Strand, London, WC2A 2LL
B e f o r e :
| SANDRA CAROL ANN SORRELL
|- and -
|MARTIN STUART SORRELL
Mr Lewis Marks QC and Mr James Ewins for the Respondent
Hearing dates: 20–22 & 25-27 July 2005
Crown Copyright ©
This judgment is being handed down in private on Friday 29th July at 2 pm. It consists of 24 pages and has been signed and dated by the judge. This judgment may be shown to the parties immediately upon receipt by Counsel. (It may not be reported without leave of the judge.) Afternote – This was lifted with effect from 10th October 2005
The Honourable Mr Justice Bennet:
"However for the present, given the infinite variety of fact and circumstance, I propose to mark time on a cautious acknowledgement that special contribution remains a legitimate possibility but only in exceptional circumstances" is of critical importance in this case. There are other issues, but these go to the quantifications of the assets or more general points.
"76. I believe that the creation of this wealth is without doubt an exceptional financial contribution. Of course the wealth that I have built for others (the investors) dwarfs the wealth that I have built up personally and for my family, but I do believe that a total family fortune of over £100 million (gross), of which almost all is invested in WPP, represents a spectacular contribution which can fairly categorised as "exceptional".
This does not represent the fruits of one lucky gamble, or merely dedication and determination, rather (as I hope I have illustrated above in the necessarily abbreviated account of my career) through a rare, if not unique, combination of inspiration, innovation, courage and hard work. I find it hard to see how the creation of wealth through the exploitation of an inherent gift for music, or sport or art could be qualitatively different from the creation of wealth through the exploitation of my own abilities."
Assets – capital and income
"H's case, supported by Mr Boulton, is that the market price of the WPP of the WPP shares includes an element, between 5% and 10% (and one arithmetical analysis might support 8%, which is Mr Boulton's figure) which is the market's appraisal of the value of husband's expected future contribution to the business. While this is a value which could theoretically be realised immediately we say that this is really attributable to H's future endeavours, after cessation of the marriage partnership and should be isolated as a "non-marital asset".
"From the long-term data contained in the analysts' reports, it is apparent that the growth ratio in WPP's revenues 1991 to 2000 was 7.5%, compared to an industry average of 6.6% (i.e. there was a growth premium of about 0.9%)."
At paras 8.22 and 8.23 he wrote:-
"In my view, therefore, it would be more appropriate (and conservative) to attribute at least one half of the 0.9% growth premium achieved by WPP in the last full cycle, to the husband as CEO throughout the period (i.e. 0.45%). "I therefore conclude that, absent his contribution, the firm's revenues would grow in future by around 0.45% less each year than they would otherwise."
Similarly with costs, after analysis he concludes at para 8.29:-
"I therefore believe that a conservative estimate of the husband's net effect on WPP's costs might lie in the region of 1.0% of WPP's sales, a figure of £50 million per annum based on analysts' forecasts of the company's sales in 2005. That is, absent the husband's prescence as CEO of WPP, its total operating costs would be in the region of £50 million higher that they are."
"Conclusion. I recognise that the assessment of the key man portion of the current WPP share price is subjective. In my view, however, based on all the evidence reviewed in this section, it is at least 5% and may well be as high as 10% of the current share price. In my calculations in section 10, I have used a key man portion of 8%."
"I believe that this outcome is reasonable on the basis of the assumptions that I have made. In particular:
(ii) the Respondent's culture of cost minimisation is likely to survive his tenure as CEO (and the higher interest payments may well have disappeared by 2010)
"In table 18A below, I have calculated the value that I believe the husband would be able to realise (my emphasis) for these assets….. In the case of his ordinary shares…..the value is simply the number of shares multiplied by the current share price less the key man portion of the current share price (my emphasis)".
"In my opinion it cannot be right for Sir Martin to seek a key man discount for shares purchased for cash as recently as March 2005 in the full knowledge of this matrimonial dispute. Had he not spent £18 million on WPP shares he would have had that amount of cash in his pocket. Had JMS RBS not spent £4 million buying WPP shares it would have had the cash available for the purpose of these proceedings. It ill behoves Sir Martin to argue that shares he bought for £18 million in March of this year in the full knowledge of these proceedings are worth 8% less than that for the purpose of these proceedings. It is an obvious nonsense".
"By 1 October 2004 Sir Martin knew he was getting divorced and, in my opinion, it is wholly inappropriate for him to seek to discount shares which could have been allocated to him on 1 October 2004 on the ground that, because he has chosen not to receive them until 1 October 2008, they are non-realisable."
The husband could have taken the shares and paid the relevant tax; or he could have taken the shares, sold them in whole or in part, and received a cash sum after tax was paid.
Standard of living
Age of parties/duration of marriage
Loss of benefits
Parties' open positions
"The effect of the above proposals is intended to be that after excluding from division the inherited assets (including W's), the Renewed LEAP and the "keyman" element of the share price, the remaining ("marital") assets are divided broadly 60/40 in favour of the husband. The wife would end up, assuming a share price of around £5.94p, with total net liquid assets of about £26.7m (as well as valuable chattels not included in the schedule)."
"(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family";
"I accept that the very significant majority of the assets in this case have been generated during the course of the marriage by the Respondent's business acumen and expertise."
At para 49 she said:-
"…….. I understand that the Respondent intends to raise an argument to the effect that his contribution has been so significant as to outweigh the contribution made by me during the course of the marriage. I believe I have made no less than an equally valuable contribution to the marriage albeit that……..[it]………..cannot be quantified in tangible financial terms."
"W accepts that husband was a perfectly good father, in the limited time he made available for the children. He was a father by appointment. He decided when and where he would have quality time with the children. It was not extensive. All the manifold humdrum aspects of parenting was left exclusively to wife."
"more than most, I have not allowed my work to eclipse my family life in which I have maintained a full family role throughout my career."
"From these authorities in this and related jurisdictions two consistent themes emerge. First it is unacceptable to place greater value on the contribution of the breadwinner than that of the homemaker as a justification for dividing the product of the breadwinner's efforts unequally between them. Secondly, both the practicality and the value of the exercise of making the parties to a failed marriage on their respective performances is questioned."
"Additionally the decision of the Full Court in Figgins v Figgins clearly supports Coleridge J's distaste for special contributions and suggests the need for this court to return to the relevance of an asserted special contribution and to reconsider its impact upon the s.25 exercise."
" Having now heard submissions, both full and reasoned, against the concept of special contribution save in the most exceptional and limited circumstance, the danger of gender discrimination resulting from a finding of special financial contribution is plain. If all that is regarded is the scale of the breadwinner's success, then discrimination is almost bound to follow since there is no equal opportunity for the homemaker to demonstrate the scale of her comparable success. Examples cited of the mother who cares for a handicapped child seem to me both theoretical and distasteful. Such sacrifices and achievements are the product of love and commitment and are not to be counted in cash. The more driven the breadwinner the less available will he be physically and emotionally both as a husband and a father. There is also some justification in Mr Mostyn's emphasis on the extent to which the homemaker frequently sacrifices her potential to generate assets by undertaking the domestic commitment to husband and children. At the same time she risks the outcome of failure and so earns her entitlement to share in the successful outcome.
" In sum I am much more wary of the issue of special contribution than I am in writing my judgment in Cowan v Cowan. Perhaps Nicholson CJ, who seems poised to banish the phenomenon, may have found the better path. The circumstances set out in para  above allow this court to re-evaluate the whole issue. However for the present, given the infinite variety of fact and circumstance, I propose to mark time on a cautious acknowledgement that special contribution remains a legitimate possibility but only in exceptional circumstances. It would be both futile and dangerous to even attempt to speculate on the boundaries of the exceptional. In the course of argument I suggested that it might more readily be found in the generating force behind the fortune rather than in the mere product itself. A number of hypothetical examples were canvassed ranging from the creative artist via the superstar footballer to the inventive genius who not only creates but also develops some universal aid or prescription. All that seems to me to be more safely left to future case-by-case exploration."
" I agree that it is not possible to define once and for all, by way of some formulaic label, the precise characteristics of the fortune-maker (or fortune- making) required in the paradigm case such as this, in order that when the proposed distribution of the resources is checked against the 'yardstick of equality', the fully contributing homemaker should receive a lesser share of the wealth than the fortune-maker.
" However, those characteristics or circumstances clearly have to be of a wholly exceptional nature, such that it would very obviously be inconsistent with the objective of achieving fairness (ie it would create an unfair outcome) for them to be ignored."
"…..Even where there is a surplus, any consideration of contribution should be undertaken on a broad basis with the aim of seeing if there was something really special about the skill or effort devoted by either spouse during the marriage." I would like to emphasise the words "broad basis".
The issue ought not to be the subject of detailed, in depth analysis but of a broad brush appraisal based on the evidence.
"At the same time she risks the outcome of failure and so earns her entitlement to share in the successful outcome."
I agree that in 1989/90, if WPP had gone under the family fortune would have gone. The wife supported the husband through that crisis staunchly and lovingly. But I do not think that in the broad picture this ought to be a decisive factor in favour of the wife.
|2 car parking spaces||183,516|
|Stocks, gilts, securities||29,792|
|Life insurance policies||36,743|
|National Saving Certificates||47,244|
|National Savings Bonds||5,095|
|Pension sharing (50%)||565,295|