Goddard-Watts v Goddard-Watts (Rev 1)

This is my judgment determining the wife's financial remedy application. This is a rehearing, the previous final order of 1^st June 2010 having been set aside by Moor J on 8^th July 2015 because of the husband’s non-disclosure in respect of his interest in two trusts.

I propose to call the parties the husband and the wife although their marriage was determined in 2010. The wife is represented by Mr Pointer QC and Mr Webster; the husband is represented by Mr Amos QC and Mr Sear.

The wife’s case is that she should receive an equal share of the parties’ current resources including the assets in the trusts. Mr Pointer submits that the sharing which took place in 2010 is of no continuing relevance because it was procured by the husband’s non-disclosure and the wife is entitled to have her award determined by reference to the current position. Accordingly the wife seeks a lump sum of £14 million plus, in the event of the sale of a company called Group Silverline Ltd, an additional sum equal to 40% of “any excess value” over the current value of the company.

The husband’s case is that the wife should receive a share of the value of the trusts’ assets as at 2010, this being her “loss” caused by the husband’s non-disclosure, plus an amount to reflect the fact that the wife did not receive her share in 2010. The other assets were shared in 2010 in a manner which was and remains fair. The husband, therefore, proposes that the wife should receive a lump sum of £3.65 million, being a third of the value of the trusts’ assets as at 2010 plus 15% “compensation”.

The parties’ respective contentions require me to consider the approach the court should take when rehearing a financial claim following a previous final order having been set aside for non-disclosure. I will consider this in more detail below but, in summary, it is clear from Lady Hale’s judgment in Sharland v Sharland [2015] 2 FLR 1367 that “there is enormous flexibility to enable the procedure to fit the case” (para 43). In some cases this will require the court to “start from scratch” (para 43) but in others it will not: as in Kingdon v Kingdon [2011] 1 FLR 1409.

The background to this case is set out in Moor J’s judgment: KG v LG (Appeal out of time; Material non-disclosure) [2015] EWFC 64. That judgment needs to be read with my judgment because I propose only to give a very brief summary of the history.

The parties began living together in 1987 and married in 1996. They separated in 2009. The husband is now aged 50. The wife is aged 52. They have three children aged between 18 and 22. The husband also has two children with his current partner.

In 1988 the husband started working for his parents’ company which later became Screwfix Direct Ltd. He was subsequently given an interest in the company which was then sold in 1999. The husband received £15 million. He purchased what became Group Silverline Ltd (“Silverline”). The husband owns 81.82% of the shares with the balance being owned by a trust for the benefit of his children.

In January 2002 the husband’s brother set up Toolstation Ltd. The husband lent his brother (over time) £1 million but he was not otherwise engaged in this business which became Silverline’s biggest customer. There was an informal agreement between the husband and his brother that a percentage of the shares in Toolstation would be treated as being held by the brother for the husband’s benefit.

The husband’s parents, having received inheritance tax planning advice, decided to transfer some of their assets to their children and grandchildren. The husband’s brother says that, rather than transfer cash, it was agreed that his parents would invest in Toolstation and subsequently transfer their shares. The husband’s parents acquired 10 million shares in the company. In due course they decided to give 3 million shares to each of their children.

The informal arrangement between the husband and his brother had to be formalised in 2008 because a third party was investing in Toolstation. It was agreed that the husband would receive 5,580,460 shares in Toolstation to reflect his notional interest in the business in return for the sum he had lent his brother as set out above.

In March 2008, the Hardy Trust and the Eagle Trust (“the Trusts”) were established. The trustees are the husband’s brother and his parents. The beneficiaries are the husband and his descendants, being currently his five children (two of whom are minors). I have read a statement from the husband’s brother, provided for the set aside proceedings, but have otherwise received no evidence from the trustees. Moor J found that the husband is the principal beneficiary of the Trusts.

The Trusts were due to receive 3 million shares in Toolstation from the husband’s parents and 5,580,460 shares from the husband’s brother. As explained by the husband’s brother, in fact, to simplify the process, he transferred 2,580,460 shares to the Eagle Trust and his parents transferred 6 million shares to the Hardy Trust.

I have explained the history of Toolstation shares in some detail because I am satisfied that 3 million of the shares settled into the Trusts were a direct contribution made by the husband’s parents whilst the balance represented the husband’s interest in Toolstation. The latter shares were in return for the financial assistance he had provided to his brother as set out above.

In March 2009 the husband acquired another business through a company called Powerbox AG. He is the sole shareholder. In his oral evidence the husband said that this cost £1.6 million of which £1 million was lent by the husband’s father and £600,000 was provided by the Trusts.

For the purposes of the June 2010 order the husband provided a Form M1. This valued his assets at £14.26 million, including only half of the former matrimonial home (at £1.57 million), plus pensions of £430,000. The husband’s business interests were valued at £9.7 million. His shares in Silverline were valued at £5.4 million and his shares in Powerbox AG at £600,000. The former was a desktop valuation provided by accountants (specifically a Mr O’Donnell). The latter was based on the amount paid by the husband for the purchase of the company in March 2009.

The M1 statement also referred to the assets in the Trusts based on accounts as at 5^th April 2008. At that date, they comprised the balance of the shares in Toolstation, after the sale of some shares in April 2008, and cash of £1.5 million. I set out more details in respect of the Trusts later in this judgment.

Under the June 2010 order the wife received the former matrimonial home (£3.25 million) and a lump sum of £4 million (£1 million of which was payable over 8 years).

Although it has been submitted that the wife received broadly half of the disclosed wealth in 2010, it would seem to me that this does not take into account the balance of the former matrimonial home, which I assume was held in the parties’ joint names. If I am right about this, the combined total, based on the figures given in the M1 statement and including pensions, would have been £16.26 million.

The wife has remained living in the former matrimonial home. The husband moved to live in Switzerland in 2010.

The husband was found by Moor J to have given a false presentation in respect of his interests in the Trusts. He set aside the 2010 order.

In the course of his judgment, Moor J describes the husband’s disclosure as “woeful”, in circumstances where the trustees had “always considered (the husband) to be their principal beneficiary”. He also said that he was “equally unimpressed” with Mr O’Donnell’s evidence. Moor J was impressed with the evidence of the husband’s father and brother.

Moor J also added, in respect of the assets in the Trusts:

“I am not saying that the wife would have received half of this sum. I accept that the fact that the husband was only the principal beneficiary would have to be factored in, as would the source of the shares …”.

As referred to above, the Hardy Trust initially had 6 million Toolstation shares and the Eagle Trust had 2,580,460.

In April 2008 both trusts sold some shares as a result of which the Hardy Trust received £1.1 million net of capital gains tax and the Eagle Trust received £470,000. In May 2008 the Trusts together lent Silverline £1 million. This loan was later assigned, in 2009, to the husband. In February 2009 the Trusts distributed a total of £500,000 to the husband (not £600,000 as referred to above), which he used in the purchase of the assets of Powerbox.

In February 2010 the Trusts received further sums of £4.2 million gross, £3.4 million net of tax.

As at the date of the June 2010 order the Trusts held 6 million shares in Toolstation and cash of approximately £3.5 million (net of cgt).

In October 2011 the husband received further distributions totalling £3.36 million. The husband used this sum to repay a loan which he had obtained to enable him to pay the wife £3 million in 2010 pursuant to the terms of the 2010 order.

In January 2012 the Trusts sold their remaining shares and received the gross sum of £7.5 million, £5.65 million net. In April 2012, the Eagle Trust distributed £1.5 million to the husband and the Hardy Trust distributed £3 million.

In March 2014 the Trusts received loan notes valued at £14 million gross which were redeemed in April 2015, leaving the Trusts with no further interest in Toolstation.

In summary, the Trusts have received a gross total of £28.8 million, net £21.45 million. As set out above, £1 million was lent to Silverline in 2008; £500,000 was distributed to the husband to fund the purchase of Powerbox’s assets; the husband has received other distributions totalling £7.86 million and has an outstanding loan from the Trusts of £2.275 million; finally, a further £2 million has been lent to Silverline.

The Trusts have been paying the elder two children £12,000 per year whilst they have been at university. These are the only distributions made for the children of which I am aware.

As at 1^st June 2016, and after deducting estimated tax, the Eagle Trust has cash of £3.7 million. The Hardy Trust has cash of £4.7 million, plus the loan to Silverline of £2 million and the loan to the husband of £2.275 million. Accordingly, the Trusts have total assets of £12.67 million, comprising liquid assets of £8.4 million and the loans of £2 million and £2.275 million.

Both parties have filed Forms E and statements. As referred to above, I also have a statement from the husband’s brother filed for the purposes of the hearing before Moor J.

Perhaps out of an undue abundance of caution, I permitted expert valuations to be obtained of the shares in Toolstation, Powerbox and Silverline both in 2010 and, in respect of the latter companies, currently. I permitted the valuation of the latter companies as at June 2010 in part because Mr Pointer submitted that the values provided by the husband in his M1 statement were based on Mr O’Donnell’s figures. He submitted that Mr O’Donnell was a tainted witness, given Moor J’s assessment of him, and, accordingly, that the figures he had provided in 2010 should be viewed with suspicion and might further undermine the 2010 order.

The valuation of Toolstation as at 2010 was undertaken by Mr Pym of Prime Forensic Accounting. The valuations in respect of Silverline and Powerbox were undertaken by Mr Greene of MGR Weston Kay LLP.

At the final hearing I heard oral evidence from the wife, the husband and the accountant, Mr Greene. I heard no evidence from or on behalf of the trustees of the Trusts.

I found the wife a credible witness and I have no doubt that she has sought to give me accurate evidence.

In respect of the husband, I approached his evidence with considerable caution given the history and Moor J’s conclusions. However, I am satisfied that the husband’s evidence to me has been largely reliable.

Mr Greene was balanced and careful in all his evidence including in his responses to questions both in writing and in cross-examination.

Both parties have argued their respective cases on the basis that the sharing principle is determinative. They differ as to the date at which the assets should be shared and the impact of the division of the assets which took place in 2010. As referred to above, the wife submits that the assets should be divided by reference solely to the current position. The husband submits that the wife’s award should be calculated by reference to what she would additionally have received in 2010 in respect of the husband’s interest in the Trusts.

The only financial evidence which I propose to address is that relating to (a) the 2010 values and (b) the parties’ current capital resources.

2010 Values

As referred to above, Mr Pointer questions the values ascribed by the husband (effectively by Mr O’Donnell) to his shares in Silverline and Powerbox in his 2010 M1 statement. To repeat, the former were given a value of £5.4 million and the latter £600,000.

The valuations of Silverline and Powerbox by Mr Greene are set out in his report dated 9^th May 2016 with an amended valuation dated 6^th June 2016. In his first report, Mr Greene makes the following astute comment:

“By its very nature, valuation work cannot be regarded as an exact science and the conclusions arrived at in many cases will of necessity be subjective and dependent on the exercise of individual judgement. Although my valuation is in my opinion reasonable and defensible, others, including (the husband or the wife) might wish to argue for different values.”

Mr Greene values the husband’s shares in Silverline as at June 2010 at £5.34 million. He valued the husband’s interest in Powerbox as being the value of his loan accounts, namely £1.36 million.

Mr Greene was extensively questioned by Mr Pointer. It was suggested to him that, when preparing the 2010 valuation for Silverline, he should have used the 2011 figures or, if not, should have obtained and considered the forecast for 2011. Mr Greene did not consider it appropriate to use the 2011 figures because they would not have been available in 2010. Further, although he accepted that it would have been reasonable for him to ask for these forecasts, he then added that he was not sure what he would have done with the figures because they would have remained forecasts on which, inferentially, he would have placed little weight.

I am satisfied that Mr Greene’s 2010 valuation of Silverline provides the value which he would have ascribed to the shares if he had valued them in 2010. I do not accept Mr Pointer’s criticism of his failure to take into account the actual figures for 2011 or the forecasts. As to the former, they obviously would not have been available. As to the latter, I accept Mr Greene’s evidence that they would not have materially affected his valuation.

As to Powerbox, there was little exploration of this issue during the course of the hearing. Clearly, account would have been taken not only of the value ascribed by Mr Greene but also the £1 million loan from the husband’s father which was used in the purchase. This was not referred to in the husband’s M1 but it appears from the husband’s statement of 23^rd January 2015 that it was not repaid until 2012. In his opening submissions, Mr Amos refers to this loan as being reflected in the husband’s Powerbox loan account.

I do not consider that the difference between the figures given by the husband in 2010, namely a total of £6 million, and the values given by Mr Greene, totalling £6.7 million, is sufficient to undermine the validity of the former. As Mr Greene has said, valuation is not an exact science. The differential is just over 10% in the value of these assets and less than 5% of the total resources in 2010 excluding the Trusts’ assets. Further, once the loan from the husband’s father is taken into account, which it would have to be, the total based on Mr Greene’s valuations becomes less than the £6 million figure given by the husband in 2010.

The valuation of Toolstation as at 1^st June 2010 was undertaken by Mr Pym of Prime Forensic Accounting. His report is dated 28^th April 2016. He values the Hardy Trust’s shares at £9.6 million gross and the Eagle Trust shares at £4.14 million gross.

Mr Pointer seeks to criticise this valuation because it was based purely on information which would have been available as at that date. He relies on what Dankwerts J (as he then was) said in Holt v Inland Revenue Commissioners [1953] 1 WLR 1488. In my view Mr Pym carried out the exercise which he rightly understood he was instructed to undertake, namely to provide the value which would have been ascribed to the shares if they had been valued in 2010.

Current Capital Resources

By the end of the hearing an agreed schedule of assets had been produced. This identifies two remaining issues between the parties. The combined total, excluding the assets in the Trusts (including the husband’s loan), is £22.8/£24.2 million (including the shares in Silverline and Powerbox valued at £16.1 million and pensions of £670,000). As set out above, the Trusts have assets, including the loan to the husband, of £12.67 million.

The wife has assets with a combined value of approximately £4.5 million including the former matrimonial home, net of sale costs, at £2.8 million (i.e. it has, somewhat surprisingly, reduced in value since 2010).

The husband has non-business and pension assets totalling either £5.3 million (the wife’s case) or £3.9 million (the husband’s case). The two issues between the parties are (a) whether the husband’s home in Switzerland is worth CHF4.5 million or CHF3.6 million and (b) whether he owes his parents £754,000. These issues are not relevant to my determination but I, nevertheless, propose to address them.

As to the former issue, the property has not been formally valued, the court directing the provision of market appraisals only. One appraisal, from Savills, suggested an asking price of CHF4.5 million with a “margin for negotiation (normally 5-8%)”. If this margin is applied, the value is between CHF4.28 and CHF4.14 million (an average of CHF4.2 million). The other appraisal, from FIMA Architecture, gave a provisional estimate of CHF3.6 million. If it were necessary for me to do so, I would take a figure of CHF3.9 million as providing a sufficient indication of the gross value of the property for the purposes of my judgment.

As to the alleged loan from his parents, in his Form E the husband said that he owed his father £754,000 which he had been lent to assist in the purchase of Powerbox. In his Replies to Questionnaire he said that the loan was in fact from his parents and had been used in the purchase of his home in Switzerland. The loan referred to in his Form E and used in the purchase of Powerbox was for £1 million and had been repaid.

In his oral evidence, the husband appeared confused about the existence of this loan. He said that he did not think he owed his father any money. Although the husband was confused I consider it unlikely that he has repaid this sum because I cannot see where he would have found the money to do so. It is possible that his father has forgiven the loan but, if it were necessary, I would include this as a liability.

Mr Greene values the husband’s shares in Silverline at £13.28 million and in Powerbox at £2.86 million. The two companies operate as one business and, in Mr Greene’s opinion, would be sold as such. He has, accordingly, valued the whole business and then attributed a proportion to Powerbox.

Mr Pointer raised a number of issues in respect of Mr Greene’s valuation. In my view none of these undermined Mr Greene’s conclusions.

As with the 2010 valuation, he asked Mr Greene why he had not considered the forecast for 2017. Mr Greene explained that the actual figures being achieved by the business were “nothing like” their projections. He did not, therefore, consider that any projection for 2017 would influence his determination.

One of the other issues, which Mr Greene considered in his report and which was further explored during the course of the hearing, was the relevance to the current value of Silverline of an indicative conditional offer (£82.6 million net of debt) made by a major public company in September 2015. This offer was preceded by an Information Memorandum dated August 2015 (“the IM”). It was withdrawn, without explanation, in October 2015.

Mr Greene noted in his report that this was a very high offer as it represented more than 26 times the company’s EBITDA for the year ended 31^st July 2015. The offer was subject to the achievement of a number of key assumptions. One of these was that the forecast EBITDA and maintainable profit adjustments for 2016 were “realistic and achievable”. The updated 2016 EBITDA forecast, based on actual figures for 7 months, is approximately half the forecast figure in the IM.

The husband commented in his oral evidence that the offer was so heavily caveated that it was never a realistic offer in the sense of being achievable.

I agree with Mr Greene that this offer is of no relevance to the exercise he undertook because it does not reflect the likely value of the business.

Likewise, I do not consider that a valuation carried out in December 2015 by KPMG, for the purposes of an employee shareholder agreement, undermines Mr Greene’s valuation. It not only uses a very similar multiple to that used by Mr Greene but it also arrives at a similar gross value based on a higher forecast EBITDA for 2016 which is unlikely to be achieved on the most recently available figures.

Mr Pointer investigated other issues during the hearing but, as referred to above, in my view none of them undermined the valuation.

The value includes the value of various intellectual property rights which are owned by the husband because, as Mr Greene says, the husband could not sell the company without including these rights and their value would be subsumed in the value of the company.

One other issue addressed in the evidence was the extent to which the husband has continued to work in the business, namely Silverline and Powerbox. In his statement the husband says that, even though he is no longer a director, he has remained heavily involved in the business from Switzerland and is its “driving force”.

During his oral evidence, the husband was asked about the contents of the IM where it was stated that he “has no day-today involvement” and that he “does not have an operational role” in the business. Mr Greene also refers in his report to the husband having no “operational role” in the business since he moved to Switzerland in 2010. The husband dealt with this at some length and I am persuaded that he does, indeed, remain the “driving force” behind the business and remains actively engaged in it.

I only propose to summarise the parties’ respective submissions but, when determining this application, I have taken all the matters raised into account.

The core submission made by Mr Pointer is that the wife is entitled to share equally in the parties’ current resources including the assets held in the Trusts. This is partly as a matter of principle and partly based on the circumstances of this case.

As to the former, Mr Pointer submits that: “Any other conclusion would allow the husband to preserve his accumulated wealth founded, as it is, upon the fraudulent presentation of his resources in 2010”. In support of his submissions Mr Pointer relies on authorities dating back to the Duchess of Kingston’s case (1776) 20 St Tr 355 as to the effect of fraud, namely that it “vitiates the most solemn proceedings of courts and justice”: De Grey CJ. With respect to Mr Pointer such industrious exploration is not necessary in this case because the relevant principles have been more recently considered by the Supreme Court in Sharland v Sharland, on which Mr Pointer also relies.

Mr Pointer relies on Jenkins v Livesey [1985] FLR 813, Smith v Smith [1991] 2 FLR 432 and Williams v Lindley [2005] 2 FLR 710 as supporting his submission that in the “ordinary case” fraud will lead to an entitlement to have the claim heard afresh on current figures. He also submits that, unless the approach taken in Kingdon v Kingdon is confined to the “very few cases” in which that approach can be properly applied, this decision will be taken up by fraudsters as a way of limiting their liability. This would lead to a “corresponding diminution in the rights available to the victim of the fraud” and to the “emasculation” of the decision in Sharland.

Mr Pointer also submits that the wife should be treated as having retained a continuing interest in the husband’s businesses in support of her claim to a share of their current and future value. This is based on a contention that the husband has been investing and managing her undivided share.

Additionally, Mr Pointer submits that the funds in the Trusts have been used to assist Silverline both by way of loans to the business and/or by way of distributions to the husband. They have also provided the husband with resources to meet his living expenses which has meant that he did not have to draw funds from the business.

Another issue substantively addressed by Mr Pointer is post-separation accrual. He relies on Cowan v Cowan [2001] 2 FLR 192 in which Thorpe LJ said, at para 70:

“The third, namely that much of the husband’s fortune was generated in the 6 years post-separation, receives no reflection because in my opinion it is inherently fallacious. The assessment of assets must be at the date of trial or appeal … In this case the reality is that the husband traded his wife’s unascertained share as well as his own between separation and trial … the wife’s share went on risk and she is plainly entitled to what in the event has proved to be a substantial profit. If this factor has any relevance it is within the evaluation of the husband’s exceptional contribution”.

Cowan was, of course, decided before the decision of Miller v Miller; McFarlane v McFarlane [2006] 1 FLR 1186. Additionally, the court’s assessment of the relevance of post-separation endeavour in the application of the sharing principle has further developed since the Miller decision. Accordingly, there is a significantly altered legal landscape to that which existed when Cowan was decided.

The last authority to which Mr Pointer refers on this issue is Mostyn J’s decision of JL v SL (No 2) (Appeal: Non-matrimonial property) [2015] 2 FLR 1202 in which he said, when referring to Roberts J’s decision of Cooper-Hohn v Cooper-Hohn [2015] 1 FLR 745:

“[40] … I think the proper analysis is that Roberts J was saying that the fund retained its matrimonial character but the wife would share unequally in the increase in value achieved by the husband alone in the period of separation.

[41] This approach is to my mind undoubtedly correct 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 as happened in Kan v Poon”.

In dealing with this issue, Mr Pointer also submitted that the husband has had little involvement in Silverline since 2010. I have dealt with this above and have found that the husband has continued to make a substantial contribution to the business.

The final element of Mr Pointer’s submissions to which I propose to refer is how he addresses the fact that 3 million of the shares transferred to the Trusts came from the husband’s parents. In his written opening Mr Pointer deployed a number of what, with respect to him, I consider to be rather convoluted arguments. First, he submitted that “it is clear” from Cowan v Cowan that at the date of separation the wife had an expectation “of a proportion (half) of the … shares that were held in the trusts”. It is not clear to me how Cowan provides any support for this proposition. Next, he submitted that even if these shares should be treated differently, the principle from Re Hallett’s Case (1880) 13 Ch D 696 should be applied so that the funds spent from the Trusts should be treated as coming from the husband’s own money first and not the wife’s or joint money. I struggle to see how this principle is relevant or applies as submitted by Mr Pointer. In any event, in his final submissions, Mr Pointer accepted that the shares contributed by the husband’s parents were not marital assets.

Mr Amos submits that the wife’s award should be calculated solely by reference to what she would have additionally received in 2010, if the husband’s interest in the Trusts had been properly disclosed, uprated to compensate her for the fact that she did not receive it then. This would remedy the effect of the husband’s defective disclosure. He further submits that any other approach would “improperly punish” the husband. The 2010 order should otherwise be upheld because the division of the disclosed assets was and remains fair. Mr Amos relies on Sharland, Kingdon and H v H (Financial Relief) [2010] 1 FLR 1864 in support of his submission that it is not necessary, in order to effect a fair outcome in this case, for the court to start with a “blank canvas”.

Mr Amos also submits that the shares contributed by the husband’s parents to the Trusts are not marital assets and are not, therefore, resources which should be shared between the parties. He, additionally, points to the need to take into account the interests of the other beneficiaries, to Toolstation being the husband’s brother’s company and to the fact that the Trusts realised a very substantial part of their interests in Toolstation in the years after the parties separated.

It is the husband’s case that the wife should receive a sum equal to 33% of the Trusts’ assets (net of notional capital gains tax) valued as at June 2010 (excluding the shares from the husband’s parents) plus an uplift of 15% to reflect the fact that the wife’s receipt of her share has been delayed. Taking Mr Pym’s valuation for the Toolstation shares, the Trusts’ assets totalled £14.8 million. Deducting 35% to reflect the parents’ shares gives £9.6 million. 33% of this sum equals £3.17 million; adding 15% (£476,000) gives a total of £3.65 million. By this route, the husband submits that the wife would be properly compensated for what she should have received, but did not, in 2010.

Mr Amos challenges the claim as formulated by the wife. He submits that, whatever approach is taken to the determination of her claim, it cannot be right to suggest that she is entitled to share equally in the wealth created by the husband’s post-separation endeavour during the past 7 years.

I now turn to the exercise of my discretion.

Although I have been referred to a large number of authorities, in my view, the principles applicable to this case require a more limited exploration particularly because those principles were the subject of the Supreme Court’s decision in Sharland. For example, there is no need to refer to the Duchess of Kingston’s case because the 2010 order has already been set aside.

In Sharland v Sharland, Lady Hale (with whom the rest of the court agreed) discussed the approach the court should take after an order had been set aside:

In determining the right approach in the circumstances of this case I also bear well in mind what Briggs LJ said in the Court of Appeal, as referred to in Lady Hale’s judgment:

“[15] In a vigorous dissenting judgment, Briggs LJ explained that the husband’s fraud was material to the agreement and the consent order for two reasons. First, it undermined the basis on which his shareholding had been valued and ‘therefore the ability of the wife to address the proportionality of agreeing a discount below her claimed 50% … against the receipt of a larger share of the other family assets’. Secondly, it created a false basis for the wife to assume that a delayed realisation of the husband’s shareholding might justify a tapered reduction in her share of the proceeds (para [30]). Once the judge had decided that the husband’s fraud had undermined the parties’ agreement and the consent order, that should have been the end of the matter. There were three inter-related reasons for this ...”

The former factor, namely the potential effect of the non-disclosure on the structure of the 2010 order, clearly remains a relevant issue when I am considering how to determine the wife’s claim.

In Kingdon v Kingdon Wilson LJ (as he then was), after having touched on the distinction between cases involving a supervening event and those involving non-disclosure, said:

I agree with Mr Pointer that I am conducting a rehearing. But I do not agree that, merely because this is a rehearing, the only way of achieving a fair outcome is to give the wife an award based on the current values of the assets. I must determine what is fair now and I must do so by reference to all the circumstances of the case. These include the current resources available to the parties but also the division which was effected in 2010 and the fact that this was procured by non-disclosure.

I also do not accept Mr Pointer’s broader submissions as to the dangers of applying, what I will call, the Kingdon approach. As I have said, I am conducting a rehearing and exercising my discretion based on all the circumstances of the case as they are now. However, as referred to by the Supreme Court, the court has “enormous flexibility” in deciding how to determine the claim and, in my view, it would not be helpful for that flexibility to become subject to sub-principles or overlain with other asserted overarching considerations.

I have dealt above with my conclusions as to the 2010 figures given by the husband in his M1 statement. As referred to, I do not consider that the figures given by the husband in 2010 for his shares in Silverline and Powerbox were inaccurate.

I next turn to the significance of the fact some of the shares in the Trusts derived from the husband’s parents. I do not see the relevance to this issue of the decision in Cowan which, as I have noted, pre-dates Miller v Miller; McFarlane v McFarlane and the identification of the sharing principle. I also struggle, in any event, to see how Cowan supports Mr Pointer’s submission that the wife had an expectation of receiving half of the shares contributed by the husband’s parents.

The relevance of property being derived from “a source wholly external to the marriage”, as described by Lord Nicholls in White v White [2001] 1 AC 596 at p. 610E/F, in the application of the sharing principle has been considered in a number of cases. These cases were not considered during the course of the hearing because Mr Pointer agreed the inevitable in his closing submissions, namely that the shares contributed by the husband’s parents are not a marital asset.

The shares contributed by the husband’s parents are clearly from a source external to the marriage. Further, in my view, there is no justification in this case for any part of the value derived from them being shared between the parties. In K v L (Non-Matrimonial Property: Special Contribution) [2011] 2 FLR 980, Wilson LJ (as he then was) said, when addressing the importance of the source of the assets:

“18.

Thus, with respect to Baroness Hale, I believe that the true proposition is that the importance of the source of the assets may diminish over time. Three situations come to mind:

(a)

Over time matrimonial property of such value has been acquired as to diminish the significance of the initial contribution by one spouse of non-matrimonial property.

(b)

Over time the non-matrimonial property initially contributed has been mixed with matrimonial property in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial property or in which, at any rate, the task of identifying its current value is too difficult.

(c)

The contributor of non-matrimonial property has chosen to invest it in the purchase of a matrimonial home which, although vested in his or her sole name, has – as in most cases one would expect – come over time to be treated by the parties as a central item of matrimonial property.

The situations described in (a) and (b) above were both present in White. By contrast, there is nothing in the facts of the present case which logically justifies a conclusion that, as the long marriage proceeded, there was a diminution in the importance of the source of the parties' entire wealth, at all times ring-fenced by share certificates in the wife's sole name which to a large extent were just kept safely and left to reproduce themselves and to grow in value.”

There are no circumstances present in this case which diminish the importance of the source of the shares. The fact that the husband has benefited from them, largely since the parties’ separated, does not justify them being shared between the parties.

In 2010 the wife received a share of the marital resources. This was procured by false disclosure in relation to the Trusts. However, subject to one point, the parties’ other resources were divided in a way which was fair and which, in my view, remains fair. The wife received less than half of the disclosed assets but this reflects the fact that the husband’s business interests formed a significant part of the wealth retained by him. To adopt what Wilson LJ said in Kingdon:

“the non-disclosure was of a discrete element of the husband's assets and it generated a defect which could be cured by one simple enlargement, to be devised pursuant to the sharing principle, of provision in the” 2010 order.

Or to adapt what Lady Hale said in Sharland, it is fair in this case to isolate the resources which were not disclosed and to deal only with those, subject to one small caveat.

It is clear to me, as I have said, that the division of the non-trust assets which was effected in 2010 was fair and remains fair save in one respect. The one aspect is that, if the truth had been known about the husband’s interest in Trusts, I doubt whether part of the wife’s lump sum (£1 million) would have been payable over 8 years. I do not accept Mr Pointer’s submissions including that, if the wife had known about the cash held by the Trusts, she may well have “opted” to receive some of her award by way of shares in Silverline. This was not explored during the hearing but I see no prospect of this either having been agreed or being ordered by the court. It was the husband’s business and the court would not have given the wife shares in it unless a fair award could not otherwise be achieved. Plainly, it could.

Further, if I was to undertake the discretionary exercise by reference to the current value of the resources, I would have to make considerable allowance for the fact that the current values of Silverline and Powerbox reflect the husband’s work over the course of the last 6 years. Indeed, it would be easy to conclude that the difference between the values given for 2010 and the current values are not the product of marital endeavour. The husband has not been trading (per Cowan) or gambling (per H v H) with the wife’s share because the resources as disclosed, including the husband’s interests in these companies, were shared in 2010.

For the avoidance of doubt, I also do not accept that the fact that part of the Trusts’ resources have been lent to Silverline and/or might otherwise have been said indirectly to have helped this business, creates any entitlement for the wife to a share of the business post 2010. This is too remote. As referred to above, the current value of the business is the product of post-separation endeavour, as between the husband and the wife, and gives her no entitlement to a further share in addition to that which she received in 2010.

I do not accept Mr Amos’ submission that the shares in Toolstation should be treated other than as an investment made during the course of the marriage. Further, the fact that the value of the shares was not realised until after the end of the marriage does not affect their potential quality as marital assets. The husband did not work in the business. The husband was entitled to the shares to reflect the sums he had lent his brother. The fact that Toolstation was the brother’s company does not, in my view, alter the fact that the shares were by way of an investment. Nor do I accept his submission that the wife’s claim should be determined by reference to 2010 values. This would be wholly artificial when the true figures are known.

The sharing principle applies with force to marital property, being treated as the product of the parties’ joint contributions during the marriage. The assets in the Trusts, excluding the shares contributed by the husband’s parents, are marital assets provided they are resources available to the parties. As Wilson LJ said in Charman v Charman [2006] 2 FLR 422:

There was no direct evidence on this issue during the course of the hearing. Mr Amos has referred to passages in the husband’s brother’s statement but these are of a very general nature, namely that in 2012 he was “conscious of my obligations as a trustee, so wanted to make sure that not all the funds were being distributed and a greater degree of control was being exercised”. Mr Amos also refers to the fact that, since 2012, the Trusts have lent, not distributed, funds to the husband.

There is also the evidence referred to in Moor J’s judgment, namely that the trustees have always considered the husband to be the principal beneficiary. They said, in a letter of wishes, that they would administer the trusts “in accordance with (the husband’s) legal and reasonable request”.

I have no doubt that, if the true position in respect of the Trusts had been disclosed in 2010, the court would have treated 65% of the Trusts’ assets as being marital resources available to the parties. This is clear from the evidence to which I have referred in the previous paragraph and from the amount distributed and lent since 2010. The court would have answered the Charman question in the affirmative to that extent (i.e. 65%) and might well have gone further. On this basis the wife would have been awarded 32.5% of the Trusts’ assets, by way of lump sums, payable by the husband as and when those assets were realised. I do not discount this percentage to reflect the fact that the husband was retaining illiquid assets (namely his business shares). This discount is already reflected in the unequal division effected in 2010. To take this factor into account again would be double counting.

Is there any reason why the wife should not now receive this percentage? The Trusts have received £21.45 million net. Of this 35%, namely £7.5 million, represents non-marital resources, leaving a balance of £13.95 million. In my view, as explained above, this is all marital wealth. £1.5 million had been distributed prior to the 2010 order and was, therefore, taken into account at that time. This leaves £12.45 million. If this were to be distributed equally between the parties the wife would be entitled to a lump sum of £6.22 million. The husband could only pay this if the Trusts gave him the funds to do so. This would leave the Trusts with assets of £6.45 million (including the loans).

I can see no reason why the wife should not receive this lump sum. It represents her share of marital resources. It is the product of an investment acquired during the course of the marriage and no part of it reflects post-separation endeavour. I am satisfied that, if the husband requested this sum from the Trusts, it would be distributed to him. The Trusts would still have liquid resources of approximately £2 million and the loans totalling £4.275 million.

I also consider that this gives appropriate weight to the interests of the other beneficiaries. I recognise that distributions have been made since 2010, significantly depleting the Trusts’ resources, but there remains more than sufficient in the Trusts for the other beneficiaries, especially if I also take into account their interest in just over 18% (through another trust) of Silverline.

The only additional question is whether I should award a higher sum to reflect two other factors. The first is that the wife would have received this element of her award earlier than now because she would have received payments in instalments (mainly in 2015 with a smaller sum in 2012), as the Trusts’ interests in Toolstation were realised. I do not include the earlier receipts (post 2010) because the distributions then made to the husband, which left the Trusts with almost no cash, were used by him to repay the loan he had taken to pay the wife £3 million in 2010.

The second, is the fact that payment of the final 2010 lump sum instalment of £1 million is being paid over 8 years (at the rate of £10,000 per month). Clearly, the remaining instalments (of approximately £280,000) should be accelerated. I will determine the date by when payment should be made when I make my order.

In my judgment, I should reflect both these factors in my award. It is not possible to achieve this by the application of any particular formula. But as Mr Amos reminded me, Wilson LJ said in Jones v Jones [2011] 1 FLR 1723 at para 35: “Application of the sharing principle is inherently arbitrary”. Whilst I am not entirely happy with the concept that the sum I award to reflect these factors is arbitrary, I take it that Wilson LJ meant discretionary rather than susceptible to the application of a precise formula. I propose to increase the wife’s award, excluding the sum of £280,000, by £200,000, making a total of £6.42 million.

The only other matter I have been invited to consider is child maintenance. I will deal with this when I determine the form of my order.