by the father.

The periodical payments made, and to be made, by the father for the benefit of Luc have two elements one of which is a carer’s allowance and this means that it is not right to proceed on the basis that if the mother goes to work, in the short term, it will make no effective difference to the father because his payments should increase pound for pound to meet the child care costs that this would trigger. Rather the increase in the outgoings because of the child care costs has to be factored into what the father should pay and what the mother’s earnings should be allocated to. In the context of this case sums of the order of £100 to £200 a week are of significance to both payor and payee.

The father’s figures for the reduction in housing benefit are different but they give a similar overall picture, namely that if child care costs are included at £200 per week the overall result would approximate to a break even position if the mother was earning £20,000 to £25,000.

I was not told how the figure of £200 a week was calculated or assessed. It seems to me that given Luc’s age that this figure may be high. But I acknowledge that during school holidays the mother would not be able to set her working hours around the school day and an average cost over the year would be appropriate.

In the longer term, it would seem to be in both the mother’s and Luc’s interests that she should return to employment as soon as possible and try to increase her earnings above the £20,000 to £25,000 range. Also, in the longer term child care costs should decrease. Further, in my judgment, on the evidence, fairness as between the parties founds the conclusions that the mother should seek employment with a view to reducing her claims on the father in the longer term.

But, in the short term, I have concluded that her spending power for herself and Luc is going to be based on a combination of:

benefits,

the mother’s earnings (estimated at £20,000 to £25,000 if she finds work), and

periodical payments by the father,

I was not told in what circumstances the payments made by the father would or could be taken into account to reduce or extinguish benefits, and thus the basis of an earlier assertion by the mother that he should relieve the state of any responsibility. In any event, by the end of the case this assertion was not pursued and it was common ground that the mother’s income for herself and Luc would include benefits.

I accept that there are uncertainties in connection with the amount of benefits the mother will be entitled to, having regard to the present economic climate and possible changes to the benefits system, her ability to work, her returning to work and possibly the impact of periodical payments made by the father on benefits.

These uncertainties are further factors in favour of there being a review from time to time.

It was accepted that the mother’s budget (a) incorrectly treated the top up for rent of £626 as an expense over and above the rent of £1,826 per annum, and (b) did not correctly reflect the impact of her housing benefit. Her budget included:

monthly expenses of £1,473 a month excluding rent and so monthly expenses of £3,299 a month including rent at £1,826, and so

planned expenses of £3,435 (over an undefined period) which included some one off expenses (e.g. £250 on assessments for Luc, £800 on a computer and £1,000 for 11+ tuition). But this did not include any budget for holidays and she told me that she would want to include £100 a month so that she and Luc could go to California once a year.

I accept, that some of the regular items in this budget have changed and that the overall effect of the changes has resulted in an increase. So, in my view, this budget and the points made on it provides support for overall annual expenditure (including one off items and rent) of the order of £48,000 a year (say £3,650 a month (including rent) and £4,000 additional expenses – the figure she told me in her evidence would be about right). The total of £48,000 could, of course be re-attributed and there can be argument as to what is or is not regular and one off expenditure (e.g. for holidays and school and leisure activities).

It was submitted that this budget was a bare minimum, but even on that basis it does not support her claim for periodical payments from the father at the rate of £48,000 per annum because they would be directed to making up the difference between that expenditure and the total of the benefits and income (including housing benefit) payable to or for the benefit of the mother.

The benefits at present being paid to or for the benefit of the mother total £1,487 a month (£17,844 a year) and therefore:

to reach a total of £48,000 per annum the father would have to pay her £30,156 per annum or £2,513 a month, and

if she was to be paid £48,000 per annum by the father her overall income and spending power per year (if the benefits remained the same) would be £65,844.

His budget was £13,633 a month (£163,596 a year). This included £6,252 a month (£75,024) for Luc and Jack including school fees and general maintenance (at approximately £20,000 per annum each) and so a balance of £88,572 for himself his present partner and child. Some small adjustments were accepted in connection with expenses paid by T Ltd but in broad terms his budget for his present household was of the order of £40,000 more than the mother’s budget and exceeded his present earnings. The consequence being that, at that level of expenditure, he would eat into his available capital to meet his annual expenditure unless and until his annual income and one off capital gains increased to cover his budgeted expenditure.

I have little or no information as to the income and prospects of the husband’s present partner but his budget includes provision for a nanny by way of remuneration and a car.

Expenditure by the father at his budgeted rate (even without contribution from his present partner) will plainly produce a better lifestyle for him (and them) than the mother and Luc will enjoy if their annual resources equate to her budget for them.

The approach in law. The claim is made under Schedule 1 to the Children Act 1989 which sets out the statutory test to be applied (see in particular paragraph 4). Additionally, I have had particular regard to the guidance given by the Court of Appeal in Re P(Child Financial Provision) [2003] 2 FLR 865. (The father was provided with a copy of that case and the relevant statutory provisions.)

Schedule 1 confers a statutory discretion to make financial provision in defined ways for the benefit of a child having regard to all the circumstances of the case including the matters listed in paragraph 4 thereof. Re P confirms that the welfare of the child is a constant influence on the exercise of the broad judicial discretion conferred by the statute and that the award for the benefit of the child can include an allowance for the primary carer which recognises the commitment, responsibility and often the sacrifice of that carer. In my view, and as was essentially common ground, this is a case where such an allowance should be included for the benefit of Luc and that in determining the amount of the award to be made the benefits that the mother is entitled to, and the impact on them of her obtaining paid employment and of the payments from the father should be taken into account.

In my judgment, costs and any charge in respect of publicly funded costs are separate issues and subject to separate discretions to that conferred by Schedule 1. But the court is inevitably aware that they can have a significant impact on the overall result flowing from the award it makes.

The periodical payments. I have concluded that the father should pay periodical payments at the rate of £28,000 per annum (£2,334 a month) with RIP increases, from 4 March 2010 (the date of the present application). He is presently paying £1,115 + £636 = £1,751 a month = £21,012 a year (of which (636 x 12) £7,632 represents his voluntary contribution towards rent and the balance of £13,380 is paid under the existing order. He offered and argued that he should pay periodical payments of £20,000 per annum (£1,667 a month) plus some extras (totalling £3,500) and school fees.

My figure (and his) includes the sum of £636 per month as a payment allocated to rent and I have reached my figure on the basis that in calculating arrears credit is to be given for the voluntary payments of that sum.

My conclusion is not, and in my view cannot properly be, based on a mathematical or formulaic approach. Rather, it is based on a consideration of all the relevant circumstances and in particular the matters set out in sub-paragraphs (a), (b), (c) and (f) of paragraph 4 of Schedule 1, as to which I have made findings earlier in this judgment, and the guidance given in Re P. There is an overlap between my conclusions on the claims for periodical payments and a lump sum.

Albeit that, as I have said it was asserted by and on behalf of the mother that her budget was a bare minimum as to regular and one off expenditure, spending power of £48,000 (of which about £22,000 is in respect of rent for a London property) produces a standard of living that is significantly in excess of that enjoyed by many (see for example Table 14 in At a Glance - the grossed up net maintenance table) and of the maximum award by the CSA. But, in my judgment, those comparisons are not the right or important benchmarks and in setting the relevant standard of living (and thus the two elements of periodical payments) it is more appropriate to look at the standard of living during the relationship and the expectations of the parties during it for any child they may have and thus for Luc (albeit that the relationship ended shortly after his birth), and the father’s present and expected standard of living for himself and all his children.

My figure falls short of the mother’s budget by around £2,000 per annum; with benefits of £17,844, it produces £45,844 per annum. I acknowledge that if the award was based only on the lifestyle and expectations for Luc during the relationship and the longer term goals and expectations of the father relating to his children the mother’s budget and an award that provided for all of it, could be described as conservative. But it cannot be so looked at because this would ignore present affordability.

Affordability has to be looked at in the context of the father’s income and capital resources, his outgoings and the possibility that the mother might be able to increase her resources by finding employment, initially at levels of remuneration of between £20,000 and £25,000 on the basis that her child care costs are below £200 per week. On the present evidence, fairness as between the parties requires that she should try to do this, and if she is successful this would increase her resources to a figure that could be a little in excess of her budget.

The essential and to my mind difficult problem in this case is that the father is in a period of transition during which by his hard work, expertise and good fortune he hopes to increase his regular income and receive significant one off capital payments from time to time. But during that period of transition, and so in the short term, both on his and my higher estimates, to meet his budgeted expenditure and my award he will have to use his readily available capital of £130,000. My award increases his budget by £8,000 per annum in round terms and so (after taking account some reductions to his budget recognised in evidence) in round terms that budget becomes £170,000 per annum leaving (again in round terms) £86,000 for his expenditure on his present household.

The rate at which he will have to eat into this £130,000 depends on the award I make, his own expenditure and his income from all sources. If his expenditure matches his budget including that for his present household (i.e. an unmarried partner and a son) he will be using up a significant part (but not all) of that capital in the next two years. My estimates are at paragraph 96 (vi) and (vii) and are £230,000 gross and £300,000 gross for the tax years to April 2012 and 2013. These produce net figures of the order of £130,000 and £160,000 (rounded up). So in round terms, and if (and I recognise that it is an important if) those estimates are correct (and are not supplemented by one off sales of shares) on his budget he would reduce the £130,000 by around £50,000. In addition:

he has other liabilities, but apart from his point that he may want to further assist his parents, by far the largest of these are (a) a loan from T Ltd largely matched by unpaid income, and (b) contingent liabilities to capital gains tax if shares are sold (and which can be met from the proceeds), leaving on his schedule liabilities apart for those in his budget of the order of £10,000, and

he may need to use some of his readily available capital to promote business opportunities.

To my mind, a factor in this case is whether reductions in the use of that capital to meet day to day living expenses should be brought about by there being economies in respect of the father’s expenditure on his present household, or through the award for the benefit of Luc being set at a lower level. In my view, the nature of the father’s present household, the history of this case and a comparison of the budgets, found the conclusion that the desirability of preserving this capital over a longer period does not lead to a conclusion that it would be fair to reduce the periodical payments for the benefit of Luc to less than £28,000 per annum. Rather, if the father wants to preserve more of that capital for a longer period he should, in my view, try to do so by reducing his estimated expenditure on his present household.

However, it is this access to available capital that makes my award affordable in the short term by reference to and without significant reduction of the respective budgets. So, it cannot be a long term basis for an award because unless the father’s regular and one off income and capital remuneration and resources improve that capital will be steadily diminished.

So, this funding method is another factor in favour of there being a review and although I shall order that periodical payments at the rate of £28,000 per annum with annual RPI increases are to be paid for the same period as ordered by DJ Bowman (i.e. until Luc is 17 or completes full time secondary education – see paragraph 3 of Schedule 1) I shall qualify this by the phrase “subject to further order of the court” and direct that there is to be review of that order (see paragraph 159 and following).

The school fees and extras. It is common ground that the father will continue to pay Luc’s school fees and appropriately defined extras. These are a significant expense which I have factored in when considering affordability and my orders for periodical payments and in respect of the claim for a lump sum.

As already indicated, I have not ruled out or in the payment of boarding school fees when Luc is 13. Also, as already indicated, there is a need for fees to be paid to provide Luc with an appropriate range of choice for his schooling at 13. This range should cover appropriate boarding and day schools and will cause some expense (e.g. to enter Luc for schools).

Extras have been a cause of dispute in the past and form part of the reasons for the mother’s present debts and thus part of her claim for a lump sum. To my mind, sensibly it was not asserted that any of the disputed sums were due as arrears under the existing order because this would have involved investigation of factual disputes over, for example, what was or was not agreed in respect of bus fares and some extras.

The route for the future is to address the extras, and the fees to provide the appropriate range of choice at 13, in the drafting of the order. This can cover the issue whether or not as the father suggested to include a maximum.

The claim for a lump sum. Although conceptually different, in my view not least having regard to the moneys presently available to the father, the arrears arising from my award of periodical payments should be taken into account in considering whether or not to award a lump sum. Equally, as acknowledged by the mother, unless I was also to award her her costs any lump sum awarded would not be available for the purposes she seeks it. The arrears on the basis of my award up to 4^th July 2011 (and so 16 months) are £9,328 (16 x 583).

Further, as pointed out by the father the mother’s present indebtedness indicates that she has been (I add sensibly) living on or close to her present income. It follows that, if she continues to do so, she will be able to use some of the increased monthly payments in meeting (a) her indebtedness (£13,216), and (b) future expenditure one off expenditure for Luc (£6,300 in her claim for a lump sum for a computer and furnishings). Also it should be remembered that one off expenditure on Luc is also included in her budget. And I accept that part of her present indebtedness is based on choices that should not result in the father having to make additional payments.

Any lump sum would have to be paid from the father’s available capital and in my view the use of that to fund the periodical payments (and the father’s other expenses), the level of those periodical payments and the points made above under this heading found the conclusion that a lump sum claimed to meet indebtedness and one off payments for Luc should not be awarded.

That leaves the mother’s claim for a lump sum for a car. Her present car is 17 years old but there was no evidence that it was not running alright, or of regular and high repair bills. Although, I acknowledge that there is some force in the view that it is reasonable that she should as Luc’s carer have a car for his benefit I have concluded on affordability grounds that, at this stage, she should not be awarded a lump sum to purchase a car.

It was recognised that unless the mother was also awarded her costs any lump sum would be subject to a charge in respect of her publicly funded costs. But, it seems to me that, that is not a reason for not making the award but something that the court knows may destroy its purpose.

The housing fund. As I have already indicated, in my view this application should be adjourned.

Adjournment, review and interim relief. There are naturally powerful arguments in favour of avoiding any adjournment or review and in reaching finality. This is because litigation is costly in both financial and emotional terms and hostility exists between the parties.

But, here the general arguments in favour of a clean break that arise under (and are recognised by) the MCA do not apply because, as is common ground, the award must be for periodical payments. Also, as indicated earlier there are a number of factors that point strongly in favour of there being a review and these have caused me to conclude that not only should the claim for a housing fund be adjourned but that there should be a review of the award of periodical payments and, if necessary and appropriate, a hearing to determine the school Luc should attend at the age of 13.

I will direct that a date is to be fixed for the hearing of such a review and such further issues in June or July 2013, with a time estimate of three days. In addition, there is to be a directions hearing in respect thereof in March or April 2013, with a time estimate of one hour.

I have sought by this judgment to give another judge a detailed starting point for any such directions and hearing but I will reserve these hearings to myself if I am available.

Understandably, the father resists any further interim relief on the basis that it will interfere with and harm his business life and attempts to increase his income and capital resources. He also points out that he has not defaulted on the sums he has been ordered to pay in the past and, indeed that he increased the payments voluntarily (albeit as I have already noted without disclosure of the significant success of CCC Ltd).

He also asserts that the freezing order I made in respect of the capital sum to be paid by his wife under the agreed ancillary relief order was unwarranted and, in any event, that the matters raised to found it no longer warrant the grant of interim relief. I do not agree with either point. In my judgment, the contradictory and self serving accounts given by the father in respect of the ownership of the founder shares in CCC Ltd, and my findings in respect of those accounts, found a real risk that in the future the father may either (a) seek to sell and use the proceeds of sale of investments without informing the mother, and (b) seek to use significant increases in income without informing the mother of them. As to these risks, his offer to provide his tax returns and audited accounts of T Ltd goes some way to meeting them, but the risk would still remain that capital and/or income will be used before the mother knows of its existence.

These risks do not warrant a continuance of the restraint on the use of the balance of the sum due to the father from his ex-wife (£50,000), which forms part of the easily realisable capital that he will have to eat into in the short term to meet his outgoings and liabilities and perhaps to further business ventures.

But, in the context of the review of my order for periodical payments, any future affordability issue on school fees and the adjournment of the application for a housing fund, I have concluded that:

the risks I have identified,

the need to ensure that the court and the mother are properly informed of relevant events, and

the balance of fairness mentioned in paragraph 104 hereof

the father is to give the mother at least 7 days notice together with full particulars of any proposed disposition of any of his shares in NewCo, SDK, HS, CGTL and WP and any other company or venture in which he invests £15,000 or more, and having done so he shall not complete such disposition without her prior written consent, or order of the court, other than on terms that he retains and does deal with, charge or in any way diminish the value of the net proceeds of such disposition (whether in cash or any other form) without the prior written consent of the mother, or order of the court,

(as offered) the father is to provide the mother with copies of (i) his tax returns within one week of them being sent by him to the Revenue, and (ii) the audited accounts of T Ltd within three months of its year end, and

the father is to inform the mother of any investment he makes of £15,000 or more in any company or venture within 7 days of him making such an investment or the total of any such investment reaching the sum of £15,000.

In my view, this should not be inhibitive, intrusive or damaging to the father’s business affairs because it is unlikely that any disposition of these assets will not have a lead up period for negotiations which he would not have to tell the mother about, and (unless restrained by the court) he can complete the transaction even if the mother does not consent to it on the basis that, pending further order of the court, its proceeds are retained. As to any future investments he only has to inform the mother after the event and they would have to disclosed before the further hearing.

I also express the hope that, as much of the present hostility related to cross allegations about disclosure, this regime will serve to reduce rather than increase hostility and dispute as to the father’s financial position.

In addition and again until further order I will order (or accept an undertaking) that the mother is to inform the father every three months of the steps she has taken to obtain employment and her arrangements for child care if she does obtain employment, the up to date position relating to the benefits she is receiving, her medical concerning her claim for ESA, her medical condition and any treatment she is having and any updates on Luc’s medical condition.