S v S

A: Introduction: This is an application by Mrs S for financial remedy orders against Mr S. For convenience I will refer to them as “the husband” and “the wife.” It raises questions as to how to deal fairly with the fact that the husband brought into the relationship and marriage substantial wealth (£13 million) upon which the current kitty of some £25 million is directly or indirectly based. It also raises fiercely disputed factual issues as to when the parties’ ‘relationship leading to marriage’ began; whether in 1995 or 1997. This is said to matter because within that disputed period the husband received a crucial payment of £9 million from a particular business transaction which enabled his business to grow. It is a case of considerable bitterness as between the parties which has impacted negatively on their attitudes to one another and on their approach to a fair overall outcome.

The wife has been represented by Mr Southgate QC and Mr Calhaem; the husband by Miss Bangay QC and Mr Sear. I have been provided with extensive written and oral submissions together with a bundle of authorities regarding pre-marital wealth and the so-called ‘marital acquest’. There are two core bundles and some 14 lever arch files of documents which would certainly not have satisfied the new dispensation as regards bundling in financial remedy cases. I have heard evidence from the following witnesses: (i) the wife; (ii) her accountant, Jason Lane; (iii) the husband; (iv) his accountant Julia Wallace-Walker; (v) the husband’s daughter B; (vi) his son, C, and (vii) his PA, Mrs D.

There is a drive for shorter judgments in financial remedy cases (see eg per Wilson LJ as he then was at paragraph 24 of K v L [2011] 2 FLR 980). But there is much ground to cover here and I have failed in my objective of brevity. Apart from the 14 issues set out in the undated ‘agreed composite statement of issues’ there are numerous sub-issues and mini-disputes. An attempt to resolve them is neither necessary nor proportionate for the resolution of the simple underlying issue: ‘how much should the wife be awarded?’ I have however read and re-read my notes all the documents to which reference has been made and so have all these sub-issues well in mind.

The wife seeks a 33% to 40% share of the current ‘kitty’ which, on the figures used, translated to a lump sum of £9,150,000. That would be on the basis that she would transfer to the husband a property (“The Small House”) in the country adjacent to the former matrimonial home at a value of £450,000 gross. This would leave her worth £8.7 million on a clean break basis with no order as to costs. She accepts that the husband will retain the former matrimonial home (“The Big House”) and the seaside holiday house (“The Seaside House”).

The husband maintains that this is a so-called ‘needs’ case because the wealth brought by him into the marriage, coupled with ‘passive growth’ on it, means that there is in fact no ‘matrimonial property’ or so-called ‘marital acquest’; all the assets are non-matrimonial property. Alternatively, he says that the maximum amount of ‘matrimonial property’ as calculated by the wife’s accountant is only £6.3 million, which he accepts would be insufficient shared equally to meet the wife’s needs. His open offer, ignoring timing of payments, is to pay the wife £3.5 million, comprising a lump sum of £3.3 million and preference shares worth £200,000 in the main company, redeemable after five years. He would retain The Big House and The Seaside House. The wife would transfer to him her interest in The Small House, being responsible for her own tax on the transfer. There would be no order as to costs. So the parties’ open positions are £5.2 million apart (£8.7 million sought, £3.5 million offered).

Leaving aside the disputed question of the duration of the parties’ pre-marriage cohabitation, the core issues are as follows:

Is this essentially a ‘sharing’ case? If so, at what percentage?

The factual background is long and detailed. It appears from a ‘Composite Chronology’ dated 10^th November 2014, which Mr Calhaem has prepared in an attempt to combine both sides’ chronologies, for which I am grateful, I adopt it as a working document. Reference may be made to it for any greater detail than appears herein. To make this judgment free-standing, I highlight the more important features of the history as follows.

In 1943 the husband was born, making him now aged 71. He has two adult children by his first wife, Mrs E (whom he married in 1969) namely B aged 42 and C aged 37. As I say, he called them as witnesses at this hearing. In 1964, aged 21 (some 50 years ago), having qualified at night school as a Chartered Surveyor, he began property holding and development as his business. He has continued in that business ever since. He has a particular interest in giving new life to historic old buildings, which he has combined with a significant degree of charitable work. He holds a number of prestigious positions which it is unnecessary to describe.

In 1967 the wife was born making her now 47. She has no children. The parties tried IVF but unhappily were unsuccessful.

On 13^th July 1973, aged 30, the husband incorporated F Ltd which later became G Ltd. In October 1996 it changed its name to H Ltd, the husband’s current main company. As from the date of a Declaration of Trust dated 31^st March 1976, creating a Settlement for B and C (“the children’s trust”), the ownership of the shares in F Ltd / G Ltd / H Ltd became and remains: the husband’s 77.5%; the children’s trust 22.5%.

In 1973 the husband incorporated J Ltd, a property company which was subsequently floated in 1981 and later collapsed in 1993.

In 1981 the husband bought land and built on it a seaside property, The Seaside House. By now he and Mrs E had their two children, B and C, whose names were incorporated into the brickwork. The husband says he regards himself merely as a custodian of The Seaside House for them and has in mind conveying it to them. The wife said in evidence that she thought this would be reasonable. In 1986 the husband set up a charitable trust.

In August 1988 the husband purchased the long leasehold of a property in London W1 (“the London House”) for some £600,000 odd via one of his property companies. Originally it was an investment property but much later, having been renovated and converted by the husband from medical use into a fine five storey Georgian residence, it was to become the parties’ first matrimonial home.

In about 1992 or 1993 the husband and Mrs E separated. He moved to a flat in Mayfair, London, W1, which he or one of his companies already owned.

At about the same time as separating from Mrs E J Ltd collapsed with debts of around many hundreds of millions. According to the husband’s Form E dated 24^th April 1997 in his financial proceedings with Mrs E, the value of his assets reduced thereafter to some £2 million.

On 1^st October 1993 the husband purchased a one third share in K Ltd for £1. It bought out divisions of a government agency and subsequently ‘turned them around’. K Ltd was a genius project which, within a few years, made the husband a great deal of money.

On 5^th October 1993, aged 26, the wife moved to London from Ireland where she had been brought up. She had been an insurance clerk there from 1986 when she was 21 and she wanted to make a change. She moved into rented accommodation with her sister, a cousin, and a couple of others in East London (“the East London House”). A few days later she commenced working as a PA with K Ltd, which is how she came to meet the husband.

In and after November 1994 the parties’ relationship started, initially with dinners out at good restaurants. The husband originally said it started in 1995 but I am satisfied from all the evidence, including the wife’s diaries, that it was in 1994. He was then aged about 51 and the wife about 27. He was still living on his own in the flat in Mayfair and was comfortably off. The wife accepts that she had no capital.

At about the beginning of 1995, as I am satisfied on the evidence, the husband moved into The London House whilst the renovation works there were still going on.

On or about 8^th September 1995 the wife gave up her job with K Ltd and a few days later started a year’s floristry course. At the end of that month (September 1995) her sister returned to Ireland. No significant investigation occurred at the hearing as to what exactly happened to the East London House at that time.

During 1995 the husband purchased the long leasehold of The London House from his company which owned it, at a price of £1,050,000 with a mortgage of £650,000. He thus became personally the owner of the property.

At the end of October 1995 (the husband says it was not until late 1997) the wife says she moved into The London House and that the parties started to cohabit. She says that such cohabitation led seamlessly to their marriage in 2003.

On 23^rd August 1996 the husband sold his one third interest in K Ltd (bought for £1) for £9.7 million gross, £9.1 million net. He invested about £7.8 million of this in H Ltd by way of credits to his Director’s Loan Account (“DLA”) and the purchase of H Ltd preference shares.

On 16^th September 1996, having finished her year’s floristry course, the wife incorporated Florists Ltd. With financial help from the husband she started trading on 10^th October 1996 and thereafter ran a flower shop in West London, for some ten years until December 2006.

On 29^th May 1997 the husband purchased The Big House, near a country town (“The Country Town”) for some £900,000 as a weekend home.

Late 1997 is when the husband says that the parties began to cohabit at The London House. The parties’ accountants agree that he was then worth some £13 million.

In June 2000 the husband acquired the freehold of The London House for £12,000.

On 6^th July 2000 the wife took a one year’s lease on a flat in N Street, just round the corner from The London House. She relinquished it seven months later in February 2001. She says it was a temporary bolthole after the parties had argued and that she only stayed there a few nights. The husband says that she stayed there for weeks and weeks.

On 21^st September 2003 the parties were married.

On 30^th September 2005 arrangements were made for the purchase in the wife’s name of a flat in Oxford, part of a substantial development which the husband was undertaking. It cost about £345,000 with a mortgage of £250,000.

On 24^th December 2006 the wife did her last day’s trading at her flower shop and closed down the business. Since that time she has not worked in the commercial sense.

On 22^nd February 2007 the husband purchased The Small House (above) in the wife’s name for £350,000. It is immediately adjacent to The Big House and is currently used by the husband as an office, with one of his companies paying the wife a rental.

On 22^nd November 2007 the husband sold a property in Majorca for €231,000 (some £165,000) being a property transferred to him by Mrs E as part of their divorce settlement.

On 19^th January 2009, The London House was sold for £7.4 million gross, £5.7 million net. Of this sum, the husband invested £4.2 million into H Ltd to give it working capital and to replenish his DLA. Thereafter, the parties made The Big House their main home. It is where they have both been living until recently in very strained circumstances. The wife has just now rented a house in the country town on a temporary basis.

In August 2010 one of the husband’s special purpose vehicle companies, P Ltd, needed to refinance its undertaking. To facilitate this, he mortgaged The Big House for £1.25 million lending that sum to P Ltd. The interest due from P Ltd to him on the loan is fixed to equate to the interest which in turn is due from him to the lender bank.

In March 2012 the parties began using a company-owned property in Chelsea as a London pied à terre. From the time of the sale of The London House in 2009 until March 2012 they had used hotels when staying in London.

In September 2012 the wife says that the parties separated, although continuing to live in The Big House. The husband’s case was originally that such separation took place 17 months earlier in April 2011, but in cross-examination he shifted from this to nearer to the wife’s case.

On 16^th February 2013 in response to a letter from the wife’s solicitors asserting that the marriage had broken down, the husband sent them a terse, written note stating that he did not agree that the marriage was over.

On 24^th April 2013 the wife’s petition was issued. Since then the financial aspect has ground on with a fair amount of difficulty and contention, now coming on before me (my first sight of the case) for final hearing.

In December 2013, the property in Chelsea was sold. It had thus been available to the parties as a pied à terre in London from March 2012 to December 2013, a period of some 21 months. Since its sale, the parties have not had a property for use as a pied à terre in London. Instead the husband has used one of his clubs when necessary to stay in town overnight and the wife has on occasions used hotels to do so.

Counsel produced to me a relatively agreed Schedule of Assets, net of latent costs of realisation (costs of sale and any tax). It does however contain six points upon which agreement had not been possible. In a case with this degree of wealth, I do not consider that these non-agreed items are of any significance, save perhaps for point (f). So I shall take them quite shortly. (a) As to the ‘marriage value’ of the Big House and The Small House when The Small House is transferred by the wife to the husband, this put at £184,000. I consider it should be included in the Schedule as an asset of his. Miss Bangay said in submission (I do not think it is in evidence) that the husband intends to do The Small House up and sell it for liquidity; so there is no ‘marriage value’. In response, Mr Southgate said that in that case the wife would prefer to keep it. In my view, the continued ownership of adjacent properties would be a recipe for disaster. It is much more sensible that the agreement for the transfer of The Small House by the wife to the husband should proceed. It is a matter for the husband then what he does with it, but the disputed ‘marriage value’ would be established.

Both Ms Wallace-Walker and Mr Lane are experienced accountants accustomed to giving expert evidence in court. I have read both their CVs. I am satisfied that each is doing his/her best objectively to assist the court. They appear however to have conflicting experiences of valuing unlisted companies such as this. Ms Wallace-Walker describes a 20% discount as commonplace, whilst Mr Lane states that he has never come across it. Both are predominantly experts in the forensic sense, as distinct from seeing their valuation opinions regularly validated in the marketplace.

A major difference between the experts is as to whether the approach regarding listed companies, which generally trade at a discount of 16 or 17% to NAV (as per the Index produced by the European Public Real Estate Association) is also applicable to unlisted companies. Ms Wallace-Walker says that it is so referable, as there is no reason to distinguish between the two types of company. Mr Lane says that listed and unlisted companies are distinct entities, to which different valuation considerations apply. For example, he points out that listed shares are influenced by outside considerations, such as market sentiment, which is not the case (or is less so) as regards unlisted companies. The experts disagree further as to whether the fact of the children’s trust owning 22% of H Ltd should be seen as a contributory justification for the disputed discount. Ms Wallace-Walker says it should. Mr Lane says that the trustees of the children’s trust would very likely conjoin with the husband on any realisations, because everyone involved is ‘in the family’ and would probably be pleased to achieve useful liquidity. So he maintains that a purchase of H Ltd would be buying ‘control’; whereas most purchasers of listed shares are not doing so. Other points on this discount issue were made and challenged which I have in mind, but which are not necessary to rehearse.

Given that the experts agreed a value for H Ltd, netted off by 3% for costs of realisation and tax, it is for the husband to satisfy me that a further discount is either standard or else subjectively called for on the facts of this case. I did not find Ms Wallace-Walker’s oral evidence on this particular occasion to be as well marshalled as would have been more persuasive. I was given the impression that the justifications for the disputed discount emerged in a somewhat unscientific way, although this in itself does not of course mean that she is not right. For example, both her substantive reports of 5^th November 2013 and 20^th October 2014 state the rationale for a 20% discount as being “to take into account of realisation costs (such as agent’s fees and legal expenses not provided for in the accounts) and mortgage penalties”. However, in her oral evidence, other justifications for the disputed discount emerged; for example, the perceived disadvantages attaching to certain properties within the husband’s companies’ portfolios. Mr Lane’s evidence came over as clear and precise, supported to some extent by chapter 14 of Tolly on Valuations which, whilst referring to the level of discounts as being subjective, does not mention a conventional percentage discount of the type under discussion. There seems a logic to Mr Lane’s point that common discounts to NAV in respect of listed companies would not necessarily transpose to unlisted companies, unless justified by the particular circumstances of the company and its assets, I observe, too, that when Ms Wallace-Walker first introduced her point about the 20% discount, it was in the context of listed companies. I am not in the event persuaded that there should be a further deduction of £1 million from the agreed value of H Ltd.

That said, Ms Wallace-Walker did give evidence of the probable need for one of the companies in the husband’s portfolio to find some £200,000 towards harbour repairs following storm damage since the valuation exercise; and Mr Lane himself (whilst opposing the principle of further discounting) was prepared to go to £250,000 (above). Taking a broad brush approach, I propose to discount the value of H Ltd in Counsel’s Schedule of Assets by a round figure of £500,000.

The impact of these six rulings on the Schedule of Assets, subject to my maths, seems to me to be as follows. Taking the husband’s column, his calculation of his own wealth goes down from £25,679,895 to £25,004,730. That is by the deduction of the £500,000 discount from H Ltd’s NAV and the sum for his unpaid costs of £175,165 (which although set out in the Schedule in red, had not been included when reaching the total of £25,679,895). The husband’s estimate for the wife reduces from £503,073 to £306,498 by the deduction of the sum for her jewellery in the sum of £196,575 which sum (by contrast) is included within the stated total of £503,073. These adjusted totals of £25,004,730 (husband) plus £306,498 (wife) give an aggregated figure of £25,311,228. Making similar adjustments in the wife’s column I get a slightly higher figure but the difference is small and would not affect the outcome. I therefore take the overall net wealth in this case as being roughly £25.3 million.

As to the actual composition of the agreed Schedule of Assets, now modified by virtue of the decisions in (a) to (f) above, reference may be made to the Schedule itself. In summary, the most significant assets are as follows. First, by way of assets in the husband’s name, there is The Big House at £3,360,000 less the mortgage of £1,250,000 (above) less costs of sale and CGT: net £1.7 million. Then there is The Seaside House, valued at £990,000 less costs of sale and CGT: net £776,000. His pension appears in the sum of £1,950,000. His business assets (the largest by far being H Ltd, together with four much smaller companies wholly owned by him) appear in the Schedule at £21,399,000. Second, as regards assets presently in the wife’s name, there are The Small House at £411,000 and her flat in Oxford at £243,000. All these sums for both husband and wife are, as I say, net of latent costs of sale and taxes.

The Schedule also deducts the parties’ outstanding costs. The husband’s total costs are £743,226 of which he has paid £568,061, leaving £175,165 still to be paid. The wife’s total costs are £577,281 of which she has paid £176,922 leaving £400,359 still to be paid. The parties have therefore spent in aggregate £1,320,500 on this litigation.

The wife says cohabitation started at the end of October 1995, just after she started her floristry course. The husband says it did not start until the end of 1997. The importance of the difference is perceived to arise from the fact that it was during 1996 that the husband was engaged on negotiating the sale of K Ltd. That gave rise to the injection of nearly £8 million into H Ltd fuelling the revival of the husband’s financial fortunes after the collapse of J Ltd. The wife considers that the proceeds of sale of K Ltd should be regarded as matrimonial property. The husband strongly disagrees.

The evidence about the date when cohabitation started consists mainly of (a) the competing recollection of the parties, (b) the evidence of the husband’s witnesses and (c) various contemporaneous documents. The documentary evidence goes both ways, some supporting the wife and some supporting the husband. In addition, I have before me a Schedule prepared on behalf of the wife identifying numerous social events between 11^th November 1994 and 17^th December 1996. It is based on original diaries of her’s for 1994 and 1995 and on a clip of letters between the parties and their friends between 8^th April 1995 and 17^th December 1996 (“the thank you letters bundle”). The standard of proof is the balance of probabilities and it is for the wife to satisfy me that the cohabitation started at the end of 1995. I have searched hard for a ‘smoking gun’ point to give me a clear and independent steer on this heavily disputed issue, but I have not found one. I, therefore, propose, to identify the factors pointing in each direction, in no particular order, and thereafter to state my conclusion.

Favouring the husband’s case are these points.

I turn to the points favouring the wife’s case about the start of cohabitation being in late 1995.

One factual issue blew up at the very end of the case which contributed to both parties being briefly recalled. During the hearing Miss Bangay called for the wife’s letters and diaries on which the wife had relied in her written evidence. She, the wife, therefore, returned from London to The Big House overnight to collect them. Unbeknown to her, the husband was himself also staying there that night. She had thought that, like her, he was staying in London during the hearing. Late at night there was an unseemly confrontation between them at The Big House. Both behaved in a manner which I expect they regret. The wife accuses the husband of not disclosing the letters, as he should have done being relevant to the issue of the parties’ cohabitation. He accuses her of being in his study without permission and rifling through his documents trying to find them. She says it is not ‘his study’ but ‘the study in our house’. Miss Bangay submits that the husband is so much more likely to be right about the study being his ‘sanctuary’ that this goes to show the wife’s overall lack of credit. I cannot, however, accept that. Given the late stage at which the issue emerged, there was no opportunity for any meaningful investigation of it and I decline to ‘take a punt’ at who is right. It seems counter-intuitive that during the happier times of a marriage one spouse should ‘ring-fence’ a particular room and, having seen this wife, I rather doubt that she would have accepted it. It may very well be, given the bitterness between the parties, that their perceptions of the status of the study have become polarised. In any event, whoever is right (or whether the truth is somewhere in the middle) this is not a point which I find assists me as to which party is generally the more credible.

So where on this review of the evidence am I left on the issue as to when the parties started to live together? On any view everyone’s recollection, the husband’s, the wife’s and Mrs D’s, was comprehensively wrong about the date of the wife taking the flat in N Street. The suggestion that this was leased in 1997/1998 originally came from the husband in a Questionnaire and it looks as though the wife just went along with that date assuming it to be accurate. The recollections of B, C and Mrs D as to certain dates have also been shown by clear evidence to be wrong although, that said, they remained firm on the point of the wife not moving into The London House until 1997. The husband’s Christmas card in December 1995 and the ‘thank you letters bundle’ clearly imply a couple who were, if not living together, then at least very close. But what about the wife’s 1995 diary with its scribbled out entries? Assuming for the sake of argument that the words scratched out after the word “dinner” are “at Ivor’s,” it could nevertheless be that someone in the very early stages of cohabiting would still refer to the home concerned as being that of its owner. I accept it could be that by scratching out “at Ivor’s”, if the wife did so, she was trying to pre-empt Ms Bangay’s point referred to at paragraph 51(iv) above. If so, she did it in a remarkably inept way, including leaving one such entry fully legible. I find myself left in a state of uncertainty about the scored out diary entries, the late stage during the hearing at which the point emerged having impeded my being able to come to a reliable conclusion. Nor do I consider that the wife’s removal of the two diary pages has been established as being ‘sinister’ (i.e., that the pages may have shown something detrimental to her case) because, as she said, she could simply have used those end pages of her diary for scrap notes. All in all, although the diary deletions concern me, I am not persuaded that the wife scribbled out the words concerned with a devious intention; or, if she did so (which I repeat I am not finding), I do not consider, having seen and heard her, that this shows that she was in fact not living at The London House when she says she was.

I am satisfied that the wife, the husband and his three witnesses all genuinely believe what they have said in evidence. I do not consider that any witness has set out to lie about when the parties’ cohabitation started. These events happened getting on for 20 years ago. It must be extremely difficult to remember dates which were unimportant at the time, as the unanimous but wrong recollection about N Street shows. In addition, the parties are, as I say, in bitter conflict about this litigation, each fighting vigorously his/her polarised corner. This affects the reliability of recollections. There is no doubt from my having seen and heard the husband that his attitude to the wife has been negatively influenced by his sense of affront at the extent of her financial claims. Having brought all the wealth into the marriage, he feels (as stated expressly in his Form E) that her claim should be assessed in the context of the rented the East London House from which she came. He told me and clearly believes that she married him for his money. I do not, however, find that to be so. On the contrary, the contemporaneous correspondence implies that he would have been proud of her and grateful to her. I have no doubt that she was in love with him and he with her. His evidence is that he took all the decisions and that the wife “always lived in my houses.” He does not consider that she contributed anything much to the marriage at all.

The wife, for her part, has put forward over-aspirational claims which have compounded the problem. For example, her first budget was for £360,000 per annum which was too high and the husband clearly saw it as provocative. It has since been reduced to nearer £160,000 per annum. She exaggerated in one of her statements the speed with which the property in Chelsea became available to the parties as a London pied à terre. She has spoken of ‘a fleet of luxury cars’, which I find to have been an exaggeration. She referred to a box at Ascot in terms which made it sound like a regular event, although in cross-examination she accepted that the last time was eleven years ago in 2003. On the other hand, contrary to the husband’s perception, I am satisfied that she supported him fully within the home in the various ways of which she spoke in evidence; and that she complemented him as a supportive businessman’s wife and hostess within the social world of culture and the arts (music, opera and museums) and of philanthropy and fund-raising in which he moved.

Taking everything into account, my conclusion is that the wife probably did start living essentially at The London House at or about the time when she says she did. I do not consider it was as late as the latter part of 1997. It may well be that there was a transitional period of time after October 1995 when she stayed most but not all nights at The London House, although that presupposes The East London House having remained available for her to use after her sister’s return to Ireland in September 1995, which was barely explored in evidence. The question still arises as to when this became a settled, enduring cohabitation of an equivalence to marriage but without the paper work. The husband’s case is that the relationship was not originally in his mind committed or exclusive. This was not amplified until during the hearing. However, his evidence was clear about it and I doubt he was lying. In addition, he has support on this point (of his not originally being ‘committed’) from B and from Mrs D, even though I take Mr Southgate’s point that such evidence was introduced other than as obvious answers to the particular questions asked. There is also a small measure of support for the husband by way of a letter dated 5^th November 1996 in the thank you letters bundle about the valuation of a watch which he says belonged to a named lady friend. I have to take a broad view about this and I acknowledge the submission on behalf of the wife that the husband’s evidence may show merely that he was ‘two-timing’ her. Nevertheless, the question is by when the parties’ cohabitation had settled into a committed and enduring relationship of an equivalence to marriage and I have concluded that the most likely date is the mid to latter part of 1996. This is the product of taking a broad view of the probabilities and is not expressly supported by any particular piece of evidence. I do not, however, think it does injustice to either party and I suspect that, nearly 20 years on, it is about the best that fallible judgment can achieve.

As to the wife’s taking the flat in N Street in 2000, this clearly demonstrates a rocky patch in the parties’ relationship. It is common ground that she did buy some flat-pack type furniture for it; nevertheless, she was very clear that she actually spent very little time there, because she was scared of sleeping there alone and because the flat was noisy. She also said she left the majority of her clothes and belongings at The London House, which I do not think was rebutted by the husband. I accept that she did not use N Street for very long and I do not consider that such a break in the parties’ relationship interferes significantly with the otherwise ‘seamless’ move from settled relationship starting in the mid to latter part of 1996 to marriage in 2003.

I have to take into account all the circumstances of the case including particularly the following factors.

The wealth brought into the relationship and marriage by the husband comprised essentially The London House, The Seaside House and his business assets held within the corporate structure. The date for valuing his wealth at the outset does not correlate precisely, since the accountants’ exercise relates back only to 1997, whereas I have held that it was by the mid to latter part of 1996 that the parties’ relationship had gained a sufficient equivalence to marriage for their cohabitation to be counted as such. But this difference is not significant. The accountants have agreed that the husband’s total net assets were at the outset around £13 million and are now around £26 million. The revised figure of £25.3 million net for the present combined total of the parties’ assets as found at D above is slightly lower essentially by the incidence of outstanding costs. The core dispute is as to how to deal with the fact of the husband’s contribution of his pre-owned wealth and his use of it during the parties’ relationship and marriage to provide for their accommodation and costs of living over the years.

Ms Bangay submits that the right approach is to augment the introduced sum of £13 million by a sum for ‘passive growth’ and to deduct the combined amount from the current £25.3 million so as to identify ‘the fruits of the parties’ partnership’ as being the ‘matrimonial property’ (the so-called ‘marital acquest’). There would then be a notional equal sharing of the ‘matrimonial property’ following which the wife’s share would be tested against her needs. Any additional sum required to meet those needs would come from the sum characterised as non-matrimonial property. This process would in itself create a fair outcome: sharing would not come into it. It was with this approach in mind that Ms Wallace-Walker was instructed on behalf of the husband amongst other things to calculate the ‘marital acquest’. Her report was exhibited to the husband’s Form E. It says that the £13 million introduced by the husband, enhanced by passive growth on it, can be seen as accounting for the entirety of the current ‘kitty’. This would result in there being no matrimonial assets for sharing, leaving the wife’s case based exclusively on needs.

At the first appointment before the District Judge, faced with Ms Wallace-Walker’s exhibited report, the wife obtained permission to instruct an expert of her own, Mr Lane. With hindsight this was an error of case management. The exhibiting of an expert’s report by the husband was without the leave of the court and contrary to the rules. It should have been dealt with robustly by an order for a single joint expert. That is what would or should have been ordered if the husband had not jumped the gun. The single joint expert would or should then have been told that what the court needed was a broad-brush approach set out in a succinct page-limited report. It would greatly have reduced the costs and reading time. It would have lessened the significant burden on the lawyers and on the court of having a lever arch file (sic) of competing accountancy evidence.

Be that as it may, Mr Lane, too, did his best to grapple with passive growth in respect of a property development company being actively ‘worked’ by the husband. His calculations and analyses led him to the conclusion that the current ‘matrimonial assets’ amount to some £6.3 million being referable to the husband’s ‘active management’ of particularly (a) H Ltd itself; of (b) The London House (the husband’s decision to sell it and invest most of the proceeds into H Ltd); and of (c) The Big House which was refurbished and improved at a cost of about £500,000, using part of the proceeds of sale of The London House. The balance of the current total kitty (being £25.3 million less £6.3 million equals £19 million) would thus be referable to the husband’s pre-relationship wealth augmented by its passive growth. However, Mr Southgate emphasised from the outset that, notwithstanding Mr Lane’s opinion, this was not actually how he was putting his case; rather, that this is a case for simple sharing of the current kitty, albeit in proportions favouring the husband.

A great deal of time, effort and expense must have gone into the accountancy evidence. But in the result neither party relies on it. Ms Bangay’s approach looks only to ‘needs’ and Mr Southgate’s looks only to ‘sharing’, both avoiding the need to grapple with passive growth. That said, both counsel addressed me on it and it is integral to the dispute between the parties as to the appropriate approach. I have, therefore, read and re-read the authorities in this area to which I was referred, the main ones of which are: Miller v Miller; McFarlane v McFarlane [2006] 1 FLR 1186 [House of Lords]: Charman v Charman [2007] 1 FLR 1246 [CA]; FZ v SZ [2011] 1 FLR 64 [Mostyn J]; Robson v Robson [2011] 1 FLR 751 [CA]; Jones v Jones [2011] 1 FLR 1723 [CA]; N v F [2011] 2 FLR 533 [Mostyn J]; K v L [2011] 2 FLR 980 [CA]; AR v AR [2012] 2 FLR 1 [Moylan J]; and S v AG [2012] 1 FLR 651 [Mostyn J].

Where a party brought financial resources into a marriage, that is clearly a form of contribution which falls to be taken into account under section 25(2)(f) above as one of the circumstances of the case. The weight to be attached to it will vary according to all the circumstances. In Miller and McFarlane Lord Nicholls referred to the ‘real difference in source’ [paragraph 22] as between (a) ‘the financial fruits of the marriage partnership’ [paragraph 21] and (b) resources brought into the marriage. He said at paragraph 23:

“...This difference in treatment of matrimonial property and non-matrimonial property might suggest that in every case a clear and precise boundary should be drawn between these two categories of property. This is not so. Fairness has a broad horizon ... accordingly, where it becomes necessary to distinguish matrimonial property from non-matrimonial property, the court may do so with the degree of particularity or generality appropriate to the case. The judge will then give to the contribution made by one party's non-matrimonial property the weight he considers just. He will do so with such generality or particularity as he considers appropriate in the circumstances of the case.”

In Robson, referring to inheritances (but the same applies to pre-owned wealth) Hughes LJ (as he then was) said:

“...What is fair will depend on all the circumstances; those cannot exhaustively be stated but will often include the nature of the assets, the time of inheritance, the use made of them by the parties and the needs of the parties at the time of trial. In the present case, although the assets were inherited from the husband's family, the parties had jointly elected to live off them and, in effect, to use them as a substitute for earned income.”

Ward LJ gave guidance at paragraph 43, recommending a concentration on the factors in S25 (above) without judicial gloss. He concluded:

“... The fact is that no formula and no resort to percentages will provide the right answer. Weighing the various factors and striking the balance of fairness is, after all, an art not a science.”

In Jones v Jones the husband had brought his pre-owned company into the marriage and, thereafter, continued working it during the marriage. The wife sought a straight 40% of the current net assets of £25 million, while the husband argued for a distinction to be made between (a) the matrimonial property and (b) the introduced wealth, with only the former to be shared. Wilson LJ at paragraph 33 determined that the approach there should be to make the distinction for which the husband argued; but he stressed that the court must then test the result by:

“... identifying for allocation to the wife such lesser percentage than 50% of the total assets as seems to make fair overall allowance for the husband’s introduction of his company into the marriage.”

On the facts of that case it was held to be appropriate to reflect ‘passive growth’ on the value of the company introduced by the husband, which reflection was achieved by reference to what seems to be the nearest relevant Index. That passive growth, with one other adjustment, brought the value of the husband’s original contribution (non-matrimonial assets) up from £2 million to £9 million. Deducting that £9 million from the current overall assets of £25 million left £16 million as matrimonial assets, leading to an award to the wife of 50% thereof, being £8 million. The essential cross check (paragraph 55 per Wilson LJ and paragraph 64 per Arden LJ) showed £8 million to be 32% of the total assets, which corresponded on the facts with the court’s intuitive view of overall fairness.

In N v F Mostyn J followed Wilson LJ’s approach in Jones reiterating his own view that (subject always to need) the court should generally speaking carry out the following steps: (a) decide whether the fact of pre-marital property should be reflected at all, depending on questions of duration and mingling; (b) if so, decide how much of the pre-marital property should be excluded; (c) and then divide the remaining property equally checking ‘the fairness of the award by the overall percentage technique’.

In K v L it was submitted to the Court of Appeal that an award of mine was disproportionately low. A schedule was presented showing that my award of only 9% of the total assets (on the unusual facts of that case) was way below awards in all other ‘wealth contribution’ cases. Wilson LJ dismissed that argument and the asserted probative value of a particular award of 23% in one of the cases on the schedule. He said:

“... [the fact] that it there amounted to 23% demonstrates nothing. What was much more interesting was ... [that] when we asked Mr Pointer to show us a reported decision in which the assets were entirely non-matrimonial and in which, by reference to the sharing principle, the applicant secured an award in excess of her or his needs [he] confessed to be unable to do so. Such a decision will no doubt be made – but not in this court today.”

In A R v A R Moylan was faced with a similar argument, the wife seeking a 30% share of the overall wealth and the husband arguing for the Jones and N v F approach. The assets there were between £21 million and £24 million, say £22.5 million, of which all but £1 million had been gifted to or inherited by the husband. At paragraph 81 Moylan said,

“... It is clear to me that the bulk of the wealth in this

case is accurately described as non-matrimonial; in other words, it is not the product of the parties’ endeavours during the marriage ... the former matrimonial home has been lived in and the family have clearly, in part, used the invested income generated from the husband’s inherited wealth. But nothing has happened to the bulk of the wealth which has changed it into matrimonial property or diminished the weight to be attached to it as a factor in this case. In my judgment, the principle which in this case best guides me in the exercise of my discretion under section 25 to the determination of a fair award is that of needs. I do not consider that the sharing principle justifies any additional or enhanced award as submitted by Ms Bangay [and continuing down to the end of paragraph 82].”

The award there was of £3.2 million which, coupled with the wife’s own assets of £1.1 million left her worth £4.3 million, just over 19% of the total assets of £22.5 million.

Last, in paragraph 7 of S v AG Mostyn J spoke of matrimonial property normally being divided equally saying that, by contrast, and except to meet needs:

“... it will be a rare case where the sharing principle will lead to any distribution to the claimant of non- matrimonial property.”

In paragraph 8 he said:

“... sometimes one party brings assets in which become part of the economic life of the marriage ... utilised, converted, sustained and enjoyed during the contribution period. This is the concept of mingling ... [although] ... even if there has been much mingling, the original non-matrimonial source of the money often demands reflection in the award.”

Cases in this sphere are notoriously fact-specific and are subject to the exercise of a wide discretion. In practice, outcomes expressed in percentage terms will be influenced by a combination of the ratio which the original contribution bore to the original kitty and which it bears to the final kitty; by the way in which the contributed wealth was treated and/or used during the marriage; and by the assessed amount of the claimant’s needs as a proportion of the final kitty. It is because such factors vary so much from case to case that schedules of ‘comparables’ cannot be of much, and are certainly not of decisive, value.

I propose here to follow the approach used in Jones and N v F, described by Ms Bangay as the orthodox approach. I have not always done so in taking such decisions and I am still of the view that there are cases where, on the facts, the exercise of a simple broad discretion under Section 25 will be more appropriate, that is will be necessary and/or proportionate and fair. The decision as to the better approach is itself discretionary. It will depend on the particular circumstances of the case and on the available evidence; but I accept that there is generally force in Mostyn J’s concern in FZ v SZ about ‘insufficient logical rigour’ being brought to bear if a discretionary percentage is just selected out of the air. If 33% is ‘right’, why is 36% ‘wrong’? Yet, the difference in this case would be £800,000.

Here I accept the £13 million figure agreed by the accountants as representing the worth of the assets brought into the marriage by the husband. It contains the nearly £8 million injected into H Ltd from the sale of his interest in K Ltd. Contrary to the wife’s case, I find that the basis for this funding from K Ltd was in place before the parties met and that the sale negotiations essentially took place before they were in a settled relationship bearing a sufficient equivalence to marriage. The fact that the deal was completed and the money paid to the husband at the time of the start of their ‘relationship akin to marriage’ is not such as to make the money ‘matrimonial property’. The husband continued to ‘work’ his company assets during the parties’ relationship and marriage by way of property development, sales and property holding for rental income. This absorbed him, along with his charitable interests, for some 60 hours per week. So distinguishing between (a) ‘passive growth’ on the £13 million, which would accrue to the husband (per Jones) and (b) enhanced wealth due to his business activities, which would be shared equally, is a considerable challenge. At paragraph 46 of Jones Wilson LJ said:

“... passive growth is to be contrasted with growth as a result of the contributions of one sort or another made during the marriage, i.e., of activity, irrespective of whether such is achieved with the assistance of a springboard already in position.”

Speaking of a small industrial company requiring active management, he said at paragraph 49:

“... there is in truth profound difficulty about quantifying an allowance for passive economic growth in such a case ... [but] ... I do not see how the law can logically decline to attempt to enquire into the existence and, if so, the amount of such growth by reference only to the nature of the husband’s investment [Wilson LJ’s italics].”

Arden LJ agreed that an allowance should be made there (Jones) for passive growth even though the asset was a private company, the business of which had been greatly developed by the husband during the marriage. She noted that:

“... it may be difficult to compute growth on such an asset, as opposed to an asset such as a painting or a vintage car or a portfolio of investments that has always been kept separate and distinct.”

In the remainder of her judgment she highlighted other conceptual difficulties in this area reverting to the “cross check of overall fairness” as the failsafe which had led her to concur in the result. She considered the first instance decision awarding Mrs Jones only 21.6% of the current overall assets (viz. £5.4 million out of £25 million) to be ‘clearly wrong’ (paragraph 64). Sir Nicholas Wall P deferring to the expertise of Wilson LJ expressed relief that the Court of Appeal award corresponded nearly enough to “... an old fashioned third.”

The experience of this case has amply confirmed these observations of the Court of Appeal about the difficulty of disentangling passive growth from the fruits of active management. Done properly it requires an accountancy retrospective over practically every transaction from the 1990s to date so as to try to distinguish the cause of each component of gain. The issue is further complicated here by the existence of matrimonial homes, three over time, and by the fact that most of the proceeds of sale of The London House went into H Ltd in 1997.

Some of the most straight forward methods of approaching the problem were highlighted by Ms Wallace-Walker in her first report when, by way of illustration, she applied to the husband’s 1997 wealth (a) the RPI; (b) the indexed rise in house prices and (c) the increase in value from notionally having placed the 1997 wealth into a bank account and having left it there. Broadly such an exercise would bring the husband’s 1997 wealth up to between £19.3 million and £23 million, depending on the precise approach used. That alone, she pointed out, would show the marital acquest to be minimal. Both accountants go on to explore other Indices and other methods of trying to assist the court. They do so necessarily with a number of caveats, assumptions and broad-brush discounts. Ms Wallace-Walker makes the point that to do the job properly would require “... an economist to identify macro-economic variables and to apply statistical techniques and econometric modelling.” Mr Lane says that it would be necessary to find “... clear dominant and reliably objective data identifiable as affecting H Ltd’s performance,” which would require “... an economist to identify significant statistical correlations that have a causal impact on the company.” Such expertise would obviously be wholly disproportionate when the underlying task is essentially discretionary.

Be that as it may, I have come to the conclusion that I should be guided by the work of the accountants. Their illustrative range for the worth of the husband’s active management of H Ltd, The London House and The Big House is between Ms Wallace-Walker’s £3.6 million and Mr Lane’s £6.3 million. For the reason at paragraph 64 above, it is unnecessary to decide between them. Erring in the wife’s favour, I will take a round sum of £6 million to represent the matrimonial property. Sharing that equally would give the wife £3 million. The husband accepts that this would be insufficient to meet her needs and I agree.

Before considering those needs in more detail under heading H below, I need to deal with Mr Southgate’s argument for a straight application of the sharing principle, leading to an award of 33% to 40%. I have paid particular regard to his arguments cogently marshalled at paragraphs 83.1 to 83.14 of his Skeleton Argument. However, given the sum of which I am about to assess the wife’s needs I have not been persuaded that an enhancement of my intended award is necessary or would be fair based on sharing. As already noted in paragraphs 69 to 71 above, this has not been done before where all or the bulk of the wealth has been brought in by just one of the parties to the marriage. Like Moylan J in re A R, I can see no particular basis here for fairness to require such sharing. The husband is aged 71. The wealth which he brought into the marriage is effectively the product of his life’s work, even bearing in mind the collapse of J Ltd. He does not have a wide range of opportunities and choices before him, except as to the date of his retirement. At the age of 47 comparatively more of the wife’s life is self-evidently ahead of her and she still has opportunities; but she will have them in addition to the fact that by virtue of her needs based award, she will be very comfortably provided for during the entirety of that life. Moreover, her award will be by way of a lump sum or sums (unless perforce some part of the award is by way of shares); whereas the husband will be left with the risk of being in property for so long as he is able and willing to continue in business. He may do better or worse than expected; but that goes with the territory. In contrast, the wife’s position with ‘cash’ will be certain and secure. In addition, whilst liquidity has not been profoundly investigated at this hearing, I must pay some regard to the accountants’ agreement that liquidity is scarce within H Ltd. Although the husband’s Form E shows that he has contemplated retirement, he spoke to me in terms of continuing to work so as to honour his commitments. My ‘needs based’ order is inevitably going to require sales and/or other re-financing within the companies. If it were augmented by ‘sharing’ up to an award of some £8.7 million as sought by the wife, I do not consider that the impact on the businesses would in the overall circumstances be fair or justified. In the result, I accept Ms Bangay’s submission that I should treat this as a needs’ case.

The wife’s needs are as contentious as everything else. I have reviewed and reflected on all the evidence which I have read and heard. My findings as to her needs in the overall context are as follows.

The total of these various items at (a) to (e) above is some £5,840,000. It is agreed that the wife will continue to own the flat in Oxford valued net at around £240,000. Deducting the value of the flat in Oxford from the wife’s assessed need figure of £5,840,000 gives £5,600,000. That is the lump sum which, following the necessary crosscheck referred to below, I have decided to award, with The Small House to be transferred by the wife to the husband. It will be on a clean break basis. Timing of payment will require consideration once the husband has had a chance to take accountancy and other professional advice as to how this sum can best be raised. I urge the parties as strongly as I can to agree timing and mode of payment and they must use their very best endeavours to do so. In default, there will be liberty to apply as to timing and implementation, reserved to myself if available. I do not think CGT on the proposed transfer of The Small House from the wife to the husband has been taken into account. Assuming it has not already been covered, I struggle to see why it should be borne solely by the wife. It is in the interests of both parties to tidy up The Small House’s ownership by uniting it with The Big House, avoiding further disagreements. In such circumstances I propose that any CGT on the transfer of The Small House should be shared equally.

As an integral part of coming to my conclusion of the above figure I have followed the approach in Jones by considering it as a percentage of the overall assets in the case, which I calculate to be some 22%. The real question is not whether this matches some conventional or intuitive percentage of the total, for example “about a third”, but whether it is fair as between the parties in all the circumstances. These include, amongst other things, their ages; the wife’s contributions in the home and by supporting the husband generally; by her accepting that £4.2 million from the proceeds of sale of The London House should go into H Ltd and by her accepting The Big House as being theoretically ‘put at risk’ by the refinancing of P Ltd; and by the husband’s working within his businesses and making his contribution of wealth at the outset. It is true that part of this wealth was comprised in homes and that certainly the main home is conventionally seen as ‘a matrimonial asset’; also that the wealth represented by the companies was used by the husband during the marriage to provide the family’s standard of living. So there is force in the wife’s submission that the introduced wealth became part of the ‘fabric’ or ‘backbone’ of family life (although it was not ‘mingled’ in the strict sense of being transferred at any stage from the husband’s sole name into joint names). Giving full weight to that submission, however, it is an inescapable fact that the introduced wealth represented a huge contribution to the welfare of this family. It was a ‘magnetic factor’ which must be substantially reflected in the outcome. I recognise that the wife will regard my award to her as far too low to meet her aspirations and that the husband will regard it as far too high. That said, when I stand back to review it in the overall context and ask myself the core question, ‘is this fair by both parties?’, my answer is yes.