In dividing the value of shares held by a couple in a company founded by the husband during their marriage, which would be sold some years after their separation, the court took account of the husband’s continued work for the company following the separation. The value of the shares when they were sold would, in part, be the product of the husband’s sole endeavours and would therefore, in part, not be marital property.
[2013] EWHC 506 (Fam)
Fam Div - Moylan J
13 March 2013
The applicant wife (W) applied for a financial order in connection with her divorce from the respondent husband (H).
H had founded a company early in the marriage. The couple’s shares in the company were estimated to be worth £32 million, but they could not be sold for two to three years. The couple had loaned money to the company and were receiving repayments from it. H continued to work for the company following the parties’ separation. The court had to determine how the parties’ resources should be divided, including whether property should be added back in W’s favour on the basis that H had been wantonly spending money; whether H had made a special contribution to the marriage such as to justify dividing the shares in his favour; and whether his post-separation endeavour justified dividing the shares in his favour. The court also had to determine whether H should pay W maintenance for herself and whether trusts held on behalf of the parties’ children should be used for their maintenance.
HELD: (1) The parties’ total assets, apart from the shares, were worth £8.7 million. H’s net earned annual income was taken as £280,000; he would also receive half the loan interest of £110,000 net and rental and utilities payments from the company until at least 2014. H’s current wife’s income was also taken into account. W’s only income in the near future would be what she received from her capital resources: her income from the loan would provide her with £105,000 net annually. The level and nature of housing which the parties could obtain in the immediate future was limited by the resources available until the sale of the shares. However, if the resources were available, it would be reasonable for each party to purchase accommodation costing around £3 million. Given the family’s standard of living, the parties would be able to justify an income needs schedule of £300,000, although the level at which they could meet those needs was also limited by the resources available until the share sale (see paras 83-89, 100-101 of judgment). (2) The question of add-back depended on what both parties had been spending: it was insufficient merely to point to certain aspects of H’s expenditure. Both parties’ expenditure had been, to a large extent, funded from capital. There had to be clear evidence of wanton dissipation which it would be inequitable to disregard, Vaughan v Vaughan [2007] EWCA Civ 1085, [2008] 1 F.L.R. 1108 followed. H’s level of expenditure had been very high. There was no clear picture of W’s expenditure; however, the evidence suggested that she had also been spending at a significant rate. W had only partly established the evidential foundation for a notional reattribution. It was not possible to carry out a proper comparison to determine whether H’s expenditure had been wanton. Further, the notional reattribution involved around 1-2 per cent of the total wealth: that degree of adjustment was not necessary in order to achieve a fair result (paras 105-114). (3) The question of a special contribution did not depend on any detailed analysis of contributions. It required a striking evidential foundation which so clearly stood out that the question almost answered itself. H had accepted in his evidence that he considered that an equal division of the shares would have been fair up until the end of the marriage: in that case, it was difficult for the court to conclude that there had been such disparity in the parties’ contributions that it would be inequitable to disregard it, Lambert v Lambert [2002] EWCA Civ 1685, [2003] Fam. 103 applied (paras 132-134). (4) The issue of post-separation endeavour involved considering what was meant by marital property and then addressing the manner in which the sharing principle was applied. The shares had been generated during the marriage, but their value could not be realised until some years after its end. That value would in part be the product of H’s endeavours, not the parties’ joint endeavours and would therefore, in part, not be marital property. The weight to give H’s post-separation endeavour was part of the court’s discretion. The overall division which effected a fair outcome was an award that gave H 55 per cent of the capital wealth and W 45 per cent. There was no justification for dividing the non-share assets other than broadly equally, although the manner in which that was effected had to take into account their current needs (paras 138-143, 150-151). (5) An immediate clean break would not be fair. It would not allow W to meet her current income needs. H was able to pay maintenance as a result of his earned income. On the basis of his net income, he should pay W maintenance for herself of £100,000 annually. It was reasonable for the children’s trusts to be used for the payment of both school fees and maintenance, given the parties’ current financial position and the level of resources in the trusts (paras 160-162, 167).
Judgment accordingly.
Counsel: for the applicant: C Howard QC, R Castle; for the respondent: M Pointer QC, T Bishop QC
Solicitors: for the applicant: Hughes Fowler Carruthers; for the respondent: Alexiou Fisher Philipps
