Neutral Citation Number: [2010] EWHC 1630 (Fam)
Case No: FD08D03388
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 05/07/2010

Before :

THE HONOURABLE MR JUSTICE MOSTYN
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Between :

	FZ	Applicant/Wife	
	-and-		
	SZ	First Respondent/ Husband	
	-and-		
	The Trustees/Managers of the CPL Pension PLAN	Second Respondent	
	-and-		
	SZA	Intervener	
			
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Philip Moor QC and Tim Bishop (instructed by Sears Tooth) for the Applicant
Deborah Bangay QC and Simon Webster (instructed by DWFM Beckman) for the First Respondent

Hearing dates: 14 – 25 June 2010
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Judgment

THE HONOURABLE MR JUSTICE MOSTYN

This judgment is being handed down in private on 5 July 2010. It consists of 151 paragraphs and has been signed and dated by the judge.  The judge hereby gives leave for it to be reported as FZ v SZ & Others (ancillary relief: conduct: valuations).

 The judgment is being distributed on the strict understanding that in any report no person other than the advocates or the solicitors instructing them may be identified by name or location and that in particular the anonymity of the children or the expert witnesses and the adult members of their family must be strictly preserved.

Mr Justice Mostyn: 

1.	In this judgment I shall refer to the applicant-wife as W and to the respondent-husband as H. The court is concerned with W’s application for ancillary relief made in Form A dated 6 August 2008, which was later amended on 11 March 2010 to add a claim for variation of a post-nuptial settlement.  
2.	The Second Respondent is the trustee/manager of H’s Jersey pension fund. It has played no part in these proceedings. The Third Respondent is H’s sister. She has not been represented in the proceedings although she did give evidence by video-link from Singapore. 
3.	H and W are both aged 41. H was born in a country which I shall call Zenda and moved to England when aged 3. W was born in the US to parents of Zendan origin; she is now a British citizen. The parties met in 1999 and were married on 5 January 2001. They have two young children R and A , both of whom attend private day schools in London. 
4.	In July 2000 a lease of BP was purchased in H’s sole name for £570,000 with a mortgage of £500,000. After living initially in H’s parents’ home the newly married couple moved to BP in early 2001.  H alleges that it was acquired on the agreed basis that he and his sister SZA would share the beneficial interest equally, which agreement was later incorporated in an express written declaration made in Zenda in November 2004. 
5.	H has estimated that at the time of the marriage he was worth around £3m; but of this there is no evidence for £800,000. 
6.	In August 2004 H purchased the final matrimonial home at WH for £3.4m with a mortgage of £1.7m. BP was retained. 
7.	The marriage came to an end in July 2008 when W filed a divorce petition. Since then the parties have engaged in attritional warfare which has been both unedifying and shameful. I will find later that within the litigation each party has behaved exceptionally poorly. Neither party showed much if any contrition for their own conduct; rather, furious and rancorous blame was cast at the other. The parties have exhaustively litigated issues of occupation, residence and contact to the children and ancillary relief.  In all they have been in court on about 40 separate days and have spent about £2m in costs of which £560,000 has been spent on W’s attempts to force H to leave WH; in disputing whether there should be a sole or shared residence order; and determining the question of H’s contact to the children. 
8.	Eventually H agreed to leave WH. W remains living there with the two children, her sister M (who has been there for a considerable period) and two staff members. 
H’s background and career
9.	In this section of the judgment I have drawn on the narrative in Miss Bangay QC’s skeleton argument which conforms to the written and oral evidence I have received. 
10.	After graduating with a law degree from University H completed a Masters at the LSE. He joined a bank where he specialised in asset financing earning approximately £300,000 p.a. including bonuses. In 1999 H joined X bank where he was employed until March 2006 and thereafter for two years on a consultancy basis.
11.	H was exceptionally well- paid at X Bank. In his first year with the bank, in addition to a basic salary of £110,000 p.a. he received a total bonus award of £700,000 paid as a mixture of cash, stock options and pensions contributions.  His remuneration increased over the years as follows:
i)	2001 - £2,750,000 
ii)	2002 - £5,625,000 
iii)	2003 - £7,750,000 
iv)	2004 - £6,250,000 
12.	Under the 2006 consultancy agreement H was to receive:
i)	A monthly retainer of £200,000
ii)	A performance fee of £3.1m on 1 April 2007
iii)	A performance fee of £3.1m on 1 April 2008. 
A total of £11m.
13.	On the advice of KPMG and Royal Bank of Canada, H set up in Jersey a tax efficient structure to receive the anticipated remuneration from X Bank, and he became non-resident for tax purposes in 2005/06. That greatly benefited the family financially. In the context of the divorce and his wish fully to participate in the upbringing of his children H has signified his intention to be an on-shore UK tax payer for the financial year commencing April 2010.
14.	The tax efficient structure involved the incorporation of CPL in Jersey of which H is the ultimate beneficial owner. Also incorporated was the CP Pension Plan (CPLPP) on 22 March 2006 which was the recipient of H’s existing pension fund with X Bank (£12.623m) together with an additional one-off payment of £8.65m from X Bank. 
15.	In order to undertake independent investment work H established CIPHL and under its umbrella CFI in November 2007. In that same month CPL was transferred into, and became owned 100% by, CIPHL.
16.	In 2005 H had begun to explore investment opportunities in Zenda. He intended to “finance, operate and transfer large scale infrastructure projects” through a vehicle called T. His intention was ultimately to sell these investments into a brand new investment fund, ZF, which would be financed by independent venture capitalists. 
17.	In 2006, A, a London based equity house, carried out due diligence on ZF. By August 2007 A had in principle approved an investment of $100m into the fund subject to the agreement of further terms and conditions. The first $50m could be drawn down by the fund once $150m had been raised from other sources and the balance when the fund reached $200m. 
18.	This was the platform for H’s plans in Zenda. He had by then invested in a private transport business in Zenda (“the J Business”). Later, he made a significant investment into the Zendan shipping sector through the construction of a new  terminal for the movement of commodities in Y (“the P Business”). H also entered into put and call option agreements on 3 April 2008 to acquire an interest in one of the main players in the Zendan technology sector. The idea was to “flip” these investments into the fund once they were up and running.
19.	Between November 2006 and June 2009 H (or his entities) invested US$23,608,631 into the J and P Businesses.  
20.	In July 2008, on the threshold of the global economic havoc that was to follow in the Autumn of that year, A pulled out of investing into ZF and the whole idea turned to ashes. The option agreement fell out of the money and the J Business, in the context of the sudden and dramatic recession, flagged, and may yet fail. The Z:$ rate fell into steep decline: this had a detrimental effect on the progress of the terminal construction given the increased costs. 
W’s background
21.	W’s father was a distinguished Zendan diplomat. Thus W was educated in various countries later completing a BSc at the LSE and a Masters Degree in the USA. She was employed as a consultant with C and latterly at the D Bank in Washington. 
The litigation 
22.	W filed her divorce petition on 14 July 2008 and Decree Nisi was pronounced on 6 March 2009. It has not yet been made absolute.
23.	No quarter has been asked or given in the subsequent litigation which has been conducted ruthlessly and at vast expense by both parties. 
24.	I am going to set out in some detail my findings in relation to the litigation history not simply  because each party relies on the other’s behaviour as conduct within s25(2)(g) Matrimonial Causes Act 1973 but also because the tale here leads to a number of lessons needing to be learned. The first lesson is that the initial move in a divorce can colour the whole of the rest of the case. The second lesson is, as I have said before, that every action tends to give rise to an equal and opposite reaction.  The third lesson is that allegations of dishonesty should be very carefully considered before they are made. 
25.	It is clear that by the early part of 2008 there were problems in the marriage, although there is no evidence of heated disputes, let alone physical or emotional abuse.  A recurrent issue seems to be W’s abiding sense of financial insecurity. There were assets in abundance but very little was placed in her direct ownership, although she was a beneficiary or potential beneficiary of the Jersey pension fund I have mentioned above. W told me that she had no idea whom to call should H befall an accident. 
26.	H accepted in his evidence that he was not as open and transparent about his finances as he should have been. He stated that W knew in broad terms what he was earning. Moreover, his financial documents were kept in WH and were at all times easily accessible by W. It is plain that W neither knew, let alone was consulted, about his massive investment in the Zendan projects mentioned above. Equally, W was wholly ignorant of the option agreements entered into by H on 3 April 2008, at a time when the marriage was decidedly rocky, and which has exposed the family to massive loss. 
27.	In this period W started snooping in H’s personal lap-top computer. She told me that she did so when she found it turned on, and that she did not misuse or breach any password to access the information. H told me that his computer is set to enter sleep mode after a few minutes of non-use and that resumption requires entry of a password which he never gave W. Thus he says that W has committed a grave wrong, probably a criminal offence, in accessing by illegitimate means the data on his computer. I am not prepared to find that this is so, although this finding is made on the barest balance of probabilities. I will have more to say about obtaining Hildebrand material from computers later in this judgment.   
28.	The emails obtained by W in the summer of 2008 include financial information, correspondence between H and his father, and at least one email of graphic sexual content between H and a female friend. The raids by W of H’s private computer data between May and July 2008 must be seen in the context of W having instructed solicitors in March 2008. Miss Bangay QC described W as having conducted a “beauty parade” in this period, but it is clear that it was much more than that. She paid £5,000 to Manches on 24 April 2008 and £2,500 to Mishcon de Reya on 27 May 2008. That would correspond to about 15 hours’ work by those firms.  In fact neither of these solicitors subsequently acted for her. W has employed Sears Tooth in the ancillary relief proceedings and Hughes Fowler Carruthers in the occupation/residence proceedings. Why she has felt the need to have separate firms of solicitors acting for her on the different fronts is hard to understand: that decision alone must have caused a degree of wastage of costs.        
29.	H told me that following the parties’ holiday in Spain which took place between 4 and 11 July 2008 W left a note for H on his bed which announced her intention to seek a divorce and citing as her reason her lack of financial security. W issued a divorce petition on 14 July 2008 alleging an improper association by H. H was not informed of this fact until a letter was sent to him on 31 July 2008. Apparently the delay was on account of the time it takes to get a sealed copy of the petition back from the PRFD. H was served with the petition on 4 August and with Form A on 6 August 2008. He was required to file a Form E by 29 September 2008.
30.	H’s immediate reaction to these developments was to seek a reconciliation. He wrote a sincere, almost desperate, plea to her on 3 August. On 4 August (presumably just after having been served) he wrote a letter promising more transparency and honesty, and better communication and availability. On 12 August 2008 he had instructed solicitors who wrote offering to place WH into joint names; to insure his life and to make a will in her favour; and to attend counselling to try to save the marriage. W’s response was that while she would keep matters under consideration the first appointment would proceed and H had to do his Form E by the due date. The time for doing so was later extended to 13 October 2008. H did not comply.
31.	On 12 October 2008 a family meeting took place at WH to see if a peace could be agreed. It was attended by W, her parents and her sister, and by H, his mother and his sister. It ended in acrimony.
32.	On 14 October 2008 W’s solicitors applied ex parte to HHJ Altman for an Order that H file his Form E forthwith. I will describe later how W made another ex parte application to DJ Segal on 10 December 2008 for non-molestation and occupation orders. It is worth my expressing the view that in the short time that I have been sitting as a full-time judge I have been shocked at the volume of spurious ex parte applications that are made in the urgent applications list. It is an absolutely elementary tenet of English law that save in an emergency a court should hear both sides before giving a ruling. The only recognised exception to this rule (apart from those instances where an ex parte procedure is specifically authorised by statute) is where there is a well founded belief that the giving of notice would lead to irretrievable prejudice being caused to the applicant for relief. I have the distinct impression that a sort of lazy laissez-faire practice or syndrome has grown up which says that provided that the return date is soon, and provided that the court is satisfied that no material prejudice will be caused to the respondent, then there is no harm in making the order ex parte. In my opinion this is absolutely wrong and turns principle on its head. 
33.	Wisely, HHJ Altman saw W’s ex parte application as an example of the syndrome I have described and refused the application, directing that it be heard inter partes on 17 October 2008. On that day H was ordered to provide his Form E by 29 October 2008 and his application to adjourn the First Appointment was dismissed.
34.	I now quote from paras 21 – 27 of the skeleton argument of Mr Moor QC (excluding references):
21.	Four days after the family meeting, H’s father sent H an email in which he said:-
“Please remain steadfast.  Please try to put them under tremendous pressure, finnancially (sic), you can dislocate them and pressurise them by all means.  Sadly and truly It is only MONEY which is in question. Their intentions were realized very early by me and others.  Please put your finnancial house in order, close or leave very small balance joint accounts, credit cards.”
 22.	H’s response to this is to say that he cannot be blamed for the sins of his father. Yet, everything that is contained in the e-mail has come to pass.  H has indeed put W under “tremendous pressure”, particularly by the use of satellite litigation and he now claims to be close to insolvent.  The satellite litigation that he has launched will be referred to later.  
 23.	Part of the pressure exerted on W has concerned the protracted contested litigation concerning the occupation of WH and residence of the children.  H refused to leave WH and even applied for shared residence of the children.  This was surprising given that, since April 2006, he has been non-resident in the UK.  
24.	There was a seven day hearing before HH Judge Atkinson in July 2009 but the matter was not concluded.  It was adjourned until September 2009.  
25.	H then claimed to have suffered a heart attack saying he was in very poor health (which became a heart episode).  At this point, he was residing in Zenda.  H’s case was that he was too ill to attend court in September so the case had to be adjourned to January 2010.
26.	In January 2010, he again said he was too ill to attend, nor could he even give evidence by video link.   W then discovered that he had been travelling around the Middle East on business since 21st October 2009.
27.	HHJ Atkinson refused to grant H a further adjournment in January 2010.  H immediately bowed to the inevitable and agreed to undertake not to return to WH and that W should have a residence order in relation to both children.  He now attempts to portray this as being done “voluntarily”, having been worn down by W’s “campaign of harassment” against him.  This is a remarkable position to adopt.  W says it was quite clear that “he jumped before he was pushed 
35.	Thus W put the subsequent occupation/residence proceedings squarely into the frame. She sought condemnation for H’s resistance of them, and vindication for her own actions. If there were any doubt about this (and there is not) reference need only be made to para 53 of W’s reply affidavit where she referred to H’s credibility being “severely damaged” in the Children Act proceedings. However, in a note received by me following final oral submissions Mr Moor QC has “withdrawn” the above passages and now does not seek any findings as to whether H’s resistance to W’s applications amounted to improper pressure.  
36.	Notwithstanding this late “withdrawal” I will in due course make my findings as to whether W’s quest for condemnation of H by reference to his resistance of the occupation/residence proceedings is made out. At this stage I would only remark that W’s possession of H’s father’s email is as a result of yet more illicit surveillance of his computer. 
37.	Most foolishly H had done more or less nothing to get his Form E together by 17 October 2009. He had his head firmly buried in the sand up to then. He therefore had to work extremely hard with his forensic accountant Miss Wallace-Walker to put it together. The pressure of time is really no excuse for the production of a Form E on 29 October 2008 that was in three important respects highly defective. The very high index of suspicion that W and her forensic accountant have held as to the integrity and veracity of H’s disclosure stem from this defective document. The three instances of misleading evidence were the overstatement of liabilities to GA (a co-participant in the Zendan projects) by £5m; the omission of any mention of a company called TL or the ownership of three boats by it; and his denial of any interest in PJ. TL and PJ are component companies of the J Business in Zenda. H’s Form E also failed to give any details of his needs.
38.	The day before H produced his Form E W served the first batch of Hildebrand documents that she had collected. This amounted to at least two lever arch files of documents that had been rounded up from a filing cabinet at WH. Apparently W had not by then discovered a stash of further documents kept under the bed in the main bedroom.
39.	W’s Form E is dated 13 October 2008 and was exchanged with H’s on 29 October 2008.  The First Appointment was dealt with conventionally on 3 November 2008. 
40.	On 4 December 2008 H made an unauthorised disclosure of part of the contents of W’s Form E to the tax authorities in Zenda, alleging tax fraud by W’s parents.  This led to over 40 letters being sent to W’s mother and the need to hire expensive tax legal advisors. H went on to make a report of W’s father’s charity F to the tax authorities in Zenda. H copied these allegations to the Foreign Minister of Zenda and to the Zendan High Commissioner to the UK. H also made a complaint about F UK to the UK Charity Commission. H told me that these steps were taken only in order to find out the facts. This is obviously absurd and untrue – the questionnaire process was only just beginning. These were malicious acts which were all of a piece with the gathering storm.  H followed these steps up on 5 March 2009 by commencing proceedings in Zenda against W’s mother for return of £325,000 being money allegedly loaned by him for building £100,000, furnishings £200,000 and a car £25,000. The claim was subsequently reduced to £100,000. The claim is utterly meritless in my view; the sums claimed are trivial in the context of the sums at large. It was made purely to cause trouble to W’s parents. I am expecting that my final order will contain undertakings that this claim will be discontinued and all the allegations to the Zendan authorities withdrawn.
41.	These exceptionally unpleasant actions by H are capable, in my opinion, of amounting to conduct under s25(2)(g) Matrimonial Causes Act 1973.
42.	On 9 December 2008 W applied for a residence order. The following day she made her second ex parte application. This was not in reaction to H’s steps in Zenda, of which she was ignorant. It sought a non-molestation order and an ouster order. To say that W’s evidence was flimsy would be an overstatement. The only instance of violence relied on was an allegation that H pushed W at the family meeting on 12 October 2008, nearly two months earlier. On the basis of that allegation a non-molestation order was made. That order was enlarged on the return date on 18 December 2008, following a one hour hearing, by an ouster order requiring H to leave WH by 6pm on Christmas Eve 2008. 
43.	The allegation of violence which founded the ex parte non-molestation order and the inter-partes ouster order was untrue. H had not pushed W at all, as was admitted at a later appeal hearing. The allegation was then revised to a banal allegation that both H and W were pushing on opposite sides of a door. Even that inconsequential allegation did not feature in a solicitor’s letter which purported to set out W’s version of the events of the family meeting on 12 October 2008 sent on 14 October. 
44.	The District Judge was not to know that the allegation was untrue, but even on the facts as (untruthfully) alleged I am at a loss as to how an ex parte non-molestation order was justified on 10 December 2008. I reiterate that ex parte relief, so much at odds with age-old legal principles, should only be granted where there is evidence that the giving of notice would irretrievably prejudice the position of the applicant. Equally, I completely fail to understand how this case came anywhere near, even taking W’s evidence at its highest, to the state of affairs that justifies the grant of the draconian and exceptional order that is an ouster. It seems to me (and this view is backed by ample authority) that before making an ouster order the court has to be satisfied, with the burden of proof being firmly on the applicant, that internal regulation or partition of the property will not supply the necessary cordon sanitaire to enable the parties to co-exist peaceably until the ancillary relief hearing can take place. If that simple principle had been understood by W then a great deal of the subsequent heartache would probably have been avoided.
45.	It follows that I am very critical of W for taking these steps. They were highly inflammatory and totally unnecessary. They must have contributed significantly to the staggering waste of costs (to say nothing of the emotional toll) that thereafter ensued. 
46.	Unsurprisingly H appealed this extraordinary ouster order. He also applied for a stay on his expulsion pending the appeal. For reasons that I completely fail to understand the stay was refused, but his time and date of vacation was adjusted to 6pm on Boxing Day. That time and date would have been very clearly understood by W and her advisers.
47.	At 2.50 pm on 26 December 2008 W and her cousin attended K Police Station. W told me that her primary reason was to gain some kind of authorisation from the police to retrieve deleted text messages on her mobile phone. I very much doubt this. No police record has been produced that corroborates this tale. What the police record states is as follows:
Getting evicted today at 1500 hrs. Him not to go quietly. There is a history of domestic violence. Mr SZ. Two children are also at location – one is four year old and one is 18 months. Never been aggressive towards children. Can officers pls stay a few doors away from loc to prevent the children from being concerned in any way.
48.	W has disputed that this is an accurate record of what she said. She has produced a hand-written statement from her cousin who says that it was she (the cousin) who was responsible for the dark reference to “domestic violence”. She stated that while W was receiving a call on her mobile she told the police “[W] had suffered an enormous amount of emotional abuse in the last three months and that I felt that she was living in constant fear of what would happen next or of what S would do next”.
49.	I do not accept this. I find that W in a very calculated way made a deliberately false statement to the police that H had to leave by 3pm. She plainly painted him as a perpetrator of Domestic Violence. Domestic Violence is nowadays the great taboo. When it is alleged to the police they inevitably take action. This is what W was trying to achieve for base motives. And she succeeded. The police duly attended while H was in effect saying goodbye to his children. H suffered a panic attack and collapsed. He had to be removed in an ambulance.
50.	This episode seems to have plunged H into a spiral of despair. In a psychiatric report dated 7 January 2009 H is recorded as saying that he was preoccupied about “the futility of everything, the evilness of my wife, my finances and being abandoned by God”. 
51.	I have no doubt that W’s actions were exceptionally malicious and are capable of amounting to conduct under s25(2)(g) Matrimonial Causes Act 1973.
52.	On 8 January 2009 HHJ Hayward-Smith QC allowed H’s appeal. An internal partition of the home was agreed and recorded as were mutual non-molestation undertakings. One might have thought that this arrangement would have been accepted to endure until the trial of the ancillary relief. This would have been a forlorn hope.  W reignited her occupation application and the parties litigated furiously the issue of whether there should be a sole or shared residence order. Contact was also disputed. In all the parties spent 13 days in court before HHJ Atkinson before H threw in his hand on 8 January 2010. I was told during the hearing that W intended to return to HHJ Atkinson to seek an order for costs. I expressed amazement. Later that threat was withdrawn and it was agreed that there would be no order as to the £560,000 that the parties had managed to spend on the exercise.
53.	In his closing submissions Mr Moor QC stated:
The court may instinctively feel that parts of the occupation order/children proceedings reflect badly on W but:-    
(a)	Quite impossible for the court to reach any findings as to the character of that litigation without reading the entire files and transcripts to see the context in which it all happened;
(b)	Legion allegations and counter allegations were made; virtually none of the pleadings, evidence, transcripts or position statements relating to the proceedings is before the court; 
(c)	Clearly emotions were running very high at the time on both sides (e.g. H’s family camped in the matrimonial home organising dinner parties without reference to W; huge stress on children and W; medical reports were produced in the occupation order proceedings);
(d)	Court should not take 26th December incident in isolation.
54.	It is true that I have not read all of the papers or heard any detailed evidence as to the rights and wrongs of this epic piece of litigation. That said, as I have explained, W put H’s resistance of them squarely into the frame as evidence of improper pressure right up until her very late withdrawal. This was a case of blowing hot until the direction of the judicial wind was gauged and then blowing very cold indeed.
55.	Nothing that has been put before me begins to explain why W believed she was justified in seeking the exceptional and draconian order that is H’s expulsion from his home. Nothing has been shown to me that begins to explain why the partition agreement was not working. As to the residence dispute I would reiterate my recent  remark in Re AR (A Child: Relocation)  [2010] EWHC 1346 (Fam) at para 52:
I am clearly of the view that a joint or shared residence order should be made. Indeed, such an order is nowadays the rule rather than the exception even where the quantum of care undertaken by each parent is decidedly unequal. There is very good reason why such orders should be normative for they avoid the psychological baggage of right, power and control that attends a sole residence order, which was the one of the reasons that we were ridden of the notions of custody and care and control by the Act of 1989.
Nothing has been put before me to explain why H should not have been awarded a shared residence order even if his actual care of the children is decidedly unequal. 
56.	On the limited material before me I have reached the conclusion that this litigation was of a piece with the war of attrition that I have mentioned; that it was pointless and futile; and that the £540,000 spent on it was entirely wasted.  W’s claims concerning them were rightly withdrawn, even if very late in the day. Had they not been withdrawn I would not have found them made out. 
57.	The ancillary relief proceedings ground on throughout 2009. By an order of Moylan J dated 1 April 2009 H was to reply to W’s questionnaire by 17 July 2009 and W’s accountant was to file his report 10 weeks later on 25 September 2009. The final trial was to be listed with a time estimate of 10 days.
58.	On 15 April 2009 W made an application for maintenance pending suit. This was another pointless application since there was no basis for saying that the sum H had been providing to W (£12,000 per month) since 2007 was insufficient. This reality was accepted in the consent order entered on 28 April 2009 where that status quo was formalised. Again, this exercise must have caused a significant wastage of costs.
59.	On 3 August 2009 H supplied his replies to questionnaire, late. They did not include certain Zendan documents which H said were confidential and which could not be disclosed until W and her team had signed confidentiality agreements. These were signed on 2 October 2009 and the confidential documents were supplied on 3 October 2009. W’s accountant therefore had 10 weeks from that date to file his report, which he did, more or less, on 18 December 2009. No criticism can be levelled at W’s accountant, Mr Nedas, for his report being filed on 18 December 2009 rather than 25 September 2009.       
60.	In his first report Mr Nedas argued that H was worth, or should be taken to be worth, £50,670,771. H’s accountant, Miss Wallace-Walker argued that he was worth only £843,792. Part of the £50,670,771 was a sum of £9,109,090 which was described as “unsubstantiated expenditure”. Following the joint accountants’ statement of 11 May 2010 the “unsubstantiated expenditure” figure fell to £6,044,312 and the overall figure to £40,475,278. This was the position when the matter was opened. I inquired what precisely W’s case was in relation to this “unsubstantiated expenditure” figure of £6,044,312. Was it being said that this had been recklessly spent and should be added back? Or was it being alleged that the sum actually existed and had been salted away in some secret undisclosed repository? Mr Moor QC made it quite clear that it was the latter. So the case began with H facing an allegation of dishonesty of the gravest nature. The claim was however abandoned on day three of the trial. By the end W was asserting that the total assets in fact amounted to £31,767,715. Almost £20m had evaporated from the way she put her case right up to 11 May 2010. It was on the basis of, inter alia, an averment that “Mr Nedas has stated that the true figure is £51m and possibly much more” (my emphasis) that W obtained an ex parte freezing injunction on 4 February 2010. 
61.	Although the figures of  £9,109,090 and £6,044,312 are very specific I was not given a breakdown of them even though I asked for this more than once. In the absence of a breakdown Miss Wallace-Walker attempted her own construction of these figures in her second report dated 14 June 2009. Mr Nedas stated that this looked about right. I am at a loss as to why there does not exist any breakdown of a very significant sum that formed the basis for a most serious allegation of dishonesty by H.
62.	A component part of the figures of £9,109,090 and £6,044,312 are payments made by H to his parents and family. In his reply to questionnaire H had disclosed a schedule of these payments. The largest such payment was for £475,000 to H’s father on 21 March 2007. In his report Mr Nedas recorded this and indorsed “no statement disclosed”. The technique of Mr Nedas in relation to expenditure has been to say that if an assertion by H is not backed up fully by corroborative evidence then he will not accept it and will go on to argue that the sum must still exist somewhere in some undisclosed repository. Obviously this is highly suspect as a process of logical reasoning, but it is consistent with the very high index of suspicion that has pervaded W’s case from the start.
63.	Among the Hildebrand documents taken by W and disclosed by her on 28 October 2008 were a X Bank funds transfer debit advice recording the transfer of £475,000 on 21 March 2007 to H’s parents and the corresponding bank statement. When confronted with this Mr Nedas’ response was merely that he had not seen it when he wrote his report over a year later indorsed with the phrase “statement not disclosed”. It is a troubling state of affairs that a case of grave dishonesty should be levelled against H concerning this sum of £475,000 when proof positive of H’s case had been in the possession of W and her advisers all along. 
64.	It gets worse. On 2 March 2010 Miss Wallace-Walker produced her report. In para 132 she wrote:
A letter from X Bank dated 18 February 2010 confirms payments to family members effected by Mr Z for the period 2007 until 2009. 
That letter confirms the payment of £475,000 to H’s father on 21 March 2007. One might have thought that at this point Mr Nedas would concede the point graciously and offer an apology. But what the joint statement of 12 May 2010 records at para 81 is that “Mr Nedas does not accept the statement provided by X Bank without comparing it with the original bank statements”. This of itself is astounding: what possible basis did Mr Nedas have for saying that the letter from X Bank was fake?    
65.	A few days later the bank statement was supplied showing the payment out to 06727 *XYXY. This exact notation was on the Hildebrand document that had been in the possession of W’s team since 28 October 2008, which showed that the payment had been to H’s father. Yet on 18 May 2010 Mr Nedas’ assistant asked “Please explain, and provide further evidence, how “06727 *XYXY” relates to family member RS” (his emphasis). Miss Wallace-Walker appended to her second report of 14 June 2010 emails from X Bank which put the matter beyond any doubt (not that there was any, at any point).
66.	Yet in Mr Moor QC’s skeleton argument dated 11 June 2010, and in his oral opening which was delivered to me on 15 June 2010, it was stated explicitly that H had salted away somewhere £6,044,312. Of this the £475,000 is a component part.
67.	There are other instances where lesser sums have been included by Mr Nedas as unsubstantiated and therefore salted away when W had Hildebrand documents in her possession that demonstrated that they had been spent exactly as H had stated. For example, there are a throng of payments to Aesel Receivables with a number which corresponded to H’s Amex card number a copy of a statement for which W had in her Hildebrand documents. But it is not necessary for me to go into these other instances. The manifold errors in relation to the £475,000 are of such a scale and degree that the whole process of inferential judgment carried out by Mr Nedas is rendered utterly unsafe such that no reliance at all can be placed on it. 
68.	Rightly, Mr Moor on day 3 withdrew the allegation that £6,044,312 had been salted away somewhere. Had he not done so I would have firmly found in H’s favour. 
69.	I will decide later whether this serious allegation of dishonesty was made recklessly and is of such a scale and degree as to amount to conduct under s25(2)(g) Matrimonial Causes Act 1973. 
70.	A second allegation of grave dishonesty related to the Zendan document concerning BP dated 4 November 2004. H’s alleged dishonesty was said to be a “searchlight” on his credibility generally and particularly as regards the authenticity of the option agreement referred to above and below. On its face this was a deed signed by H and his sister SZA, whose signatures were purportedly witnessed on that day in Zenda. W always doubted the authenticity of this document. H positively asserted on affidavit that to the best of his recollection he signed the document on that day in Zenda before the witnesses. Late in the day, as a result of a disclosure order made by me, W obtained evidence from BA which showed that on 4 November 2004 H was on an aeroplane flying between New York and London. H then obtained an affidavit from his Zendan lawyer AR who explained, having recovered the file from storage, that what had happened was that H had approved the deed when in New York; had signed it there on “white paper”; had returned it by fax; and had later, in December 2004 signed it on the “stamp paper”, which the witnesses had already signed back on 4 November 2004.  He produced a copy of the file which bore this out. The original of the file was couriered over from Zenda. Faced with this W’s allegation became that the entire file had been professionally forged. Later, this allegation was dropped, and by the time that closing submissions came to be made it was accepted that even though the witnessing of H’s signature was defective the Zendan deed comprised a valid express declaration as to the co-ownership of BP by H and his sister.    
71.	I do not regard W’s allegations in this regard as being of the same degree of recklessness as the £6m given that H had given some cavalier evidence which suggested that to the best of his recollection he had signed the deed in Zenda before witnesses on 4 November 2004, when he had done nothing of the sort. But once the explanation had been given supported by apparently credible evidence from the Zendan lawyer W should thought long and hard before accusing H, his sister, and Mr R of conspiring on a grand scale to produce a file of forged documents.
72.	W’s very firm view of H as utterly dishonest and intrinsically mendacious was the basis on which she sought an ex parte freezing order on 4 February 2010. W did not identify any imminent transaction which could be characterised as an act designed to spirit away assets in defeat of her claims. Rather, she relied strongly on her vision of H as irredeemably dishonest. At the forefront of her affidavit was reference to H’s father’s email dated 17 October 2008. Then in a section intituled “S’s highly dubious presentation of his resources” she stated:
…S swore a Form E in which he deposed to having net assets of only £7,092,813. It is clear that I regard this as a complete misrepresentation of the truth. Mr Nedas has stated that the true figure is £51m and possibly much more. Understatement of this scale has been undertaken for but one purpose: to reduce my award to a minimum 
73.	After referring to the put and call option agreement mentioned by me above and developed below, W stated that:
The only sensible explanation is that this “contract” is a fairly transparent attempt to reduce his assets dramatically for the purposes of this litigation
Thus W was plainly alleging that the option agreements were shams.
74.	In conclusion W stated:
35.	I am extremely concerned that S has tried to put a completely false presentation of the value of his wealth before court. This has plainly been done to produce my award to a minimal level and to protect it from distribution in these proceedings. S has produced a vast quantity of paper, purportedly in support of his assertions. However, as Mr Nedas has observed, within the many pages few are materially relevant to the assessment of his worth.
36.	I have come to the very clear view that S is determined to defeat me within these ancillary relief proceedings. This would be in line with the rest of his behaviour since our separation. He has tried to do this by the extreme misrepresentation of his resources and by the suppression of material information. When he comes aware of my intention to seek orders in relation to the assets within his pension, I firmly believe that he will immediately take steps to try to place these assets out of reach
75.	Thus W justified her decision to approach the court ex parte. Her case was that H had been guilty of massive dishonesty and manipulation in the proceedings hitherto; this justified a one-eyed view of him as a likely defeater of her claims; therefore the order should be made ex-parte.
76.	I am very doubtful that there was in truth any justification for approaching the court ex parte at that time; and I have already explained that had Mr Nedas read all the papers he would never have been able to write that H was worth £51m. How W was able to say that H may be worth possibly much more than £51m is beyond me. That said, the order was confirmed on the inter partes hearing before the President. In his judgment he stated:
18		As in many cases which come before this Court where international businessmen are concerned, proof of the level of such risk is highly problematic and, to a considerable extent, a matter of impression. There is no doubt that these are proceedings where upon the account of H and his forensic accountant, H’s businesses are in decline and, if that is so, there is a clear risk that H may prefer to seek to use finances readily available to him for business purposes rather than meeting W’s ancillary relief claim. It is also clear to me that proceedings have reached a stage of considerable bitterness between the parities with hostile proceedings in Zenda which W asserts but H denies are associated with these proceedings. It is also clear that H has received encouragement from his family to minimise his exposure (see the oft-quoted letter of 16 October 2008), whether or not he has succumbed to such advice. What is clear on the other hand, however, is that H denies any intention further to deplete the pension fund or seek to alter the terms of the Rules prior to the final hearing in June. 
19		In my view, a risk of dissipation has been demonstrated while, at the same time, on H’s professed intentions he will suffer no prejudice if he is made subject to the relief sought by W in respect of the pension fund assets pending the ancillary relief proceedings. Provided the C companies, their assets and trading activities are in no way encumbered or adversely affected and provided the relief granted is worded in a form which in no way inhibits free operation of their business and bank accounts, I think it right to grant to W the protection which she seeks.
This is a case where the “impression” given of the level of risk has turned out to be misplaced.
77.	On 16 and 25 February and 15 March 2010 W produced further batches of Hildebrand documents. She says that she had only lately alighted on their location in a suitcase under the bed. That does not explain why they seem to have been drip fed; but I am not prepared to find that they had been found much earlier and deliberately held back   
Conclusions on Conduct 
78.	I deal first with the issue of Hildebrand documents obtained from H’s computer. 
79.	Wilson LJ is of course the architect of the Hildebrand rules. It was he as counsel who made the submissions accepted by Waite LJ in Hildebrand [1992] 1 FLR 244 itself. It was he who gave the seminal judgment of T v T  [1994] 2 FLR  1083 and the lecture reported at  [1994] Fam Law 504 where the essential rules are set out, which are in a nut-shell that documents lying around the family home or in the dustbins can be legitimately copied and used, but that it was unacceptable for locks to be breached, or for mail to be opened. Moreover originals should not be retained and early disclosure of the copied documents should be given.  Of course those rules were formulated in the prelapsarian age where storage of data on personal computers was very uncommon. In L v L [2007] 2 FLR 171 Tugendhat J expressed serious misgivings as to the practice of whole scale copying of the hard drive of a party’s PC and suggested that this may very well be unlawful under the Data Protection Act 1998. In White v Withers LLP [2009] 3 FCR 435 both Wilson and Ward LJJ acknowledged that further thought may need to be given to electronic data copied from computers. In Imerman [2009] EWHC 3486 (Fam) vast quantities of the husband’s personal electronic data was copied by or on behalf of W and passwords were breached. Moylan J decided that the non-privileged material was admissible in full but that the court had a discretionary power to regulate the use of such material. The exercise of that discretion would depend on the egregiousness of the process of obtainment and the materiality of the documentation. That decision is under appeal to the Court of Appeal, and judgment is awaited.
80.	I hope very much that the Court of Appeal will not outlaw the use of Hildebrand material. In many cases in which I was involved when in practice the existence of substantial undisclosed funds, in some cases running to millions of pounds, was revealed by virtue only of the wife having obtained Hildebrand documents. But for the obtainment of the documents the funds would not have been found and a gross iniquity perpetrated on both the wife and the court. 
81.	The problem is peculiarly intractable. If the documents show dishonesty by one party (usually but not invariably the husband) then the process is justified, post hoc, propter hoc, and nothing by way of complaint will be heard from him. But if nothing is revealed by the raid then the husband can say with justification, as here, that his privacy has been violated; that his rights to due process that would normally exist under a disclosure Anton Piller type order have been trampled on; and that he has been treated as if he were a common criminal to whom no respect should be afforded.   
82.	In my view the normal Hildebrand rules should be extended to a family computer that is used by both parties which is not password protected. Documents on such a machine can be legitimately copied in the same way as documents can be copied that are lying around the home or which have found their way into the dustbin. Taking copies from such sources should not be regarded as a matter of criticism but as part of the warp and weft of ancillary relief litigation.
83.	If a wife decides to breach locks or to open post then she takes a calculated risk that (a) she will be prevented from using the documents in the proceedings, as Moylan J has pointed out (although no process could ever remove her knowledge of what she has found out), and/or (b) having her actions characterised as conduct under s25(2)(g) with a financial adjustment to reflect that, and/or (c) an order for costs being made against her (as happened in Imerman). It will all depend on whether the filched documents prove undisclosed assets or not. It is a dangerous strategy.
84.	The same principles should apply to a wife who breaches a password on her husband’s PC to obtain documents. A grey area is the position found by me to obtain here. This is where the wife goes to the computer used by her husband, finds it turned on, and prints out or otherwise copies documents. She does not breach a password.  I incline to the view that this should be regarded as just falling on the legitimate side of the line.
85.	Therefore I do not find that W has been guilty of any material misconduct in taking documents from H’s computer, as I am not prepared to find on the evidence that she has breached a password. 
86.	I find that W has been guilty of conduct under s25(2)(g) Matrimonial Causes Act 1973 by making a false report to the police as to H’s obligations under the ouster order of 18 December 2008. I do not find that the reckless allegation by W that H had secreted £9m or £6m amounts to such conduct, although it is close to the line. I do not find that the allegation that H had forged the entire Zendan file to amount to such conduct although it was highly reprehensible. These allegations of dishonesty have their root in H’s initial defective disclosure, and in the unfortunate terminology of H’s father’s email of 17 October 2008. That email has always been interpreted by W and her advisers as an incitement to act unfairly and dishonestly. An equally tenable reading of the email is an exhortation to H to fight hard in the face of oppressive behaviour by W. The later allegations by W of dishonesty are all of a piece with the fog of war that has descended  on this case.  
87.	I find that H’s actions in reporting W’s parents to the Zendan authorities, using information confidential to these proceedings, and his subsequent court action against them to amount to conduct under s25(2)(g). I do not find that his defective Form E or his later inadequate replies to questionnaire to amount to such conduct, although they too were highly reprehensible.
88.	Had the conduct I have found been on one side only I would have had to give it expression in a financial way in my award. There is little guidance as to how it should be reflected. The discretion is unbounded, as Burton  J has pointed out in S v S (Non-Matrimonial Property: Conduct) [2007] 1 FLR 1496. Fortunately, I do not have to grapple with the conceptual difficulties as the conduct on each side had been equally bad. So my award will be unaltered by these findings. I do not rule out however giving expression to my findings in the costs phase that will inevitably follow this judgment.     
Computation of the assets 
89.	The assets fall into two classes namely H’s Zendan assets and liabilities, and the non-Zendan assets and liabilities. The latter are straightforward and are more or less agreed. The Zendan assets and liabilities are protean and very hard, if not impossible, to value. As I will explain they will have to be the subject of Wells sharing or some other creative treatment. 
The non-Zendan assets 
90.	These are simply stated in the following table:
H’s assets and liabilities			
WH subject to mortgage	
2,663,975 	

BP (50%)	315,250 		
Cash	69,370 		
Shares	316,939 	18,843,800 	
CFI	400,000 		
CPLIPP funds (pension)	2,598,172 		
CPL IPP Cash (pension)	12,520,094 		
Unpaid RBC fees	(40,000)		

W’s assets and liabilities 			
 L Street, Washington 	
173,261 	

The S business, Zenda 	36,000 	(696,490)	
Cash	59,150 		
Pension Assets	48,000		
Legal fees loan/outstanding costs	(1,012,901)		
	18,147,310		
 	
91.	I find that H brought into the marriage assets worth £2,182,111, as per Appendix 8 of Ms Bangay’s skeleton. H has produced no evidence that on top of this he had £800,000 or any other sum in a X Bank savings account. I do not adjust this sum of £2,182,111 to reflect the effect of inflation over the last 10 years, for two reasons. First, in that period the FTSE 100 has in fact gone down. It is debatable whether that sum if invested would now be worth more than £2.182m. Second, given the degree of merger that has taken place over the period of the marriage I take the view that any investment return on these monies should be regarded as matrimonial rather than non-matrimonial property.
H’s Zendan assets and liabilities  
92.	In order to understand H’s Zendan investments it is necessary to identify the participants.
93.	H’s sister SZA is married to NS. NS is a close friend of Mr GA. GA is a successful Zendan businessman, the leading light in the P Group of companies.  MS is a rich Zendan businessman. He and his family own 45% of a listed Zendan company called AL. GA and MS are married to twin sisters. 
The J Business
94.	H owns 47.5% of the J Business. GA owns 47.5% and NS owns 5%. The business comprises three ship owning companies (HL, BB and TL) and the trading company PJ. HL owns two ships; BB owns another ship; TL owns three boats.
95.	The ship owning companies have borrowed money from banks to buy the vessels. H and GA were required each to enter into personal guarantees to cover half of 125% of the sums borrowed. H was unable to supply his. Therefore he and GA entered into agreements whereby in consideration of sums to be paid by H to GA, GA would assume sole responsibility for the guarantees. A similar arrangement was entered into in relation to the P Business. In all H owes GA £2,253,621 under these arrangements. I shall revert to the sums due to GA later.
96.	In March 2009 the ships were all professionally valued by Mr C of A Inc of A,  USA. These valuations were served with H’s replies on 3 August 2009, and had lain unchallenged thereafter. They formed the basis of calculations in both of the accountants’ initial reports and in their joint statement. On the very eve of the trial Mr Nedas produced, unblushingly, a controversial report from an shipping specialist, Mr O G of I in M, USA. Somewhat to my surprise H did not object to its admission. In that report Mr G suggested that the value of the machines had gone up since March 2009. He stated that “values presented were measured at the market’s lowest point in mid-2009 and the values have increased 5 – 20% depending on regions and ships features”.  During final submissions Miss Bangay told me that in the light of this very late evidence H’s solicitors had reverted to Mr C who was of the view that one ship’s value was unchanged since his report, another ship was down 12% and the third ship was down by 17%. This is all highly unsatisfactory. I propose to use the March 2009 written valuations.
97.	We do have the June 2009 accounts for all of the companies save TL, for which we have December 2009 accounts. We also have management accounts for PJ from July 2009 to April 2010. Using Mr C’s valuations it is possible to construct consolidated accounts for all the companies as at June 2009, making the assumption that TL’s figures remained unchanged in the latter part of that year. The consolidation is shown by the following table:

	30 June 2009	30 June 2009	31 Dec 2009	30 June 2009	Total	
US$	HL	BB	TL	PJ		
						
Net assets per balance sheet:	4,846,721 	6,352,095 	6,411,550 	(3,907,437)	13,702,929 	
Ship1	4,076,126 	 	 	 		
Ship 2	2,522,764 	 	 	 		
Ship 3		12,058,750 	 	 		
3 boats	 	 	5,520,000 	 	 	
	6,598,890 	12,058,750 	5,520,000 		24,177,640 	
Less: Book value	(9,440,333)	(22,906,198)	(6,183,620)	 	(38,530,151)	
Adjusted net assets	2,005,278 	(4,495,353)	5,747,930 	(3,907,437)	(649,582)	

98.	The management accounts of PJ for the 10 month period July 2009 to  April 2010 show accumulated further losses of Z438m or $5m. 
99.	It is clear that the J Business is at present insolvent. Indeed it would not be able to repay the $7.5m loan made to it by the P Business. Within its liabilities are $5.5m of convertible bonds owed to H’s entity CLIPP. On the best figures available to me none of that can be repaid. However, Ms Wallace-Walker is prepared to assume that £1.8m of this might be repayable and has used this figure for her valuation of H’s interest in the Jet’s business.
100.	Mr Nedas’s approach is rather different. First, he disputes that simply because a business is exhibiting negative equity and faces cash-flow problems it is, by definition, worthless. Second, he takes an approach similar to his approach concerning unsubstantiated expenditure. Unless H can produce right up-to-date financial information for the businesses then a proper commercial valuation is impossible and so I should take H’s investment as the true metric of current value. The former argument has similarities to the wholly unsuccessful submissions made by me to the Court of Appeal in Marano, which I will deal with more fully below.
101.	Mr Nedas therefore says that the measure of value should be taken as £8.7m being the sum invested by H directly into the J Business together with £3.2m being part of the £6.045m invested by H into the P Business but which in fact was promptly diverted into the J Business. Mr Nedas therefore contends that the value of H’s interest in the J Business is, or should be taken to be, £8.7m + £3.2m = £11.9m when the latest valuations and accounts suggest that it is insolvent to the tune of $5.6m.
102.	H’s evidence is that he and his partners are going to do what they can to keep trading during this recession in the hope that good days return and the business can return to profit. He stated that it would be in no-one’s interests to wind this business up. The court is therefore faced with the following scenario:
i)	The business will continue.
ii)	On its most recently available financial material and valuations it is insolvent to the tune of $5.6m.
iii)	H has invested £11.9m in it, and this is the figure that W contends should be taken as to value.
iv)	H’s accountant says that a fair value to take is £1.8m.
It is impossible for the Court to settle on any firm figure for the value of H’s interest in the J Business, either now or in the foreseeable future. 
The P Business 
103.	FTL was incorporated in 2007 in Zenda to build and thereafter operate a fully automated terminal at M. This would be the first automated such terminal. At present cargoes are unloaded and removed manually with much delay and wastage. FTL has been granted a 30 year concession to operate the terminal: this is extendable for another 30 years. The terminal is due to be completed in the Autumn of this year 2010. The financial projections show the project moving into profit in the future. When and at what rate depends on the inputted assumptions, which are just educated guesses. 
104.	FTL is owned as to 50% by the FF. It (FTL) is owned as to 47.5% by a company called PIL (PL) and as to 2.5% by management. FTL is a joint venture between the FF and PIL.
105.	H’s entity CPHIL owns 38.83% of PIL. Thus H is indirectly owns 18.44% of the project. GA owns 46.2% of PIL and indirectly 21.94% of the project. Under an investor’s agreement made in October 2007 H and GA agreed that they would each contribute the funds into PIL to enable it to finance 50% of the equity or working capital required by FTL. If either party defaulted in making his contribution he would pay to the other party $3m. This is a contingent liability of H that is incapable of quantification.
106.	H’s entity CPIHL has invested just over £6m into PIL. Of this £2.8m went off to support the J Business. £2.8m went into PIL and then into FTL. 
107.	Miss Wallace-Walker values H’s interest in the P Business as follows:

	Zm	
Net assets per draft June 2009 accounts	1,395 	
Add true present value of investment in FTL	415 	
Less cost/investment in FTL	(690)	
Less non-recoverability of loan to J Business 	(638)	
	482 	
expressed in £m	3.6 	
CPHIL's 38.83% interest £m	1.4 	
Mr Nedas did not dispute that the true present value of the investment in FTL was Z415m. Instead he argued that a present snap shot of value was inapt. This was a project that would acquire its value over time. A more appropriate valuation date lay years in the future. The present state of affairs represented a temporary diminution in value. Therefore the better measure of value is the £2.8m invested by H in it.
108.	The gulf between the accountants was therefore huge. Miss Wallace-Walker argued that present market values for both businesses was £1.8m + £1.4m = £3.2m. Mr Nedas wholly eschewed present market value and argued that the sums invested by H totalling £14.7m should be used. In his first report he in fact argued for a figure £16.16m as the sum invested. It was never explained to me how this figure reduced to £14.7m.
109.	The court is used to grappling with hard-to-value assets. In GW v RW [2003] 2 FLR 108 I was concerned with stock options. I stated:  
[64] That this was the only viable route became plain during the evidence. Both W's accountant and H agreed that it was impossible to attribute anything other than a wild guess to the value of H's options. H would extend this uncertainty to the rest of his deferred assets. It therefore follows that a Wells sharing is the only way of achieving fairness. Indeed, it would seem to me that this should become standard fare where a case has a significant element of deferred or risk-laden assets. For why should one party receive most of the plums leaving the other with most of the duff? 
110.	The court has also had to deal with the phenomenon of assets that are presently distressed in these difficult economic times. Thus in Livock v Livock (unreported , 21st December 2009) Coleridge J stated:
26.	The essential differences between the experts in their competing arguments are set out at C91 to 95, which was drawn up by the valuers to isolate the issues between them. The wife proposes a figure of £1,116,000 as the value for the group. The husband proposes a figure of [minus] £1.9 million.  The difference is therefore just in excess of £3 million, which takes into account a possible tax liability which arises for reasons which I will develop below.  
27.	How should the court resolve this?  Both accountants concede that what goes into the accounts cannot be decisive by itself.  Of course, viewed narrowly and strictly, there can be no doubt that the value on a sale today must be the value calculated by reference to the most up-to-date property valuations. But, is that the end of the matter?  Does that really inform the court about the company’s true value in the context of this family litigation? I am quite sure it does not.  I need to look at the whole background and picture. When I do that, I note the husband’s clear evidence that in his view the company was well-placed to move forward; that it was supported by five blue chip clients; that it had an excellent relationship with its bankers; and that it had recently taken on more staff and was attracting new business.  All the evidence points to the fact that this is a strong, well-managed, diversified company with a track record of producing profits which, one way or another, provided a very high standard of living for the husband and the wife.  Nothing has changed, except of course that the business environment is presently very rocky.   I essentially agree with Mr. Levitt that there is a “temporary diminution in value” so far as this company is concerned, but it is likely in the fullness of time to come back strongly when the environment improves, which, on balance, I believe will happen.  If I have to put an actual figure on the value of the company, I prefer the wife’s approach as providing a more realistic appraisal of the true value to this man and for the purposes of my exercise. I, like the husband’s bank manager, am confident about its future. 
111.	In Marano [2010] EWCA Civ 119 the Court of Appeal was faced with a situation where during the course of the litigation two commercial properties had suffered an extraordinary and exceptional collapse in value in the period between Form E (June 2007) and trial (March 2009). The net value to Mr Marano in those two properties fell from plus £83m to minus £10m. The collapse in value meant that the properties were in negative equity. The £10m liability was personal US CGT that would be imposed on Mr Marano. Although Mr Marano had no intention of selling the properties – it would be his last act on earth – and King J acknowledged some unquantified “hope value” in the properties, she took the snap-shot present market values for the purposes of her calculations, which led to an award against Mrs Marano of £5m.  
112.	In the Court of Appeal it was argued by me that King J should not have taken this course; rather she should have deployed a species of Wells sharing namely the contingent lump sum that was used in respect of an unquantified tax liability in the case of Charman. 
113.	The main argument of my opponent Lewis Marks QC was recorded by Thorpe LJ as follows:
38.	As to Mr Mostyn's principal submission, Mr Marks, in reliance on the dicta in White, emphasises that the judge simply followed the golden rule and did what judges do up and down the land in order to evaluate both equality and fairness. In Charman all contingent tax liabilities were dealt with at trial in precisely the same way as in the present case with the sole exception of the latent liability of up to £11,000,000 which was very late discovered and which was, in any event, disputed. Here the liability is neither late discovered nor disputed.  
			…
41. What the judge did precisely complied with the guidance given by the appellate court. Whilst the judge might have imposed a contingent rather than an immediate obligation on the wife, it was certainly not something that she was bound by authority to do. Thus no appealable error has been demonstrated.
114.	Thorpe LJ found this argument to be convincing. He stated:
46.	 This appeal was argued with exceptional ability by Mr Mostyn and by Mr Marks. As a generalisation I conclude that Mr Marks' responses to Mr Mostyn's attack were well founded and well expressed. On close analysis no error of principle has been demonstrated. This is an impressive judgment which brings to a close a difficult case in which the judge's perception of the essential issues and her proper conclusion were not assisted by the unorthodox way in which the wife's case developed and fluctuated. Those difficulties did not deflect the judge from a shrewd perception of the essential issues, to which she found an outcome which was very plainly in the ambit of her discretion. I would dismiss this appeal.
115.	In Charman No 4 [2007] 1 FLR 1246 Sir Mark Potter P acknowledged that sometimes a measure of value other than present market value is aptly to be used. He stated:
[102] 	In the light of the failure of a substantial part of Mr Singleton's challenge to the approach of PricewaterhouseCoopers, we will not take long to explain why we reject the rest of it. Insofar as Mr Pointer suggests that the judge's attribution of value to the Axis instruments was a finding of primary fact, and thus particularly hard to disturb on appeal, we disagree with him. We accept nevertheless that the question for us remains whether it was open to the judge to prefer the approach to valuation on the part of PricewaterhouseCoopers. We conclude without hesitation that it was. It contained no methodological error. On the contrary, it reflected, more than did the approach of KPMG, the need for the divorce court to adopt valuations which are realistic and which, in particular, proceed from a premise that the present value of an asset in the hands of a party may sometimes differ both from its value in other hands and from such price as might be achieved in the event of its immediate sale.  
116.	In  A v A [2006] 2 FLR 115 Charles J had made a similar point. He stated:
[64] 	In an assessment of a fair division of assets under the Matrimonial Causes Act problems obviously arise in respect of 'snap shot valuations'. The greater the volatility in value, or the potential for a wide range of valuation, the greater the problem. In respect of private companies, and shareholdings therein, the difficulties and potential unfairness of a 'snap shot valuation' clearly arise and can do so in a stark form. Such valuations turn in large part upon opinions as to prospects, and what multiple and discount should be used in the valuation method adopted. They suffer from the background difficulty that there is generally no open market for the shares. This can regularly give rise to large differences between highly reputable valuers even when they are using the same methodology and these can be compounded by differing views on prospects and methodology. All this, and other problems, flow from the nature of the asset. 
[65] 	In general terms it seems to me that these points can easily give rise to the difficulty in ancillary relief proceedings that neither of the clean break solutions urged by both sides by reference to the valuations they advance (or a clean break solution somewhere in the middle) produce a result that the court considers to be fair in all circumstances. That in turn can give rise to the problem that the court is not sufficiently informed as to the possible alternatives to order what it thinks might be the fairest solution and can be left in a position of having to adopt an approach dictated by the solutions advocated by the parties which the court thinks may not include the best result. 
[66] 	In making these general remarks I am very conscious of the need to seek to do broad justice in ancillary relief proceedings and to minimise expense, and thus of the need to avoid ancillary relief proceedings being converted into company litigation. I, therefore, make these general comments on the basis that in my view they should be part of the process of identifying the issues and what should be provided to the court to enable it to perform its task under the Matrimonial Causes Act 1973.   
117.	In [2008] Fam Law 361 Ruaraidh Adams‑Cairns of Savills wrote an article explaining how the RICS had adopted alternative measures of value for realty namely market value and fair value. He wrote: 
Until the end of 2007, the Royal Institution of Chartered Surveyors (RICS) only sanctioned one definition of value known as 'market value' (MV). Put simply, this required a valuer to arrive at a level of value which it was reasonable to suppose might be arrived at by a willing seller and buyer in an open market transaction. In the majority of cases this approach is suitable and the figure it produces is fair and appropriate for settlement in divorce proceedings. However, there are situations, particularly when it is intended that a property is to be kept by one of the parties after the divorce, when MV could be thought to be both inappropriate and unfair. Take, for example, a property which has been owned by the parties for many years, is in a poor state of repair and is laid out in an idiosyncratic style. The MV may well be depressed by these factors, yet to the owners they are irrelevant. This means that if the 'displaced' party wanted to replicate their home they would be unable to do so at the MV ascribed, because no such identical property would be obtainable in the marketplace. They would be obliged to purchase a more conventional property, probably in better condition, at a higher price and then alter it. This would mean that they had had to expend additional funds on a condition on which they personally placed no value, meaning that they would be 'out of pocket' on the transaction. When contrasted with the position of the party who retains ownership, the relative position of the parties to one another might well be thought of as unfair.
Perhaps a more usual example is when the parties have comparatively recently acquired a new home and have spent substantial sums on renovations and improvements. Some improvements may add value in excess of cost, but not all. New kitchens, bathrooms and decorations may well fall into this category. Others, such as swimming pools, tennis courts and stables, may only add value in line with cost, while others such as specialist paint finishes, sophisticated wiring systems, extensive landscaping and the renovation of outbuildings might add as little as say 25 pence in the pound. If a divorcing couple have willingly spent £3 million on a property which was bought for £4 million 2 years ago (since when values have appreciated by 25%, ie it is now worth £5 million), is it fair that the husband should be allowed to keep it at its market value of say £6 million when, to them, the property must be worth £8 million, because that is what it would cost them to replace it?
From 1 January 2008 the RICS introduced a new definition of value known appropriately as 'fair value'. Although it is anticipated that the usual application will be for the valuation of the shareholding in a business, the underlying concept is that it should reflect the specific advantages (or disadvantages) of ownership to the parties involved, rather than to the market at large.
118.	While acknowledging the merits of these arguments, which include my own in Marano, I have to say that simple rules are required to be applied in the vast generality of cases. This is because the family justice system depends on the majority of ancillary relief cases settling. There are enough vagaries attaching to the distributional stage of the exercise without introducing similar vagaries to the computational phase. It is hard enough for judges to advise at FDRs what the result should be without having to grapple with different measurements or concepts of value of the assets in question. If the adoption of present market value results in rough justice in some cases then that is a price worth paying in order to achieve predictability and consistency. My view is therefore that present market value should be the usual measurement of value and that fair/hope/economic values should only be used in the exceptional case. I think that serious injustice would have to be demonstrated before departure from the usual rule was justified.  
119.	It therefore follows that I am not prepared to attribute a present value to H’s interest in the P Business of more than £1.4m although I recognise, as did King J in Marano, the existence of hope value. Plainly all the investors are hoping for profits, perhaps significant profits, down the line, but beyond recognition of that I cannot go.
The Put and Call option agreements 
120.	In 2007 H and GA conceived the idea of acquiring for the benefit of the investors in the ZF around 30% of the shares of a Zendan company with substantial interests in technology called AL. This company was (and is) listed on the Y Stock Exchange. The CEO was (and is) MS and he and his family own 44% of the shares.
121.	On 3 April 2008 H and GA each entered into two options agreements with MS:
i)	A Call Option agreement whereby they each were entitled but not obliged to buy on 30 September 2010 24m shares from MS at a price per share of Z83. Following a rights and bonus issue the number of shares was adjusted to 35.92m and the price per share to Z58.08.
ii)	A Put Option agreement whereby MS was entitled to sell on 30 September 2010 to each of H and GA 36m shares at the same price of Z83. The number of shares was adjusted to 51.725m and the price to Z58.08.
122.	The options were valued at the time of the agreement. The number of shares was calculated so that the premiums payable for the options netted off so that only a nominal amount changed hands.
123.	The effect of the option is conceptually the same as a spread-bet on the value of the shares, or the entry into a forward or futures contract to buy the shares at a certain price in the future. Essentially on 3 April 2008 H was making a bet that the price of the shares would rise above Z83 in next 2½ years. From MS’s point of view he was hedging a significant part of his family’s shareholding. 
124.	H’s evidence, which was not challenged, was that he commissioned professional research as to the prospects for AL which was positive, confidently anticipating a significant rise in the price to figures well in excess of Z100.
125.	Unfortunately for H and GA their bets have gone disastrously wrong. Not only has the global financial crisis eventuated since the contracts were entered into, but Zenda has had its own particular political problems which are well known and which do not need to be set out here. The share price has plunged to Z15.27. The call option is very much out of the money. The put option is very much in the money to the tune of £17m. If the share price stays as it is then under the contracts both H and GA will have lost this sum in favour of MS. Of course, it is impossible to predict what the share price will be on 30 September 2010 or where it will go thereafter.  
126.	In his skeleton argument Mr Moor QC echoed what W had said about this contract in her affidavit in support of the freezing application. He wrote:
43.	H’s “liabilities” are quite remarkable.  By far and away the largest component is a so called “derivative” investment entered in April 2008.  In his Form E, H said that his liability in relation to this “investment” was (£9,620,811) or ($15 million) and “further losses are probable”.  Ms Wallace-Walker puts the losses now at (£17,174,802).  Moreover, GA would have exactly the same level of losses.
44.	When this “investment” was examined, it emerged that it was a totally nonsensical contract in which H (and GA) can be compelled by a MS to acquire 51.725 million shares in a Zendan quoted company known as AL for Z58.08 each on 30th September 2010, when the quoted price is now only Z15.27.  Indeed, he would have to find £23 million to comply with the contract (as would GA).
45.	W has always taken the view that this “contract” is now being relied on simply to reduce his assets dramatically for the purposes of this litigation.  It will be noted that this contract was not even mentioned in the e-mail dated 1st September 2008.  At the time, the share price was Z30.53 as against a call option price then of Z83 per share (a potential loss of £15 million).   
46.	H never disclosed the identity of MS but W informed the court on 2nd March 2010 (and H accepted) that MS is GA’s brother-in-law.  Presumably, it is H’s case that MS will also require his sister’s husband to pay £23 million for shares now worth £6 million.    
127.	I asked Mr Moor QC what he meant by “a totally nonsensical contract”. Was he saying that the contracts were shams in the technical legal sense that is to say documents executed by the parties which were intended by them to give to third parties or to the court the appearance of creating between them legal rights and obligations different from the actual legal rights and obligations (if any) which they intended to create? He seemed to say yes, although he did not dispute that these were valid contracts executed in a commercial context.  
128.	These contracts are not shams. They were a commercial bet that H thought would come good. H was unwise, possibly reckless, to have entered into a bet of this nature thereby exposing both him and his family to massive loss. 
129.	As I have explained there are close connections, including family connections, between H, GA and MS. Although there was nothing in H’s affidavit evidence as to what steps he might take to mitigate this enormous loss he gave me some oral evidence about negotiations with MS in the context of developments in AL. That evidence seemed to me of such moment that I required H to depose to it on affidavit overnight so that it could be carefully considered by all.
130.	The affidavit revealed a degree of knowledge possessed by H in his role as “informal unpaid adviser” to the MS family. He had been wholly silent about this role. As such he (and GA) had advised MS of a scheme whereby the technology side of AL would be hived off and floated as a separate company. The idea is that the FF would acquire this hived off business and MS thereby relieved from personal guarantees that H estimates stand at around £80m. H wrote:
8.		The attraction of ridding themselves of the personal liabilities is a point of leverage that we hope can be used by us to reduce our liabilities in exchange for allowing the MS family to retain the shares which they need to do the deal with the FF or anyone else.
 …
13.	While I believe we have some leverage which we can use to try to mitigate our losses there is no doubt that it will be impossible to wipe out the loss….if we are extremely fortunate we may be able to negotiate a reduction in the loss to £10 – 15m being somewhere around 50p in the £. 
131.	H’s explanation as to why he had kept quiet about these developments was wholly unconvincing. While the evidence does not justify a description of the contracts as “nonsensical”, let alone a sham, it does demonstrate that quantification of the debt is well-nigh impossible and whatever sum it comes in at, it is likely to be soft. After all, MS is hardly likely to bankrupt his own wife’s brother-in-law; and he is equally unlikely to wipe out H, his trusted unpaid informal adviser. 
Debts owed by H to GA and NS 
132.	H owes GA £2.25m being the price agreed to be released from personal guarantees in relation to the J and P Businesses. H also owes his brother-in-law NS £1.9m in relation to a host of expenses met by NS on H’s behalf. The latter debt is obviously soft, given the relationship involved. When it will be actually repaid by H, if ever, is impossible to predict.  While the former is the subject of a repayment programme and was accepted by W as a hard debt I do not consider that it would be right to bring it into account in my reckoning of the non-Zendan assets.  I have little doubt that if needs be H could negotiate further deferrals with GA.  I do regard this debt as having a soft character.
Treatment of the Zendan assets 
133.	Pure theory would suggest that all of the Zendan assets should be dealt with by Wells sharing, specifically by contingent lump sums to be paid by H to W as and when value in relation to the J Business arises in his hands. £10m of the £14.7m invested by H in the two businesses is secured by bonds. A principled solution would be to give W a contingent lump sum of a fixed percentage of the repayment made on those bonds. By the same token W should be made liable to pay a contingent lump sum to H of the same fixed percentage of the put-call option liability and the debts should they ever eventuate as hard liabilities for him.
134.	In his closing submissions Mr Moor QC wrote:
13.	The fair way of dealing with the Zenda assets is to give W a share of the Convertible Bonds as and when they are repaid to the pension fund (repayment dates are at D-20 but W should share even if repaid later).  
14.	W accepts that this should not be an equal division to reflect:- 
(a)	H’s Zenda debts (see below);
(b)	H’s continuing endeavours in creating future value. 
15.	But there should be sharing because:-
(a)	The investments were made from marital funds;
(b)	W was not consulted;
(c)	H has made (on his case) huge losses which exceed even the recoverable face value of the bonds;
(d)	H’s reckless behaviour.
16.	The court should make a further variation of the post-nuptial settlement to assign to her 30% of the face value of the bonds.
17.	This also cuts through much of the valuation dispute in the case. 	
135.	Mr Moor agreed with me that 30% of the bonds corresponded to 20% of the value contended by him for H’s interest in the J and P Businesses. I asked him: if 20% was a fair share of H’s upside in relation to the J and P Businesses why should W not share equivalently in H’s potential downside under the option agreements and the debts owed to GA and NS? Mr Moor’s reply was that H’s downside was fully taken into account in selecting a low percentage for sharing the upside. I do not follow this reasoning. Whatever the selected percentage is it should surely be the same for both the upside and the downside. I asked Mr Moor to take instructions on whether his client would prefer a 20% sharing of both the up and downsides, or no sharing at all. In a written submission delivered after oral submissions had been concluded he wrote: 
W’s position in relation to Wells sharing of convertible bonds is that, if she must take a share of both bonds and liabilities, she would rather have neither.    
136.	This is a sensible approach that corresponds to my own view. Sometimes pure theory must yield to pragmatism. There are so many uncertainties in relation to both the up and downside that my view, painting with a broad brush, is that in all likelihood they will all net off at or around zero. 
137.	Accordingly the values of the Zendan assets and liabilities will be disregarded. There will be no sharing of them. It leaves H with all the considerable risk, and all the potential reward. How things will pan out is impossible to predict.
Distribution of the non-Zendan assets. 
138.	I deal first with the treatment of H’s non-matrimonial property which I have found amounts to £2.182m.
139.	The identification, and separate treatment, of non-matrimonial property has its genesis in White v White  [2001] 1 AC 596, but receives its full exposition and rationalisation in Miller v Miller [2006] 2 AC 618. In Paragraphs 17, 19 and 20 Lord Nicholls referred to the “financial fruits of the marriage partnership”. In his section “Matrimonial property and non-matrimonial property” (Paragraphs 21 – 25) he explained how fairness demanded separate treatment of these categories. Similarly, Baroness Hale in Paragraph 141 referred to the “the sharing of the fruits of the matrimonial partnership”.
140.	In S v S (Non-Matrimonial Property: Conduct) [2007] 1 FLR 1496 Burton J was clear that the sharing principle should only apply to the matrimonial property, and that the non-matrimonial property should be invaded only to meet need. He stated:
[69] 	Mr Mostyn QC submitted that the effect of Lord Nicholls of Birkenhead's words in White, at 989 is that the judge must test his conclusion against the yardstick of equality of all the property, including the non-matrimonial property. I do not agree. I consider that the yardstick is by reference to 50% of the matrimonial property, and that the non-matrimonial property is excluded, and only brought into consideration if needs dictate. However, if I am to measure my conclusion against that yardstick, then the total figure I award to the applicant (exclusive of the payment off of the £500,000 debt) would fall from approximately 40% of the matrimonial, to approximately 35% of the total of matrimonial and non-matrimonial, property. This latter, lesser, percentage would be, in my judgment, more than justified by virtue of the fact that the respondent's financial contribution would then have to be considered to be all the greater if it included, not only his financial contribution to the matrimonial property, but his deemed contribution of the entirety of what is otherwise non-matrimonial property. In either event, against whichever yardstick my award is measured, there is, in my judgment, and by reference to the factors in s. 25 of the 1973 Act, ample good reason for it.
141.	Burton J conducted a two stage process. First he considered the effect of his award as a percentage of the matrimonial property. Then at a secondary stage he considered it as a percentage of all of the property.  
142.	Some argue that this approach has been disapproved (albeit obiter) by Paragraph 66 of Charman No 4. There Sir Mark Potter P stated: 
[66] 	To what property does the sharing principle apply? The answer might well have been that it applies only to matrimonial property, namely the property of the parties generated during the marriage otherwise than by external donation; and the consequence would have been that non-matrimonial property would have fallen for redistribution by reference only to one of the two other principles of need and compensation to which we refer in para [68], below. Such an answer might better have reflected the origins of the principle in the parties' contributions to the welfare of the family; and it would have been more consonant with the references of Baroness Hale of Richmond in Miller at paras [141] and [143] to 'sharing ... the fruits of the matrimonial partnership' and to 'the approach of roughly equal sharing of partnership assets'. We consider, however, the answer to be that, subject to the exceptions identified in Miller to which we turn in paras [83]-[86], below, the principle applies to all the parties' property but, to the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality. It is clear that both in White, at 605F-G and 989 respectively, and in Miller, at paras [24] and [26], Lord Nicholls of Birkenhead approached the matter in that way; and there was no express suggestion in Miller, even on the part of Baroness Hale of Richmond, that in White the House had set too widely the general application of what was then a yardstick.
143.	Some argue that this dictum stipulates that the two stage process should be telescoped into one. I find it difficult to accept that this is what the Court of Appeal intended. A telescoped approach runs the risk of insufficient logical rigour being applied to the identification and treatment of the two very different categories. It runs the risk of palm-tree justice being applied. It is so easy to say – “well there is a good deal of non-matrimonial property here so I will reduce the claimant’s share to 40%”, but that approach simply does not tell anyone what weight is being given to that factor. There is also the point that Paragraph 66 of Charman by its terms requires an identification and quantification of the non-matrimonial property in order to inform the percentage share. What is the point of all this work if it is then to put to one side in favour of a percentage based on “feel”? 
144.	I therefore decline to accept that the Court of Appeal intended to abrogate the two stage approach used by Burton J and in other cases. Certainly, the overall percentage share must be undertaken as a final check, for the yardstick of equality applies to all the assets and is there to guard against inadvertent discrimination as Lord Nicholls memorably pointed out in White.
145.	I have found above that the total non-Zendan property amounts to £18,147,310. H’s pre-marital property amounts to £2,182,111. The matrimonial property is therefore £15,965,199. On the facts of this case there is no good reason why this should not be equally shared in accordance with well established principle.  Thus W will receive net exit funds of £7,982,600. Given that her own assets amount to the negative figure of £696,490, she will need to receive a transfer of WH, subject to its mortgage, with a value of £2,663,975, and a lump sum of £6,015,115. That should be paid within 2 months of the date that this judgment is handed down in final form. Until payment the present maintenance pending suit regime shall continue.
146.	The award to W of £7,982,600 will be on the clean break basis.  In calculating it I have not factored in H’s earning capacity.  H has earned enormous sums in the past.  Whether he will be able to earn any appreciable sums in the future given his age, state of health and the condition of the economy, must be questionable.  I do not therefore have to grapple with the difficult question of whether actual earnings or an uncontroverted earning capacity should augment a sharing award.
147.	The award to W of £7,982,600 represents 44% of the Non-Zendan assets which I judge to be fair having regard to the scale of H’s pre-marital property.
148.	H’s Jersey pension fund is unquestionably a variable post-nuptial settlement. I have read an uncontested opinion from a Jersey Advocate which is to the effect that a variation of the scheme to grant W a lump sum would in all likelihood be recognised and afforded comity by the Royal Court. If there are any delays in effecting my award I will hear an application to vary the maintenance pending suit award so that W is suitably recompensed for being kept out of her money.
149.	Child maintenance has been agreed at £18,000 per annum per child plus school fees. The periodic maintenance should commence upon payment of the lump sum.    
150.	The award of £7,982,600 is amply sufficient to meet W’s needs. It corresponds to the value of WH mortgage free, and a Duxbury fund that will supply £125,000 per annum, which meets W’s budget when account is taken of those parts thereof that are properly to be met from the child maintenance. 
151.	I will hear submissions as to costs and the detail of the order in due course.              
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