JB v MB

This judgment concludes the final hearing of an application for financial remedy following divorce proceedings. The husband (‘H’) is now 52 and the wife (‘W’) 50. They began to live together in 1990, when H was 27 and W 26. They married in July 1997, and separated in late 2006/early 2007. Prior to that they had 2 children, a boy of 16 and a girl of 13. W’s petition was issued on 1^st June 2011, but not then accompanied by Form A. Indeed it was H who commenced these financial proceedings on 5^th December 2013. The matter proceeded in a local county court, before being transferred to the High Court for final hearing on 3^rd December 2014.

During the course of this hearing I have heard evidence from H; W; the SJE Mr Dodge, who has valued H’s shareholding in Z Ltd, a company in which H has a 70% shareholding, and the value of which is the principal asset in this case; as well as from Mr AH and Mr HH, the other shareholders and participators in the company; and from Mr W, the company’s financial director. In addition to counsel for the 2 parties, I have also heard brief submissions from counsel instructed by the company (Mr Thorpe) in circumstances which I will now explain.

The matter came for directions before Mostyn J on 30^th March 2015, when he heard an application to intervene by Z Ltd. The application was made under FPR r.9.26B(1)(a), which reads: ‘The court may direct that a person or a body to added as a party to proceedings for a financial remedy if it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings’.

In a short but characteristically uncompromising judgment Mostyn J determined that ... ‘the rule was not intended for the purpose for which it is advocated by Mr Thorpe at all which is simply to put a third party on a better footing to advocate its point of view. That can be done by the husband here and by witness statements which have already been made by the other shareholders and directors of the company and so I regard this application as being completely misconceived and it is dismissed.’

However, Mostyn J later determined that he would permit Counsel, or a representative of his instructing solicitors to attend the trial ‘so that [counsel for the husband] can be prodded if you do not think that he is saying the right things.’

On the eve of this hearing, Mr Thorpe, counsel for Z Ltd, submitted an 11 page skeleton in which he indicated that, but for Mostyn J’s permitted ‘prodding’, the company might have seen fit to appeal his decision, on the basis of it’s perceived view that his decision not to grant it party status was inconsistent with the decision of Moylan J in Tchenguiz-Imerman v Imerman [2012] EWHC 4277 [Fam]. He then sought to justify the filing of the skeleton as rendering him less likely therefore to need to ‘prod’ either counsel in the hearing. He was clearly seeking to go significantly further on this client’s behalf than Mostyn J had intended when dismissing his application for party status. Mr Thorpe and his solicitor have been present throughout the hearing, intervening only occasionally, and not then inappropriately. However, the cost to the company of their intervention has been £54,163.60. In the event, now that the specific facts relevant to my determination of the issues involving the company have been found, I doubt very much whether those costs have been worthwhile.

Factual background. As indicated, the parties began their cohabitation in 1990, the year before H, a systems analyst by training, and the 2 other shareholders, first set up their enterprise which was initially called X Ltd. In 1992, the name was changed to XYZ Ltd, which was shortened to Z Ltd in 2008. H in his statement dated 31^st October 2014 describes the primary function of the company at its inception to have been to develop insurance administration systems, and explains how the company gradually expanded its client base. In 1995, following an idea from H, Z Ltd developed what he describes as ‘the very first website on which you could buy a motor insurance policy in real time’. This appears to have been the pattern for the company. H was the ideas man, who came up with a concept, proved that it worked, and then passed it over to his fellow shareholders who were the developers. He said: ‘I believed we would be successful working together and I was right’.

H goes on to describe that ‘over the years the company became modestly successful, enabling (him) to provide a comfortable standard of living’ for his family. He sets out that in 2007, when the parties separated, the company had a turnover of £1.8m, with profit of £477,000, and he had an overall annual income of £100,000. Mr Dodge has valued the company as at 1^st February 2007 at £2.75m, with H’s 70% shareholding being worth £1.9m pre-tax, and £1.73m post tax.

When the parties first met, W was working as a PA in London. By 1997, she was PA to the managing director of an international company, earning a little under £30,000pa. She ceased working after the elder child was born in the summer of 1998, and did not in the event return to work until after the parties’ separation, over Christmas/new year of 2006/7. When the parties separated, initially H moved out of the family home, a well-appointed 5 bedroom house in a town in south east England, leaving W there with the 2 children, then aged 8 and 5. He went to live in a 2 bedroom flat owned by his father. In April 2008, W returned to work as a school receptionist where she has stayed, earning now just over £1,000pcm net in that employment.

The controversy between the parties centres principally around 3 areas. Firstly, the events which unfolded in 2009, whereby W and the children moved from the former family home at number 12 C Road, and into the much smaller, if still well appointed, 3 bedroom house at number 21, a few hundred metres away; and H moved back into the larger property at no. 12. Secondly, how, from about 2010, the progress of Z Ltd increased rapidly on the back of H’s creating of a specific product for the insurance industry, and the impact that that progress has on W’s entitlement. And thirdly, why, following both of these developments, W took no steps to pursue her claim for financial provision against H until he himself issued a Form A in December 2013, over 2 years after her original petition.

The Law. In N v F [2011] EWHC 586 (Fam), Mostyn J said this about the basis upon which the Court must exercise its discretion in considering the treatment of pre (or post) matrimonial property:

The law in this area has undoubtedly been developing in recent years, as the competing calls either for increased flexibility or for greater certainty continue to be heard from different judges sitting in these courts. The difficulties inherent in the task were recognised by the Law Commission Report on the Financial Consequences of Divorce (Law Com No 112) in as long ago as 1981, when it reported at [19], in a passage cited by Lord Hope in Miller v Miller, McFarlane v McFarlane [2006] UKHL 24 at [104]:

Following the House of Lords decisions in White v White [1998] EWCA Civ 1046, and Miller/McFarlane (above), the proponents of flexibility undoubtedly held sway, such that in Charman v Charman [4] [2007] EWCA Civ 503 – Sir Mark Potter P. held at [66]:

However, 4 years later this concept was developed by Wilson LJ said K v L [2011] EWCA Civ 550 at [21], where he said:

So, although the words of Lord Nicholls in Miller/McFarlane (above) at [27] remain good law, where he said:

In argument in this case on 30^th March, Mostyn J said this in relation to the current state of the law in relation to post-separation accrual, and the above referred to divergence of judicial approach. ‘I have been banging on about that recently as has Roberts J. Our decisions are not completely consistent...but they are sort of travelling in the same direction really...’

Despite this element being considered and analysed by different judges from the standpoint of differing factual matrices on a number of occasions over recent years, the starting point for that analysis has usually been the oft-cited passage from his decision (as Deputy Judge Nicholas Mostyn QC) in Rossi v Rossi [2006] EWHC 1482 (Fam), [2007] 1 FLR 790. Having carefully captured the competing arguments of principle at [15], he went on at [24] to provide the following guidance (as applicable in this case):

In his recent decision of JL v SL (No.2) [2015] EWHC 360 (Fam), Mostyn J referred to this passage, and its subsequent approval both here and in Hong Kong, before continuing:

Mostyn J then went on to consider Moylan J’s decision in SK v WL [2010] EWHC 3768 (Fam), where the judge had awarded a wife 40% of all the assets, the departure from equality reflecting his intuitive view of how the growth should fairly be reflected, and Cooper-Hohn (above), where Roberts J awarded the wife 36.12% of the total assets to reflect both the husband's special contribution to the point of separation and his growth of the assets post-separation. He continued:

‘45. It will be apparent from what I have written above that I do not agree with this approach as it risks the criticisms of being a lawless science and an unreasoned expression of instinct and intuition. To my mind the preferable approach where there is a significant amount of active post-separation growth of a matrimonial asset is first to determine the share of the pool in the absence of that growth (usually an equal share) and then to determine the share of the growth (usually an unequal share).

46.

It is of course correct that in Jones that Wilson LJ stated at paras 34, 35 and 52 that the fairness result achieved by this approach should be checked by the overall percentage technique, although it is hard to imagine a case where the datum of the overall percentage of a mixture of matrimonial and non-matrimonial property could alter the primary result (although an alternative view of the decision of Roberts J in Cooper-Hohn v Hohn is that she did just that).’

In this case, Mr Lyon, for H urges upon the court the approach advocated in is judgments by Mostyn J, that is to say a precise differentiation between the matrimonial and non-matrimonial assets of the parties, whilst Mr Walden-Smith, for W, urges the more intuitive approach preferred by Roberts J and Moylan J. In fact, I doubt very much whether, in this case as in many others, the route which the court takes to get to a fair outcome will radically affect the ultimate destination which it reaches. It must be the case that a determination by the court which has no recourse to quantification, or delineation between what is matrimonial or non-matrimonial, risks being impugned as overly arbitrary. But this is a sphere in which Wilson LJ himself famously acknowledged in Jones v Jones [2011] EWCA Civ 41 at [35] that:

‘Application of the sharing principle is inherently arbitrary; such is, I suggest, a fact which we should accept and by which we should cease to be disconcerted.’

On the other hand, when dealing with issues, as here, of post-separation accrual to the value of a shareholding (which on W’s case began life as very much a matrimonial asset, but has since been the subject of much endeavour by H over a significant period of years), the proportional division of the current value which must be undertaken is also, if not quite equally, the product of value judgment. It is, however, certainly in the context of this case, more satisfactory for the parties to have the exercise of discretion explained by reference to a share of what is matrimonial, and an explanation of why that determination has been so made, rather than simply to be told that x% of the whole combined pot will be the right proportion, for reasons rooted in the judge’s experience but not more specifically articulated. That is not to say that such an approach will always be practicable, or even possible, nor that in any event it is any less arbitrary. It is simply that if such a determination can be made, then it must be a useful way-marker for the court and the parties to have been able to do so. There are bound to be many cases (and Cooper-Hohn may be an obvious recent example), where even to make such an attempt would appear futile.

The issues. I shall now return to the specific factual circumstances of this case and the issues which are dividing the parties, as identified above. In order to determine the those issues which I identified at paragraph 10 above, it is necessary first to consider the evidence which the parties gave to me and the way in which their respective cases have been presented. It is also of significance to note that, as the evidence in the case has progressed, both parties’ positions have modified significantly, albeit in different (if no less helpful) ways. Specifically:

This movement, from both sides, represents not just mathematical adjustment, but also significant concession of principle, both rightly made, which does reduce significantly the findings required from the Court. W is now accepting, as she must following the evidence of Mr Dodge about the company Z Ltd’s limited ability to make available future profits as likely dividends for shareholders, that the bulk of her award must await a future sale of the company. It is a pity that she did not heed the warnings given by Mostyn J on 30^th March 2015 in this regard. For his part, H is conceding that W’s entitlement has not been met simply by her receipt of the property in which she currently lives, and that to some extent, he has been trading with her undivided share of the matrimonial element in Z Ltd.

The evidence. But how to bridge the significant gap that still exists between their two positions? Firstly, I must assess the evidence that I have heard. Mr Dodge, in his characteristically concise but robust reports as SJE, values the equity value of Z Ltd. at between £11.75m and £13.4m, and H’s shareholding at between £7.4m and £8.5m net of tax. He values the surplus cash of the business as being in the region of £2m., calculating that were that amount to be extracted by way of dividend, H’s post tax distribution would be in the region of £972,000. He notes that H’s gross salary has been and is forecast to continue to be slightly in excess of £200,000pa, but that his additional dividends have been sharply reduced, in circumstances which I will consider below, since the payment of a significant figure in the year to February 2011. Since then Z Ltd has retained profits of £1.52m, and its cash reserves have increased by £1m. He was clear that further dividends could have been declared should the directors have wished to do so, whether from historic reserves or the further retained profits. He acknowledged that dividend payments required the consent of all directors.

Mr W, Mr AH and Mr HH all gave evidence to substantially the same effect, which was that the company’s strategy was to invest its current profits year by year into research and development, with a view to making the organisation a more valuable commodity in advance of its eventual sale. This was a course adopted after an unsuccessful takeover attempt by venture capitalists in 2011 had foundered because such investment had essentially been lacking. The growth in staff numbers in the years since then reflects that strategy. They were all clear that the company needed significant cash reserves (1) to make it more attractive for eventual sale, and (2) to guard against the risk that they might lose a lucrative contract and run into unforeseen cash flow issues. Both of the latter two witnesses, who between them share 30% of the company, were clear that the refusal to take dividends over recent years was in pursuit of that strategy, and that they would be unhappy to be compelled by the fact of the majority shareholder’s divorce, if that strategy should be compromised to their financial disadvantage. Faced, as they were, with the extreme position advocated for W at the outset of the hearing, it was unsurprising that they should on the company’s behalf indicate their firm opposition to that course.

W’s evidence went not to the current financial position of the company, but rather to her own financial needs, and to how the parties’ current circumstances had arisen. In relation to her needs her Form E dated 28^th January 2014 set out an income need for herself of £34,837.83 pa., and for the children a further £17,962 pa. A total of £52,799.83 pa., in addition to mortgage (since paid off) and insurances. Whilst she did make reference to the amenities of the former family home at No. 12 under ‘standard of living’, her capital need for housing was put at £525,000, plus a car and a sums for maintenance and redecoration. This was the value of the property acquired for her and the children to live in in 2009.

Later, after Mr Dodge’s valuation, and as this final hearing approached, W in her statement dated 16^th March 2015 reassessed her future need both as to capital and income. The income schedule for herself now came to £69,413.65 pa., and for the children to £12,238.60 pa., although this included £12,000 pa. for household repairs previously treated as a capital item. She acknowledged that the balance of the increase was down in large measure to the fact that her housing requirement had now increased sharply to £1.25m., roughly the value of the former family home at 12 C Road. The reason for this increase was what I found to be W’s entirely predictable feeling of upset at the turn of events which she perceived had led to her leaving the family home with the children, whilst H moved back in.

12 C Road had been acquired as the family home in July 2000, with a significant but inexpensive interest only mortgage, for £740,000. At various times H had borrowed further against that mortgage facility to provide additional capital for his business but appears then to have repaid those sums when the business had the cash available. He having vacated the property at the start of 2007, W says that H asked her not to commence divorce proceedings, for the children’s sake. She also says that H then told her that Z Ltd was then not in a strong position, and that if he had to give her 50% of the company, the company would not survive. He told her, she said, that it would be to her financial benefit to wait until the business was worth more. Given subsequent events, I accept this evidence.

However, W says that by 2009, H had tired of living in a smaller flat and encouraged her to move from the family home so that it could be sold and the proceeds split. It is accepted that she identified 21 C Road, a smaller house in the same complex, as a suitable alternative, as moving there would allow the children to stay in a familiar environment after the move. She says that she understood that H was to move back into No. 12 only to redecorate it with a view to sale. She says that she would not have accepted the move to a much smaller property if she had known that H would move back to their former home significantly upgrade it and make no attempt to sell the property. No. 21 was bought for £485,000 in March 2009, with a mortgage of £408,623.

H’s case in this regard is that W always knew that this was what he intended, and that she moved out in the full knowledge that he would be moving back in for the longer term. He says that W positively wished to downsize following their separation, and further he points out that the current arrangement has suited the children very well as they have both of their parents very close by and able to see each of them virtually every day. It is also the case that W has continued to accept this arrangement now for the last 6 years; and as recently as January 2014, in her Form E, she was not expressing a housing aspiration at a greater level than the value of her current home. Indeed, she accepted in evidence that she could buy a larger property for the same value as her current home, if she was prepared to move from the complex.

W’s case is that her failure to initiate divorce proceedings was down to ongoing prevarication from H, who appeared keen to find a settlement when he felt financially able (as when he received a substantial dividend in 2010), but not when he feared that any financial proceedings would lead to a possible sale of his company. W says that he ‘got irritated’ when she said that she wanted to take advice. I have to say that I do broadly accept her evidence about this, and the picture that she paints about the reasons why (a) she moved out of the family home and into the much smaller property next door, and (b) she did not initiate any divorce or financial proceedings over this period. Consequently, I reject H’s case in that regard. However, the fact that she did settle into her new home, without any greater level of income provision from H, is another circumstance to which I must have regard.

Of the utmost significance in corroborating her account, is the offer which H made to her, in writing, in October 2011, at the time when there was the prospect of a sale of Z Ltd to the AB Group, in a deal which might have produced an available sum for H of some £9.4m. The offer which he made to her then was that she could retain her house, without mortgage (£500,000), and receive a further £2.03m. for herself, plus £156,000 in child support. H was to be left with a little under £7m. This suggests very clearly that certainly at this time, he did consider that he was trading with W’s ‘unascertained share’, and confirms her account that he had asked her not to take proceedings earlier so that he could grow the business first to their mutual advantage. In fact, the negotiations with the prospective buyers failed as they began to drop their price and H took the view that in due course he could do better.

It is evident that this failed acquisition in 2011 was a watershed moment for the company. H in his statement gives a full and I accept accurate account of how he saw, first in 2010, that the insurance market was struggling to get control of its pricing, and that insurers needed to host and manipulate their rating algorithms centrally. He consequently developed what he describes as a ‘unique and highly sophisticated piece of software’ which processes quotes at what he describes as phenomenal speed. He describes in some detail how the existence of this solution has lifted the company from bit part to major player in their industry. In his statement he suggests that it only since 2012 that the nature of the company and its business has really changed, as a result of their deployment of the product in the market-place. In his oral evidence he accepted that it was after the failed negotiations with AB Group that he and his fellow shareholders really began to reshape and redirect the company’s efforts. Had the sale progressed, the Solution would have been the prize asset acquired.

In his statement H says that since 2010, the shareholders have ‘invested heavily in the business to assist in the ongoing development’ of the product, and to design and develop further new products. H’s offer to W in October 2011 indicates that whilst he has viewed her interest from then as being worth a lot less than an equal share, he was certainly aware that it was significant and subsisting. He goes on to describe how the management structure of the business has been reshaped from 2012, and it is significant that when the Finance Director Mr W was appointed in 2012, it was with a view to sale within 3-5 years. Mr W told me, and I accept, that the timescales have lengthened somewhat, such that there may now be another 4 years before the market conditions favour a sale, but that remains very much the company’s intended direction, as I find.

H’s case is that his own role in Z Ltd has now changed, and that the enterprise is now a quite different one from that which existed in 2006/7 when the parties’ marriage came to an end. However, by his belated offer of a 10% stake in the value of H’s shareholding, he has latterly acknowledged what I would otherwise have been driven to find, which is that he has always treated his shareholding, which remains that which he held in 2007, as a matrimonial asset, and whilst his later endeavour undoubtedly will reduce significantly the extent to which it will be shared, W must still retain some valuable entitlement.

In this regard, I have to consider the extent to which H has provided for her from the investment over the years since the parties’ separation. The amount of such provision has been very significantly reduced by the policy which he and his fellow shareholders have adopted of regularly reinvesting the profits of the business into research and development projects. In other words, rather than passing on to W some share of her interest, the majority of it has, along with H’s entitlement, been reinvested with a view to maximising future profit. Indeed, the principled objections of the other shareholders to the release now of any dividend to enable H to make a payment to W are made on the basis that they do not wish their investments yet to be realised before they have matured at the point of sale. W’s investment must be treated, to a significant extent, in the same way – as being retained in the business.

I do have to bear in mind that, in September 2014, H did discharge the mortgage on W’s home at 21 C Road (£404,000), and this represents in part a payment out to her of her invested share in the company. Contrary to Mr Lyon’s suggestion, however, I credit that as a payment made in the last 9 months and during these proceedings, and as a payment made towards the current value of W’s entitlement, as I determine it to be, rather than as part of the payment made in 2009, when no doubt the value of H’s Z shares would have been less (and probably not much different from that on separation in 2006/7).

Quantification of the matrimonial assets. The only asset which may fall fairly outside the matrimonial bracket to any extent is H’s shareholding in Z Ltd., and that only because H’s post-separation efforts and occasional inspiration have added significant value to the shares which were held by him as a matrimonial asset, as I find, at the date of separation. As Mostyn J said in JL v SL (no. 2) (above):

‘41. …for those assets which were in place at the point of separation. They remain matrimonial property but the increase in value achieved in the period of separation may be unequally divided. I emphasise may. Obviously passive growth will not be shared other than equally, and there will be cases where on the facts even active growth will be equally shared...

42.

On the other hand there will be cases where the post-separation accrual relates to a truly new venture which has no connection to the marital partnership or to the assets of the partnership. In such a case the post-separation accrual should be designated as non-matrimonial property and save in a very rare case should not be shared.’

Neither counsel in this case have sought to present a case based on any rationale other than their suggestion that I should award a simple percentage figure to express W’s interest in the current value of H’s shareholding. I thus do not have the tools to perform other than an exercise in ‘lawless science’. I cannot have recourse to any suitable index by which I may measure equivalent progress in companies roughly akin to Z Ltd., but such a guide would only be of limited assistance in circumstances where I must assess the extent to which what must in 2007 have been a half share in the value of the holding has been eroded by H’s very significant post-separation endeavour. H’s offer of 10% values W’s current share at £795,000, or less than her interest would have been in 2007 (£865,000), and as such is inadequate, given the value which he himself subsequently placed upon retaining her unascertained share within the company.

The following other factual matters bear upon my consideration:

In light of the above, I am able to find clearly that more than half of the current value of the shares is attributable to this later effort, on the basis of the evidence that I have read and heard. I therefore find that W’s share of the current value of H’s shares should be expressed as 20% of the whole, on the basis that 60% of the value of H’s holding represents post-separation accrual, and the remaining 40% is a matrimonial asset to be shared equally. This is 5% less than the amount contended for by W’s counsel in closing, and 10% more than the amount offered by H. W’s share is worth £1.59m, and whilst this increases the value of her 2007 entitlement by more than the general share or prices indices, that it does so is appropriate having regard to the value to H of having the those shares at his disposal, and to the 2011 offer which he made. The fact that that offer was made at a time when his shares were valued more highly than they are now is reflected in the fact that the value W is to receive at this current time is less than what was then offered. Whilst the outcome which I have arrived at may be arbitrary to a degree, I am quite satisfied that in all the circumstances it is fair.

I thus come to compute the value of the matrimonial assets in this case. I have included in this the current levels of the parties’ respective bank and savings accounts, given these are anyway much less full than they might have been but for Z Ltd’s determined policy of inward investment. I also include in full the parties’ respective pensions, given that any contributions made since separation have been made in the full knowledge that W’s claim had yet to be determined, and that the level of provision made would not have enabled her to make any sufficient provision for her own retirement. I have included chattels as this rightly adds the value of H’s two Porsche motor cars, less their respective loans.

In those circumstances the matrimonial assets can be tabulated thus:

On this basis it can be seen that W’s entitled share may therefore be calculated at just about £2.336m. I also note that that sum is just short of 25% of the total asset pot in this case, which I have taken at the figure of £9,443,190 (Footnote: ¹). I am quite satisfied that this is a fair overall proportion for W in all of the circumstances of this case.

In order to determine whether that sum fairly meets her needs I must first assess how and when W might receive it. She should prima facie have 50% of the combined joint pension pot, which would have required a pension credit to her with a present estimated value of £161,382. If she is also to retain an interest in 20% of the value in H’s Z Ltd. shareholding, as I have explained above, then she would require a further lump sum from H in the sum of £57,000 to achieve her 50% entitlement. However, this receipt alone may cause her a short term liquidity issue, in that her resultant liquid capital would not enable her to discharge at once her current liabilities (£77,139).

Consequently, I propose to augment the lump sum payable by H by £20,000, to £77,000, whilst reducing the size of her pension-share accordingly (to that percentage which would provide for her a credit worth £141,382). I find that this is a lump sum which H can pay from his own personally held investments at this time without the need to declare any further dividends from the company, or attempt to persuade the other shareholders to alter the company’s chosen course. Mr Thorpe’s forays into the worlds of Thomas v Thomas and Nicholas v Nicholas were therefore ultimately unnecessary to determine a fair outcome to this case.

W’s matrimonial entitlement, subject to assessment of her need, may therefore be expressed thus:

I have set out W’s case as to her income and capital needs at paragraphs 26 and 27 above. Taking first her capital case, I have already provided for a sum to meet her current liabilities by the adjustment I made at paragraph 46 above. I do not accept that she needs to, nor should be able to require the funding to move into a significantly more expensive property. Although I have found that she did not expect H to move back into the family home when she vacated it, she has now been in her current property since 2009, and accepted that she could in due course buy a bigger house for the same money, once the location was no longer so important for the children. Had the house really been unsuitable, she could have raised the point before purchase, but chose not to. I do not therefore find that her needs require the release to her now of an additional capital sum for re-housing.

Looking at her estimate of future living expenses attached to her statement of 16^th March 2015, it can be seen that the apparent drop in costs for the children can be explained by the movement of £6,000 of holiday costs from their budget to W’s, and if these are returned, her budget becomes £63,418pa. If the household repair items then treated as capital are added to her original budget this moves to £46,838pa. This is the true disparity between the two presentations, and she frankly accepted in her evidence that the higher of these figures was predicated upon her living in the larger property which I have found is not commensurate with her needs at this stage, given the time that she has been living with the children in her current home. Until the sale of Z Ltd leads to her receipt of the balance of her sharing entitlement, I find that her income needs can fairly be met in the sum of £48,000pa, taking a broad view of the items in her original budget, their suggested increase, and a sensible amount for the repairs. W will also have had the benefit of the additional lump sum referred to above, which will enable to discharge her current indebtedness.

H puts his own net income at around £170,000pa (after the significant dividend reductions of recent years), and his Form E budget totals £161,000pa, but of this £20,000 relates to spending on the W’s house, which in relation to the mortgage costs has stopped, and as to the balance this will in future be W’s responsibility. He also allows as much as £24,000pa for depreciation in relation to his car collection, so I am satisfied that factoring in this and other easily achieved economies, he can afford the order for periodical payments which I propose to make to cover the interim period.

W’s own earned income totals around £1,000pcm. In addition, until sale of the company H should make periodical payments to her at the rate of £3,000pcm, allied with child maintenance payments at the rate of £1,000pcm per child. He will also discharge the school fees for the one further year that these have left to run. This will not require him to seek to amend Z Ltd’s remuneration policy to the detriment of the other shareholders in any way pending completion of that sale. For W, and assuming for the purpose a sale in 2 years at no more than the current value, her net receipt then from the company, without amortisation and allowing inflation on her capital sum, will enable her (Footnote: ²) to have an income, before resorting to her pension, of over £56,000pa for the rest of her life, assuming only that her current earnings continue to retirement. I am therefore satisfied that W’s needs are appropriately met by the award that I am making.

H also intimated that he may at some stage soon issue further shares under an incentive scheme for certain of his employees, which would have the effect of diluting his own shareholding. I have formed the view that if he does so, which he must be at liberty to do for the benefit of the company, this should not require a recalibration of W’s entitlement, provided that the dilution affects no more than 10% of the current holding – ie. provided that H’s residual entitlement is not less than 63% of the company’s shares. Should that course be taken, I am satisfied that it will be done only in the best interests of the company, and so in the best interests of H’s and so W’s financial stake in that company. Should a larger proportion be taken, then W’s entitlement should be recalibrated such that her entitlement is equivalent to not less than 12.6% of the whole.

I should make clear that I am making this order on the basis that, in the light of the evidence which I have heard, the company is on balance likely to be brought to market within the next 4 years. If for whatever reason that does not happen, and, as a result of a different strategy being taken by the shareholders more liquidity within the company is potentially available, it may become appropriate to review the timing of the payment to W of her entitlement, which I envisage will be in the form of lump sums as set out in W’s ‘revised proposal’ document. The order must therefore contain a suitable permission to apply.

I also intend that there will be suitable security, about which I hope that the parties can agree, but which I will determine if that proves not to be possible.