Strand, London, WC2A 2LL
B e f o r e :
| JAMIE ANNE COOPER-HOHN
|- and -
|CHRISTOPHER ANTHONY HOHN
Lewis Marks QC, Elizabeth Clarke and Emma Chamberlain (instructed by Withers LLP) for the Respondent Husband
Hearing dates: 1st to the 11th July 2014
Crown Copyright ©
Mrs Justice Roberts:
This is necessarily a lengthy judgment. It is arranged in the following sections:-
A. Introduction (paragraphs 1 6)
B. Headline issues (paragraph 7)
C. Background (paragraphs 8 84)
D. Computation (paragraphs 85 146)
E. Law in relation to post-separation accrual (paragraphs 147 197)
F. Tax (paragraphs 198 227)
G. Findings in relation to the known tax risks (paragraphs 228 242)
H. Consideration of the individual tax risks in respect of which the husband seeks an indemnity from the wife (paragraphs 243 248)
I. Conclusions in relation to computation (paragraphs 249 251)
J. Special contribution (paragraphs 252 294)
K. Quantum of the wife's award (paragraphs 295 310)
The respective cases of the parties
B. Headline issues
i. What is the extent of the assets available for distribution as between the husband and the wife (the computation issue)?
ii. To what extent do those assets fall to be considered as part of the marital acquest or, alternatively, to what extent have they been generated (or added to) in the period between separation and the date of trial (the marital acquest or post-separation accrual issue)?
iii. What percentage of the overall available wealth should each party receive at the end of the marriage? In particular, is a departure from equality justified on the facts by either or both of (i) post-separation accrual and/or (ii) special contribution on the part of the husband (the distribution issue)?
iv. In either event, should there be a Wells sharing of any or each of the various categories of assets, to include any goodwill value which I find to exist in the TCI entities over and above the value of the assets they currently hold?
The parties and the early years of their married life
The Children's Investment Fund ('TCI Fund') and the related Charitable Foundations
The TCI Fund (or the Master Fund)
i. In terms of its (apparently) unique underlying concept, who was responsible for introducing the concept of the contractual nexus between the performance of the TCI fund and the fees which would be paid to the Foundation?
ii. How did the parties anticipate the 'division of labour' in terms of their individual contributions towards the TCI Fund and the Foundation?
iii. What contributions has each subsequently made?
i. as a result of growth in his personal investment in the TCI group entities;
ii. as a result of his share of the management fees charged (a) to external investors in TCI (represented by a flat percentage of the funds under investment from time to time, usually 1.5%) and (b) to Talos (which owns the Foundation's assets); and
iii. as a result of his share of the incentive/performance fees (based upon the underlying performance of the fund from time to time) received by the Manager of TCI (between 15.5% and 16.5% of the increase in value of investments once a fixed 'hurdle' rate is achieved).
'What does it mean? It means that you make change within a company. You identify dramatic change within a company, and that can be both public and private, and the most extreme and public examples of activist investments that I made were ABN Amro Bank listed in the Netherlands, where I bought 1% of the shares and put a motion on the Annual General Meeting for the bank to put itself up for sale and be sold. The management said, "You should go to hell". I said, "Well, it is my legal right. You have been underperforming." 70% of the shareholders voted for my motion and the Bank was sold for US$100 billion, virtually all cash, in a hostile break-up by three financial institutions, and the [TCI] Fund made US$1 billion on that investment.
Another example was Deutsche Börse where I bought a very large stake in order to stop what I thought was a value destructive acquisition of the London Stock Exchange. I formally put motions to the Annual General Meeting to remove the CEO. The Chairman was Chairman of Deutsche Bank. Under that pressure, the CEO was sacked, the Chairman sacked himself, and the shares went up five times.
Most recently during 2013, there are two examples where we are investing in a lot of privatisations recently, where dramatic change is occurring and we are driving it. Horizon was a big investment for the fund; there is the Australian Railroad where we have actively lobbied the board. We were the largest shareholder, where the company has bought back US$1 billion of stock, about 8% of that company, driving and doubling the stock price.
There is Japan Tobacco, a large investment for the [TCI] Fund, 16% of the Fund. We publicly lobbied the Japanese Government to privatise the company to pay for earthquake reconstruction. We were successful. The Government sold about US$8 billion of stock. The company bought back billions of dollars of stock and fired the CEO and, under the pressure of hostile Annual General Meeting proposals which we have repeated every single year, including this year, the stock price rocketed and doubled because it transformed itself from an underperforming company in the process to a performing company.
There is Airbus. The other part of what we do is concentrated investing. We pick a handful of investment ideas. This is the other aspect of it. It is incredibly concentrated investing. Most funds would invest 1% in 100 ideas and say we are very diversified. We take the opposite approach. Our core investments might be seven to ten ideas. So, at the start of 2013, post-separation, I identified Airbus, one of the world's largest makers of commercial airlines, as an activist investment idea. Because it was being privatised and I thought we could push change harder, we made a public proposal (which was front page of the Financial Times in 2013) for the company to sell off a division which was accepted as a sale by the board publicly. They accepted our advice and they accepted our recommendations to buy back shares, and huge change occurred in the company. But I put 18% of the [TCI] Fund in it – 18%. The shares went up over 90% in 2013.
The same goes across all our investments. One way or another, virtually all our investments are actively managed. We work hard to create change in the company; it is not passive. We take a handful of debts for things where we drive dramatic change in the company, and that is what produces these dramatic returns which are far in excess of what normal people can receive by investing in the stock market. That is how we justified what are very high fees."
'We have a policy for several years now that we only take … it is explicit; we put it in all our marketing materials and verbally … approximately subscriptions equal to redemptions, because if you grow too large you cannot compound, and without compounding, there is no point to what I do. So there is a finite capacity that is taken up by management shares. In effect, it precludes fee-paying clients from entering in, because it uses up finite capacity.' [Transcript  page 499]
'There is a finite liquidity in every security, so when the Fund became US$20 billion, it was impossible to manage and the returns became too large ….. If you keep compounding, you need to take a decision on whether you return capital to investors ….. It is a judgment call whether you can put the money to work based on the amount of ideas and whether they are in large capitalisation liquid securities or small capitalisation illiquid securities. I would say that at any time you get in the range of US$5 to US$10 billion of assets, it starts to become problematic which is why we put a policy for the last few years of no subscriptions greater than redemptions overall. So there might be small variations month by month within a particular year, but we capped …. the new capital we would take with a formal rule and we are now actively discussing return of capital to people, return of profits. But there is a subjective thing. We look at the quality of the investor and we may say, 'we like this pension fund or we do not like that fund or funds. Is it a good investor or a bad investor?' [Transcript  page 718-720]
The overarching structure of the TCI Group entities
The Foundations (UK and US)
'We see our funding as an investment rather than a gift. Therefore we monitor the effectiveness and success of our investments very carefully. Secondly we take a business approach, which means that we accept that nothing quite works out in reality as it did in the business plan.'
'I begged organisations to support a change in protocol for years and, finally, the new executive director of the Elizabeth Glaser Paediatric AIDS Foundation, who I had a relationship with, agreed that we would take a country, there are seven countries where AIDS is a leading killer of kids, so we agreed that we would take one of those countries where they have their strongest team. We were shocked when they said Zimbabwe, it was an incredibly difficult political time. It was at the height of the Mugabe issues but that is where they felt they had their best team. They had about 80% coverage, I believe, of this protocol that we did not believe was terribly effective.
We agreed that we would bring it nationally because the country has the issue nationally and that we would change protocol and we did that all in conversation with the government. Chris, actually, he was very concerned about my safety and actually went before I did to meet the government. I was very, very involved in developing the strategy. We had done similar programmes on a smaller scale or with paediatric anti retro-virals before that. Again, it was very effective. There was 37% transmission from a pregnant woman who was infected to a child when we started the programme. A year later it was 19% and we are now below 10% and the government has fully embraced the programme and has taken over most of the funding of it.'
'It is very typical that an organisation starts small with founders actively involved [and] graduates to being something where professional management takes over the management. So it is not unusual. It is not that I want to criticise Jamie or the board wanted to criticise Jamie and hence the diplomatic language used here ….. everybody wanted to be respectful for the contribution Jamie had made and say thank you, you know. Things have gotten started [sic], we plan to spend 5% of the assets [which] the Foundation has generated, but 95% of the assets remain to be spent. We want, as all trustees have, we have a duty of care to act in the best interests of the Foundation. That means have the Foundation run as professionally and effectively as can be the case.
I know you want me to state something in a certain way, but I would like to express it as the way Bridgespan has expressed it; it was time for the management to evolve and move from founders to experienced professional people who have extensive 30 years' experience in complex projects like this in Africa and India.' [Transcript  page 544]
'Our biggest area [in grant making] is climate change and I sit on the Climate Change Advisory Board which meets regularly to review in detail. I am often the champion or specific designated person for review of those proposals. It was my concept and proposal to found the European Climate Foundation which has been our largest grantee in our climate change work, and I am an active advocate of climate change work. You can see, for example, a recent issue of Institutional Investor where the main story is on climate change and the author attributed the article on it to me.
I travelled extensively in the past on Foundation work. Most recently I spent a week in India researching in the red light districts of India a grant to an Indian anti-trafficking organisation whose board I sit on, and I was actively involved in working…in creating input and changes in laws on Indian anti-trafficking legislation personally and successfully.
I gave a personal grant of US$1 million and asked the Foundation to make a grant of US$9 million to that organisation, and carried out extensive legal due diligence on the organisation internally and that grant was approved. So I am very active on the trafficking side. I have been visiting their projects in Zimbabwe for a week, Kenya in the past, Malawi and India. So I have travelled the most of any board member in reviewing projects.
I am an active advocate for the Foundation. I was asked by David Cameron to speak at a No. 10 summit on malnutrition. In addition, it was my conversation with Mark Lowcock, who is the 'number two' at DFID, to propose that we work together on solving malnutrition. That was the genesis of the large commitment that the Foundation made to malnutrition and, together with Jamie, I announced that grant at a large conference which raised $4 billion, speaking on the stage with Bill Gates, whom I meet regularly each year to discuss the work of the Foundation and collaboration. Most recently I travelled to California where I met with him and we discussed a number of grants, including the grant that we have committed to for HPV vaccines in partnership with the Gates Foundation.' [Transcript  pages 483-484]
'You know, I do not think I travelled as a trustee as much as Jamie would, but you know I would certainly in terms of time, my commitment in time to the Foundation I would say was greater in aggregate than Jamie's time commitment to the Foundation, because you have to factor in the two components of the work. Managing the money, without which there was no Foundation, and creating the wealth, and then I would say secondarily, because without the money there is no Foundation, secondarily time as a Trustee.' [Transcript  pages 535 to 536]
The course of the litigation to date in terms of the husband's disclosure
' I have listened carefully to the arguments advanced by both sides and I am not persuaded that this application should now be granted. I, having read the submissions of the parties and many of the documents, am completely persuaded that this exercise would be so theoretical as to do nothing more than generate an argument which would not assist the court at all. At the end of the day, the court in a case of this kind wants to be able to proceed so far as possible on ground which is, if not solid, then at least supportive of some weight. It seems to me the more I have thought about this proposed valuation exercise, the more I have become convinced that it is shot through with so much theoretical speculation that the court would find itself quite unable to ascribe any sort of reliable value to it.
 At the end of the day, the key factor in any valuation would be the extent to which the husband Mr Hohn's own contribution to the business was relevant. On the one hand, it will be said on his behalf, (because, judging by the documents that have been produced thus far, this is the position that has been taken) that any discount should be in effect 100%. In other words, without him, there is nothing. And I am as confident as I can be at this stage that this is the most likely result. The fact that there are others in the organisation in which he works who assist him by the production of raw material, the production of analyses, does not in any way meet the point that in a business which is wholly dependent upon the investment eye of the individual concerned, it is quite impossible for the court to carry out a valuation exercise of the organisation in those circumstances.'
' On the material put before this court, I have to say I tend to agree [with the reasons given by Coleridge J as set out in para 34, above] but, in any event, I cannot regard that judgment as being wrong.
 It is speculative to suggest that a purchaser could be found to pay for an income stream that can and would walk out of the door together with the vendor of that income stream. The evidence filed in the case included disclosure of the offering memoranda in respect of the underlying funds. The key man provisions were patent and their purpose is self-evident.
 I would go further. Some assets cannot sensibly be ascribed a capital value. It is a fallacy that every asset must be valued in every case or even in every sharing case. Of course, the court will need to draw a balance sheet or asset schedule, but that does not lead to the conclusion that every asset must be valued in order for the court's statutory duty to be complied with. The valuations sought in this case would likely be theoretical. It would not be a valuation of assets available for distribution between the parties.
 That is not to say that it will not be open to the wife to argue at trial about the division of existing capital assets which might reflect the fact that the husband could augment his share in the future from his substantial earning capacity within the management entities. There could be a Wells sharing of any profit in respect of the husband's subsequent earning capacity. Those are matters for the final hearing judge.'
The main frame asset schedule
i. profit of just over £7 million allocated to the husband for the year to 28 February 2014 in respect of which it is said he has provided no account;
ii. profit yet to be allocated for the same period which was (or is) potentially available to the husband in the sum of just under £21.25 million net;
iii. the value (some £8 million) of an investment in Indian real estate (IREO) which the husband contends represents post-separation accrual;
iv. the value of contingent incentive fees which have not yet crystallized (which, on the wife's presentation, amount to US$113.6 million).
Agreed aspects of computation
Properties / Real Estate
Liquid cash reserves and loans receivable
Investments in the TCI Fund
The value in the TCI Group entities
'I have absolutely zero interest in working for somebody [else]. I do not need the money. I do not want to be constrained. The purpose of the fund is actually to compound my capital. You know, if I wanted to sell my capitalised stream of future income, first, there is no buyer, but I would have done it by now if there had been. I have no interest to work for anybody. Why would I want to work for anybody? I am a billionaire, Mr Pointer … why do I want to work for anybody? I do not really care about money. I gave away nearly all that I made to charity.' [Transcript  page 639]
'Investors do not have to leave. In perfect example, they did not have to leave the Perry European fund, but they did, completely. They all followed me when I started up again … because it was me they backed. They did not back the parent or some third party. To answer your question, I have never had any interest to work for somebody else. I do not want to sell my future earning stream. There is no value in the business other than what I take. There is [sic] no profits. There is only my partnership allocations. I have no interest. You assume that I work for money, Mr Pointer.' [Transcript  pages 642-643]
Other investments - IREO
Profit for year end 28 February 2014 – has the husband failed to account for a sum of c. £7 million?
Contingent incentive fees : should a value be included?
i. Whilst the figure of US$290 million represents accrued contingent fees as at 1 April 2014, to adopt the approach advocated on behalf of the wife requires me to make an assumption that these fees will, in fact, be paid out on the same day. It ignores the fact that payments will fall in according to a cycle which is dependent upon the length of each investor lock in period and the fact that there remains a hurdle which TCI needs to outperform. That hurdle is linked to LIBOR plus a margin. Whilst the highest hurdle rate is currently 5%, that rate is predicated on the basis of historically low interest rates following the global collapse in 2008. With emerging improvements in economic markets, that hurdle rate may well rise, linked as most of them are to LIBOR. Under the terms of their investment contracts, the hurdle compounds for investors either on an annual basis or on a month by month basis. In the event that a particular share class is below its high water mark, the hurdle continues to compound, thus raising the bar further before eventual crystallisation. If the Fund performance is lower than the compounding hurdle rate, the amount of contingent incentive fees will be reduced or never collected.
ii. The figures provided assume there will be no early withdrawal of funds by investors because they are 'locked in' and cannot withdraw their funds or because they choose not to. There is the opportunity to 'roll over' into an alternative class of share in some cases. The rolling programme of crystallisation will occur principally over the course of the next three years if performance does not dip below the compounding hurdle rate. This was set out in the husband's solicitors' letter dated 30 April 2014 as follows:-
|to year end February 2015||$77,404,093|
|to y/e February 2016||$86,200,606|
|to y/e February 2017||$125,704,701|
|to y/e February 2018||$372,883|
iii. The accrual of these fees has occurred almost exclusively since the parties' separation. Figures have been provided from the accounts. They are as follows :
Accrued incentive fees as of date shown
|31 March 2012||$5,475,380|
|30 November 2012||$9,050,890|
|31 March 2013||$46,154,088|
|31 March 2014||$289,682,284|
'After the financial crash [in 2008], the fund went down by 40%. The way incentive fees are calculated is that you do not receive them until you have made back all the losses to the so-called high watermark. After 2008, we spent until the beginning of 2013 making back all the losses for investors before we received any material incentive fee – maybe one investor here or there, but nothing material. Then and only then, so a year after separation, I think at February 2013 – sorry, January 2013 – there was only after tax about $1 million of crystallised incentive fees. Long after separation, only $1 million of incentive fees had been crystallised because of that high watermark issue.
Finally, at the beginning of 2013, we suddenly began to accrue or have contingent fees created. Then 2013 was a good performing year for the Fund; it went up by 47% but the vast majority of those incentive fees still remained contingent on continued performance. In order to retain investors, we offered them this long crystallisation period plus hurdles. Without making the hurdles, we do not make the incentive fees. It is not as good as many other hedge funds that you may be thinking about, Mr Pointer, where they get their money every year, come what may, and there is no contingent, no crystallisation, and no hurdles. We have those factors in our contracts.' [Transcript  pages 601-602]
'The fact that there is this machine, as I think Coleridge J referred to it, which the husband is able to use to generate money, most of that machine resides between his ears, but he nevertheless has the benefit of the machine going forward.' [Transcript  page 961]
E. The law in relation to post-separation accrual
Date of separation
'Sixthly, if account is taken of the increase in the value of the parties' assets during the marriage (the matrimonial acquest), a question may arise about the date up to which one should measure it. Should this be up to the date when the parties ceased effectively to live as married partners (here April 2003), as Mr Mostyn QC considered in his judicial capacity in GW v RW at para ? Or should it be up to a later date such as the date of trial, or even, in a case where an appellate court thinks it right to re-exercise its discretion, up to the date of the appellate decision? Reference was made by Mr Mostyn QC to my remarks in Cowan v Cowan  Fam 97,  2 FLR 192 paras  – . The matters to which the court must have regard under section 25 include several which exist or appear likely as at the date the court has regard to them (cf s 25(2)(a), (b), (f) and (h)). Others of the listed matters require the court to look back at the past (eg s 25(2)(c), (f) and (g)). To the extent that the focus is on the matrimonial acquest, the period during which the parties were making their different mutual contributions to the marriage has obvious relevance. The present may be viewed as a case (paralleling the then unreported decision of Coleridge J in N v N (Financial Provision: Sale of Company)  2 FLR 69 to which I referred in Cowan v Cowan) where the increase in value of the New Star shares between separation in April 2003 and trial in October 2004 or judgment in April 2005 was contributed to by the husband's further investment of time and effort, independently on its face of any contribution by the wife. Further, Mrs Miller had here no right to, and could not have been given, any part of Mr Miller's New Star shareholding in relation to which Mr Miller carried the risk. Mrs Miller has at all times been living in the house, which has now been formally transferred to her. Her only further claim is to a sum of money, assessed by the judge at £2.7 million (which Mr Miller paid in two instalments in May and June 2005). Mr Miller cannot easily be said in this case to have been holding on to any asset which should have been Mrs Miller's, or to owe anything other than money. Assuming that the focus is on assets acquired during the marriage, rather than on the husband's overall means, it seems to me, therefore, natural in this case to look at the period until separation.'
i. it is more often than not the case that the relevant business remains under the sole control of one of the parties;
ii. that party is continuing to trade with those assets; and
iii. the claimant is unable to realise her undivided share and reinvest it in another venture or asset and so attract what might be similar or equivalent growth elsewhere.
'All the above considerations are capable of inclusion in a review of the respective needs, responsibilities and/or contributions of the parties. They cover three of Mr Pointer's four submissions summarised in  above. The third, namely that much of the husband's fortune was generated in the 6 years post-separation, receives no reflection because in my opinion it is inherently fallacious. The assessment of assets must be at the date of trial or appeal. The language of the statute requires that. Exceptions to that rule are rare and probably confined to cases where one party has deliberately or recklessly wasted assets in anticipation of trial. In this case the reality is that the husband traded his wife's unascertained share as well as his own between separation and trial, particularly committing those undivided shares to the investment in [X company]. The wife's share went on risk and she is plainly entitled to what in the event has proved to be a substantial profit. If this factor has any relevance it is within the evaluation of the husband's exceptional contribution.'
' Third, in my opinion fairness certainly permits and in some cases requires recognition of the product of the genius with which only one of the parties may be endowed. Indeed Miss Baron conceded the proposition, whilst contending that this husband was not in the category, since she submitted that he was no more than a hard-working businessman. That submission does not seem to me to do justice to the husband's achievements, which clearly for their scale depended upon his innovative visions as well as upon his ability to develop those visions. It is a factor that in the present case deserves some recognition. I do not regard it as discrimination by the back door. Whilst no doubt the husband's capacity to devote himself to the expansion of the companies depended in part upon the stability and security of the home and family life which the wife created and sustained, his creativity was not so dependant to the same or perhaps to any degree.'
The business of investment in the TCI entities as a continuum
' In this case there has been a very substantial passage of time between the separation of the parties and the hearing of H's claim for ancillary relief. Quite apart from the independent question of whether delay per se is a relevant factor in the exercise of the statutory discretion there is the critical question of whether money or property that has been acquired after separation forms part of the matrimonial property (or marital acquest).
 In all cases now a primary function of the court is to identify the matrimonial and non-matrimonial property. In relation to property owned before the marriage, or acquired during the marriage by inheritance or gift, there is little difficulty in characterising such property as non-matrimonial (provided it is not the former matrimonial home). The non-matrimonial property represents an unmatched contribution made by the party who brings it to the marriage justifying, particularly where the marriage is short, a denial of an entitlement to share equally in it by the other party : see White v White  1 AC 596,  2 FLR 981; GW v RW (Financial Provision: Departure from Equality)  EWHC 611 (Fam),  2 FLR 108; P v P (Inherited Property)  EWHC 1364 (Fam),  1 FLR 576; Miller (paras -, ).
 But what of money or property acquired by one party after the separation? This gives rise to a number of conceptual problems which I have to say have not been altogether resolved by the opinions in Miller.'
'24.1 The statute requires all the assets to be valued at the date of trial.
24.2 For the purposes of establishing the matrimonial property in respect of which the yardstick of equality will 'forcefully' apply the value of assets brought into the marriage by gift or inheritance (other than the former matrimonial home), together with passive economic growth on those assets, should be excluded as non-matrimonial property.
24.3 Assets acquired or created by one party after (or during a period of separation) may qualify as non-matrimonial property if it can be said that the property in question was acquired or created by a party by virtue of his personal industry and not by use (other than incidental use) of an asset which has been created during the marriage and in respect of which the other party can validly assert an unascertained share. Obviously, passive economic growth on matrimonial property which arises after separation will not qualify as non-matrimonial property.
24.4 If the post-separation asset is a bonus or other earned income then it is obvious that if the payment relates to a period when the parties were cohabiting then the earner cannot claim it to be non-matrimonial. Even if the payment relates to a period immediately following separation I would myself say it is too close to the marriage to justify categorisation as non-matrimonial. Moreover, I entirely agree with Coleridge J when he points out that during the period of separation the domestic party carries on making her non-financial contribution but cannot attribute a value thereto which justifies adjustment in her favour. Although there is an element of arbitrariness here, I myself would not allow a post-separation bonus to be classed as non-matrimonial unless it related to a period which commenced at least 12 months after separation.
24.5 By this process the court should, without great difficulty, be able to separate the matrimonial and non-matrimonial property. The matrimonial property will in all likelihood be divided equally although there may be deviation from equal division: (a) if the marriage is short; and (b) part of the matrimonial property is 'non-business partnership, non-family assets' (or if the matrimonial property is represented by autonomous funds accumulated by dual earners).
24.6 The non-matrimonial property is not quarantined and excluded from the court's dispositive powers. It represents an unmatched contribution by the party who brings it to the marriage. The court will decide whether it should be shared and, if so, in what proportions. In so deciding it will have regard to the reality that the longer the marriage the more likely the non-matrimonial property will become merged or entangled with matrimonial property. By contrast, in a short marriage case non-matrimonial assets are not likely to be shared unless needs requires this.
24.7 In deciding whether a non-matrimonial post-separation accrual should be shared and, if so, in what proportions, the court will consider, among other things, whether the applicant has proceeded diligently with her claim; whether the party who has the benefit of the accrual has treated the other party fairly during the period of separation; and whether the money-making party has the prospect of making further gains or earnings after the division of the assets and, if so, whether the other party will be sharing in such future income or gains and if so in what proportions, for what period, and by what means.'
' In the application of the statutory test under the MCA which looks to past events and to the future it is inevitable that the court will have regard to current values at the time it makes its award. This does not mean that such a value would identify the value of the matrimonial property to which the yardstick of equality applies with force. Further, as in Miller, that yardstick may not be a fair one to apply whichever date is taken for the identification and valuation of the matrimonial property.
 If those assets include one that can change in value the reasons for any increase or decrease in value over a relevant period would be a factor to be taken into account. For example, the value of a property, or the shares in a public or private company, could go up or down for a great variety of reasons and it seems to me to run counter to the objective of the MCA, its terms and the guidance of the House of Lords to seek to set tests, or formulae, as to how these changes should be taken into account in a given case (see for example Baroness of Richmond at para  of her speech in Miller and McFarlane).'
' In my view, the concept of the matrimonial property to which the yardstick of equality applies readily and with force is based on the concept of an equal and voluntary partnership providing mutual emotional, economic and general support and matching contributions to it of different kinds. A point, or line, for defining the matrimonial property is therefore a date when that mutual support ends see, for example, para  of the speech of Lord Mance where he says:
'To the extent that the focus is on the matrimonial acquest, the period during which the parties were making their different mutual contributions to the marriage has obvious relevance … it seems to me therefore natural in this case to look at the period until separation.'
 This mutual support could have diminished, or ended, before the parties split up but the guidance given as to the effect of conduct by the House of Lords means that in this case the first possible point, or line, to identify the matrimonial property is early January 2005 (the husband having announced dissatisfaction with the marriage on 24 December 2004 and having left the matrimonial home on 9 January 2005). ….. Correctly no earlier date was argued for.'
' In my judgment it cannot be said that the unsuccessful attempts to reconcile, or the discussions about reconciliation, that took place continued the mutual co-operation, support and goal that had existed during the happy years of the marriage beyond the date when the husband left the matrimonial home. Indeed in my judgment a conclusion that they did would fly in the face of the reactions of these parties to and after that event, and indeed of normal human nature.
 Thus, in my view, the sad reality was that in January 2005 the underlying foundation of the marital partnership was brought to an end and was not re-established.
 The marriage however continued as did the husband's financial support for the wife and the children, and the wife's role as primary caretaker of the children. But this will continue after the decree absolute and the award of ancillary relief. Therefore it does not seem to me to provide, of itself, a guide to a later date being taken for the definition of the end of the marital partnership as the producer of the matrimonial property and thus for defining the matrimonial property.'
'Passive growth is to be contrasted with growth as a result of contributions of one sort or another made during the marriage, ie of activity, irrespective of whether such is achieved with the assistance of a spring-board already in position……'.
Continuum versus new ventures
i. the IREO (second stage) investment of some £8 million;
ii. the unallocated profit of some £40 million gross (£21.25 million net) earned in the period 1 March 2013 to 28 February 2014;
iii. the vast majority of the contingent incentive fees of US$113.6 million which, if crystallised, will become payable over the course of the next four years (2015 – 2018). Whilst it is simply not possible for me to put a precise figure on the split of pre- and post-marital assets in this category, I bear in mind that only 1.3% of the Fund is held by the 'old' 5 year class of investors. I know not what percentage of the D (quarterly) shares represent 'old' 'rolled over' money but I bear in mind there is likely to be some. However, I take the view that such 'roll over' as there might have been is neutralised to a significant extent by the work which the husband subsequently did to invest the money into new investment opportunities where the funds increased significantly under his particular style of activist management.
|30 November 2012 (year of separation)||US$664.6 million|
|30 April 2013||US$872.7 million|
|31 December 2013||US$1.107 million|
|30 April 2014 (assume date of hearing)||US$1.1773 million|
i. are the figures involved significant in the context of this case? and
ii. is there any material risk of future liability crystallising?
Tax treatment of the pension and potential future tax on the winding up of TCI
'Counsel submitted that the use of net values in this situation should be discontinued. I do not agree. As with so much else in this field, there can be no hard and fast rule, either way. When making a comparison it is important to compare like with like, so far as this may be possible in the particular case.'
'Accordingly, if this issue [of potential CGT] were an important one (which I do not think it is) I would not be inclined to deduct CGT on the entirety of the wife's holding. Equally, however, in the fullness of time and as things turn out, she may wish to bring some of her fortune into this jurisdiction, as she has done on some occasions in the past, thus attracting CGT on the proportion remitted. There is no way of anticipating this in any informed way. So taking a broad brush, I would deduct latent CGT on an arbitrary £10m worth of her shareholding, but would not deduct it from the balance of the share holding. I consider that this discretionary although speculative approach is open to me, as there is 'no hard and fast rule' and because I think it is the best way to produce a fair and realistic determination on the issue, given the unusual facts of this particular case. The gross kitty, therefore, reduces in size accordingly.'
'In circumstances such as those pertaining here, suggested guidance as to maximum and minimum likely outcomes does little to assist. Each case simply has to be looked at on its own particular facts and fairness achieved by the exercise of judicial discretion based on those facts, informed by the s 25 exercise and by the authoritative guidance referred to at para  to  above [relating to various quotations from the judgments of the House of Lords in Miller]. It is for this reason that the schedule of 'Cases involving extra-matrimonial property' referred to at para  above [being cases cited by Mr Pointer QC who had acted for the husband in that case] if only of limited informative value and not in the end compelling as regards determination of the actual outcome.'
'… if there is a risk of a tax liability of $100m (so that W's share would be $50m), and it will be determined within, say, 12 months then it would probably be reasonable to require an indemnity. If there were a minor risk of a tax bill of $2m which will not be determined for 5 years then it would be unreasonable and inconsistent with the court's objectives [to achieve a clean break at the earliest opportunity pursuant to s25A] to require an indemnity.'
Wife's proposals to 'cap' the indemnity she offers
'The formula for computing at what level of tax payable the 'cap' comes into play is not complicated, it is
A x r
Where A is the total asset base and r is the percentage of W's award which is held in escrow or withheld to be the second lump sum. H has proposed that r should be 40% (but says that there should be no cap) whereas W has not proposed a figure for r, but does say that it should also serve as a cap.
If the cap came into play the consequence is that H bears more than his proportionate element of the tax.
While this is not 'likely' it is 'possible' and if it eventuated it would convert a 'fair' outcome into an 'unfair' outcome. Clearly the greater the amount by which the tax exceeded the proposed cap, the greater would be the distortion of the ordained outcome.' [3/36 of H's Tax bundle]
The husband's position in relation to tax
G. My findings in relation to the known tax risks
Treatment of the pension funds
'However if a pension sharing order was made the current position of the trustee is that there would be no withholding tax on payment to a sub-fund for Mr Hohn's ex-wife but that she would then be subject to the same restrictions as above. As any tax liability arising would strictly be Mr Hohn's liability, presumably appropriate provision would be needed to ensure that the new sub-fund would bear its share of any tax arising at a later date depending on the choices made by Mr Hohn's ex-wife.'
'It would, in our view, avoid sterile arguments, and expense to the parties, if the English courts were, in cases involving a Jersey Trust, having calculated their award on the basis of the totality of the assets available to the parties, to exercise judicial restraint and to refrain from invoking their jurisdiction under the Matrimonial Causes Act to vary the trust. Instead they could request this Court to be auxiliary to them … we can see no reason why the trustee or one or more of the parties before the English court as the case might be, should not be directed to make the appropriate application to this court for assistance in the implementation of the English court's order. It appears to us that this would be a more seemly and appropriate approach to matters where the courts of two civilised and friendly countries have concurrent interests. It would furthermore be more likely to avoid the risk of the delivery of inconsistent judgments.'
Potential tax on the winding up of TCI Group entities (£19.9m or $33.7m)
H. Consideration of the individual tax risks (known and hypothetical) in respect of which the husband seeks a general indemnity
The hypothetical tax risks
I. Conclusions in relation to computation
J. Special contribution
'(iv) Special contribution
 Coleridge J postponed delivery of his judgment until after publication of the determination of the House of Lords of the appeal in Miller. He did so not least because of the wife's concession that the husband had made a special contribution which should lead to a departure, albeit modest, from equal division of the property was expressed to be conditional upon the 'survival' in Miller of the possibility of a special contribution for the purposes of the exercise required by s 25 of the Act.
 It was inevitable, so it seems to us, that the notion of a special contribution should have 'survived' the decision in Miller. The statutory requirement in every case to consider the contributions which each party has made to the welfare of the family, as well as those which each is likely to make to it, would be inconsistent with a blanket rule that their past contributions to its welfare must be afforded equal weight. Nevertheless the difficulty attendant upon a comparison of their different contributions and the danger of its infection by discrimination against the home-maker led the House in Miller heavily to circumscribe the situations in which it would be appropriate to find that one party had made a special contribution, in the sense of a contribution by one unmatched by the other, which, for the purpose of the sharing principle, should lead to departure from equality. In this regard the House was unanimous. First it approved at paras ,  and , the decision of this court in Lambert v Lambert  EWCA Civ 1685,  Fam 103,  1 FLR 139, in which Thorpe LJ had ventured at para , 'a cautious acknowledgement that special contribution remains a legitimate possibility but only in exceptional circumstances'. Then it reached for the criterion by which the court determines whether a party's conduct is relevant to the inquiry and suggested that it should be applied to identification of the linked and in effect obverse feature, namely the special contribution. When, by s 3 of the Matrimonial and Family Proceedings Act 1984, Parliament had recast the reference to conduct in s 25 of the Matrimonial Causes Act 1973, it had provided in s 25(2)(g) that conduct should be taken into account if it was 'such that it would in the opinion of the court be inequitable to disregard it'. On one view that criterion is of fair width. In practice, however, its meaning has largely been interpreted in line with the narrow criterion for determination of the relevance of conduct set by this court prior to 1984, in particular in Wachtel v Wachtel  Fam 72, in which, at 90C, it approved the trial judge's suggestion that conduct was relevant only if it was 'obvious and gross': indeed see the current re-affirmation of this criterion by Baroness Hale of Richmond in Miller itself at para . It is therefore in the light of the very limited ability of a party to establish a case of conduct under s 25(2)(g) that we must have regard to the statements in Miller both of Baroness Hale of Richmond, at para , that contributions should be approached in much the same way as conduct; and of Lord Mance, at para , as follows :
'[S]ection 25(2)(g) recognises the difficulty and undesireability, except in egregious cases, of any attempt at assessing and weighing marital conduct. I now recognise the same difficulty in respect of marital contributions – conduct and contributions are in large measure opposite sides of a coin.'
In saying that he 'now' recognised the same difficulty, Lord Mance no doubt had in mind the wider room for special contributions which, as a member of this court, he had identified in Cowan v Cowan  EWCA Civ 679,  Fam 97,  2 FLR 192, at paras  and .
 The notion of a special contribution to the welfare of the family will not successfully have been purged of inherent gender discrimination unless it is accepted that such a contribution can, in principle, take a number of forms; that it can be non-financial as well as financial, and that it can thus be made by a party whose role has been exclusively that of a home-maker. Nevertheless in practice, and for a self-evident reason, the claim to have made a special contribution seems so far to have arisen only in cases of substantial wealth generated by a party's success in business during the marriage. The self-evident reason is that in such cases there is substantial property over the distribution of which it is worthwhile to argue. In such cases can the amount of the wealth alone make the contribution special? Or must the focus always be upon the manner of its generation? In Lambert Thorpe LJ said, at para :
'There may be cases where the product alone justifies a conclusion of special contribution but absent some exceptional and individual quality in the generator of the fortune a case for special contribution must be hard to establish.'
In such cases, therefore, the court will no doubt have regard to the amount of the wealth; and in some cases, perhaps including the present, its amount will be so extraordinary as to make it easy for the party who generated it to claim an exceptional or individual quality which deserves special treatment. Often, however, he or she will need independently to establish such a quality, whether by genius in business or some other field. Sometimes, by contrast, it will immediately be obvious that substantial wealth generated during the marriage is a windfall – the proceeds, for example, of an unanticipated sale of land for development or of an embattled take-over of a party's ailing company – which is not the product of a special contribution.'
' Mindful of the postscript to the judgment of Coleridge J …… we have wondered whether, in order to help courts to perceive the circumstances in which, subject to our remarks in para , above, the generation of substantial wealth during the marriage might qualify as a special contribution, we should identify a threshold of wealth below which a court would be unlikely to conclude that it was the product of a special contribution. It is obvious that any such guideline would have to be laden with qualification so as to avoid any impermissible gloss on the court's duty under s 25 to assess each case on its merits. Subject to that caveat, we invited counsel to make submissions upon the threshold. Both Mr Singleton and Mr Pointer were rightly tentative. Mr Singleton suggested a threshold no higher than £40m or £50m. Five years ago, in Lambert, Mr Pointer had suggested a threshold of £10m, in relation to which Thorpe LJ stated, at para , that it was 'futile and dangerous even to attempt to speculate on the boundaries of the exceptional'. Before us Mr Pointer suggested £30m or £50m.
 Like this court in Lambert, we find ourselves unable to identify any figure as a guideline threshold for a special contribution of this character. It would, we consider, be dangerous for us to do so. However laden with qualification, the guideline might discourage a court from discerning special contribution in the generation of wealth below the threshold in circumstances, however rare, in which it should properly do so. The greater concern, however, is the obverse risk that it might encourage a court to discern special contribution in the generation of wealth above the threshold in circumstances in which it should not properly do so. While the law recognises the concept of a special contribution in the generation of wealth, there is no doubt that, following the decision of this court in Lambert, approved and developed in Miller, it keeps the concept in very narrow bounds. We would not wish a party's claim to have made a special contribution to succeed by reference to something interpreted as effectively a presumption deriving from our identification of a threshold figure.
 There has been an interesting collateral discussion as to whether, if a party makes a special contribution by the generation of wealth, as a result of which the proportions of its division with the other party under the sharing principle will be unequal, the extent to which the proportions are unequal should depend upon the size of the wealth. The greater the wealth generated by one party, submits Mr Singleton, the lower should be the proportion awarded to the other. Mr Pointer disagrees. He submits that in any event the principle will yield to the maker of the special contribution more than half of the wealth; that the greater the wealth, the greater will be the amount thus yielded; and that fairness requires no further adjustment in favour of its generator. In principle we agree with Mr Singleton. If such a contribution is special, it follows that it is unmatched; and the greater the wealth, the greater is the extent to which it is unmatched and to which it calls for an unmatched, or unequal, division under the sharing principle.
 Although we decline to identify a threshold for the application of the principle of special contribution, we are nonetheless prepared to respond to the judge's postscript to the extent of offering guidance on the appropriate range of percentage adjustment to be made in cases in which the court is satisfied that the principle requires departure from equality; it is necessary however to bear in mind that fair despatch of some cases may require departure even from the range which we propose. As it happens, our views on this subject are by way of endorsement and development of what in this case Coleridge J has himself said. As we have recorded at the end of para (d), above, the judge suggested that any adjustment for special contribution of this character should be significant as opposed to token. We agree. We find it hard to conceive that, where such a special contribution is established, the percentages of division of matrimonial property should be nearer to equality then 55%-45%. Equally, in the course of Mr Singleton's application to him for permission to appeal, the judge, in referring to percentages in cases of special contribution, observed 'I think you need to be careful, after a long marriage, to give a wife half of what you give the husband'. Arbitrary though it is, our instinct is the same, namely that, even in an extreme case and in the absence of some further dramatic feature unrelated to it, fair allowance for special contribution within the sharing principle would be most unlikely to give rise to percentages of division of matrimonial property further from equality than 66.6%-33.3%.
 We turn to Mr Singleton's contention that the method by which the judge allowed for the husband's special contribution was flawed. It will have become apparent in paras  and  that we reject the contention. In what one might now almost call the old-fashioned way, namely in accordance with White, the judge considered all the factors in s 25; reached a figure; and checked it against the yardstick of percentages. In the light of Miller he would, as it happens, have been entitled to move at an earlier stage to consider percentages. In any event this was a rare case of special contribution by the husband's generation of wealth; and the size of the wealth which he generated and contributed to the welfare of the family compelled quite a substantial departure from equality. The judge's endorsement of a departure to 63.5%-36.5% in part reflected his view that the award to the husband was of assets laden with greater risk. Mr Singleton's surmise is that the judge justified a discount against the wife of 3% in this respect; but the risk is not obviously demonstrated by the near seamless accretion of wealth by the husband as a result of his activities in the sphere of insurance throughout the marriage and we regard 3% as a maximum of what the judge must have had in mind. It is clear that the extent of the departure from equality very largely reflected the value placed by the judge upon the husband's special contribution. Such departure lies very near the middle of the range which we have suggested in para , above, and, in the light of the scale of his special contribution, appropriately so. Neither in its method nor in its result do we regard the judge's treatment of the husband's special contribution as vulnerable to appeal.'
' It is clear to me that the husband is a very able business man. He has a number of important skills that have enabled him to create two very successful businesses in the field of cutting edge technology. He has excellent computer skills. He is a very good salesman. He is clearly good administratively. He is able to lead a team and motivate his staff. He has deserved all his success.
 Nevertheless, I am quite satisfied that, applying the authorities, this does not amount to a "special contribution" such as to amount to a good reason for departure from equality. It would not be accurate to describe him as a "genius". Equally, whilst the extent of his business success is rare and something to be applauded, it cannot be said to be "exceptional". I did not in any way get the impression that it was something that it would be inequitable for me to disregard.
 I realise that the quantum of the fortune amassed by a businessman is only one feature. I am certainly not intending to lay down a rule that it is impossible to make a "special contribution" if the assets are below £20 million. It is however a factor that the husband's business success has not been so great as to generate truly vast wealth. He has been very successful. Whilst he is to be applauded for that, it is quite impossible to say that his contribution in this regard gets close to justifying a greater share of the wealth than that of the wife who contributed herself in an equally valuable way to the best of her ability.'
' There is no doubt but that H, for his part, achieved tremendous things in his generation of wealth. He is the one who has been principally responsible for their now holding assets worth in excess of $1.5b. He has also been the architect of the funds now held within CIFF, amounting to a further $4.5b. We do not suggest other than that that is a significant achievement.'
And of the wife's contribution, they said :
' It is difficult to exaggerate the work undertaken and therefore the contributions made by W. She was running their household throughout the marriage. She was the primary carer of their children. Because of their ages and because of their being triplets, for about 2½ years she had to care for 4 children under the age of 5. To this can be married her work at CIFF [the Foundation]. She was at the helm from its inception in 2003 up to now. Under her CIFF has grown from a modest family foundation to one of the largest and most influential organisations of its kind in the world. This could not have been achieved merely by the injection of money. W is the one who has performed the outreaching across the globe (which required international travel of c 8 weeks a year): she is primarily the one who has been the interface with governments in the beneficiary countries; she is the one who has managed the administration of the fund right up to September 2013. To categorise this endeavour as "ordinary" is not just a slight; it is a significant distortion of the way in which she has applied her energies in pursuit of their common goals.'
'…. Sometimes, having carried out the statutory exercise, the judge's conclusion involves a more or less equal division of the available assets. More often, this is not so. More often, having looked at all the circumstances, the judge's decision means that one party will receive a bigger share than the other. Before reaching a firm conclusion and making an order along these lines, a judge would always be well-advised to check his tentative views against the yardstick of equality of division. As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination.
This is not to introduce a presumption of equal division under another guise. Generally accepted standards of fairness in a field such as this change and develop, sometimes quite radically, over comparatively short periods of time. The discretionary powers conferred by Parliament 30 years ago enable the courts to recognise and respond to developments of this sort. These wide powers enable the courts to make financial provision orders in tune with current perceptions of fairness. Today there is a greater awareness of the value of non-financial contributions to the welfare of the family. There is greater awareness of the extent to which one spouse's business success, achieved by much sustained hard work over many years, may have been made possible or enhanced by the family contribution of the other spouse, a contribution which also required much sustained hard work over many years. There is increased recognition that, by being at home and having and looking after young children, a wife may lose for ever the opportunity to acquire and develop her own money-making qualifications and skills. In Porter v Porter  3 All ER 640, 643-644, Sachs LJ observed that discretionary powers enable the court to take into account 'the human outlook of the period in which they make their decisions'. In the exercise of these discretions 'the law is a living thing moving with the times and not a creature of dead or moribund ways of thought.
Despite these changes, a presumption of equal division would go beyond the permissible bounds of interpretation of s 25. In this regard s 25 differs from the applicable law in Scotland. Section 10 of the Family Law (Scotland) Act 1985 provides that the net value of matrimonial property shall be taken to be shared fairly between the parties to a marriage when it is shared equally or in such other proportions as are justified by special circumstances. Unlike section 10 of the Family Law (Scotland) Act 1985, s 25 of the 1973 Act makes no mention of an equal sharing of the parties' assets, even their marriage-related assets. A presumption of equal division would be an impermissible gloss on the statutory division. That would be so, even though the presumption would be rebuttable. Whether there should be such a presumption in England and Wales, and in respect of what assets, is a matter for Parliament.'
' Third, in my opinion fairness certainly permits and in some cases requires recognition of the product of the genius with which only one of the parties may be endowed. Indeed Miss Baron conceded the proposition, whilst contending that this husband was not in the category, since she submitted that he was no more than a hard-working businessman. That submission does not seem to me to do justice to the husband's achievements, which clearly for their scale depended upon his innovative visions as well as on his ability to develop those visions. It is a factor in the present case which deserves some recognition. I do not regard it as discrimination by the back door. Whilst no doubt the husband's capacity to devote himself to the expansion of the companies depended in part upon the stability and security of the home and family life which the wife created and sustained, his creativity was not so dependent to the same or perhaps to any degree.'
Mr Cowan's particular 'vision' was the creation and development of plastic bin-liners and draw-string bags which enabled him to build up wealth of £11.5 million. As to what constituted 'special skill and effort', the Court of Appeal rejected the suggestion that it would only be in cases of a 'stellar contribution' that a departure was justified. There was one continuous spectrum extending from the entirely ordinary to the 'stellar'. As Lord Justice Mance explained at para ,
'The underlying idea is that a spouse exercising special skill and care has gone beyond what would ordinarily be expected and beyond what the other spouse could ordinarily have hoped to do for himself or herself, had the parties arranged their family lives and activities differently. The first spouse's special skill and effort is special to him or her, and the individual's rights to the fruits of an inherent quality of this nature survives as a material consideration despite the partnership or pooling aspect of marriage. For my part, I think this consideration is a material one to which weight can and should be given in appropriate cases.'
i. the principle is now outmoded given the court's emphasis on a computational approach and the treatment of assets as matrimonial or non-matrimonial, the latter often excluded from the sharing principle other than in cases of need : see Charman (No 4); N v F; and K v L.
ii. the parties could have regulated their financial affairs by entering into a pre- or post-nuptial agreement which, following Radmacher , would in all likelihood be carried into effect.
iii. the special nature of this marriage and the parties' agreement as to how each would perform and their mutual objectives of deploying their resources to benefit the deprived in the world make the concept of contribution inapt.
'The next step is for the two of you to meet them as quickly as possible. Each of them understands that indispensable to success in this role is a strong relationship of mutual trust with both of you so I anticipate that you will need to devote significant time to determining whether such a personal chemistry will or won't develop with each of the three.'
i. Can it properly be said that he is the generating force behind the fortune rather than the product itself?
ii. Does the scale of the wealth depend upon his innovative vision as well as on his ability to develop those visions?
iii. Has he generated truly vast wealth such that his business success can properly be viewed as exceptional?
iv. Does he have a special skill and effort which is special to him and which survives as a material consideration despite the partnership or pooling aspect of the marriage?
v. Would it, in all the circumstances, be inequitable for me to disregard that contribution?
HUSBAND'S GROSS INCOME (2011 – 2013) [C/F:140]
Whilst it is true that, of these sums, significant amounts were diverted to the Foundation, it is also an established fact in the case that, with effect from April 2012, he ceased to make any further contributions.
K. Quantum of the wife's award
' These issues reflect the continuing debate about, in particular, the effect of the House of Lords' decision in Miller v Miller; McFarlane v McFarlane  UKHL 24,  2 AC 618,  2 WLR 1283,  1 FLR 1186 and of the subsequent decisions in the lower courts. At present we are engaged, in my view, in an incremental search for a consistent pattern in the application of the principles identified by the House of Lords. This is unlikely to happen quickly. It needs to be incremental because of the risk that broad statements about the application of these principles can overlook their effect in different factual situations not then before the court. Consequences can also become evident in the long as well as the short-term. It was, after all, many years before the adverse consequences of Mesher orders were fully appreciated, when Ormrod LJ referred to the chickens coming home to roost.
 In this search, there is a well recognised tension between predictability and flexibility in approach and outcome. A too ready reliance on the former at the expense of the latter can easily result in unfairness (Lord Hope of Craighead's harshly frank appraisal of the effect of the law in Scotland, as capable of 'producing very real injustice', provides a clear demonstration of this point.) On the other hand, complete flexibility leads to a consequent lack of predictability (and exposes parties to the costs of litigation referred to by me at the outset of this judgment).'
i. 40% of the total value of the cash element of the wife's award (US$197.3 million) (reflected as a separate lump sum order) shall be held in a designated, and agreed, escrow account. The parties have already taken steps to identify the identity of the account holder and the terms of the escrow. In the absence of an appropriate undertaking from the husband (and I have no reason to doubt that one will be forthcoming), I shall make an order which prevents either of the parties from taking any steps to deal with that account before the date stipulated in sub-paragraph (iii) below.
ii. The beneficial interest in the escrow account will remain the husband's albeit any net income arising on the account shall be paid to the wife as and when the escrow is released to her.
iii. The funds held in escrow may be released to the wife on the earlier of:-
a. 6 April 2017 (unless a formal enquiry on the part of HMRC is by then already in train); and
b. The later of (i) a determination that the husband continues to be non-domiciled in this jurisdiction and (ii) 6 April 2015.
The escrow account can be used to cover any of the identified tax risks. Should she elect for the funds, or part of them, to be left in escrow for a longer period in order to cover the period of her exposure under the indemnity which should, in my view, continue until 6 April 2019 (see sub-para vi), that will be entirely a matter for her.
iv. To the extent that her liability to meet 36.12% of any tax arising in respect of potential identified hypothetical liabilities exceeds the amount held in the escrow account, she will be wholly responsible for any such grossing-up unless the original escrow account has been fully deployed in meeting her share of the liability. In this event, the cost of grossing-up shall be borne by the husband and wife in the same proportion as my award (ie.36.12% by the wife and 63.88% by the husband).
v. In relation to the tax indemnity sought by the husband in relation to identified risks, I do not accept that this should be limited to the value of the funds held in escrow, as the wife contends. Given that all parties and their advisers accept (and I have found) that the risk of liability crystallising in respect of the identified risks is very low if not negligible, I do not regard any potential liability on the part of the wife to contribute to represent an unfair or unrealistic burden in terms of sharing what could conceivably, in due course, represent a diminution of the assets currently available to these parties as I have found them to be. Her liability (or potential liability) will be limited to 36.12% of the tax, interest and any penalties charged for the period 2008/2009 to 2014/2015. I have extended the period back to the tax year 2008/2009 because (a) it relates to a period when the marriage was subsisting and the parties operating as a partnership in all senses of the word, and (b) I take the view that the risk of HMRC being successful in any challenge is low. She shall only be liable to contribute pro rata to the husband's professional costs incurred in dealing with any tax liabilities if such instructions are made on the basis of joint instructions and she is kept fully informed of any and all negotiations which may be ongoing with the Revenue.
vi. In terms of the scope or reach of the indemnity, I do not accede to the husband's request that there should be a general tax indemnity which covers all and any risks outside those which have been identified and addressed by tax counsel in the schedule at Appendix 1. I consider that it is reasonable for the wife to share in any liability arising under those risks but not for the term sought on behalf of the husband. My objective is to achieve a clean break between these parties at the earliest date in accordance with the statutory objective set out in s 25A(1) of the 1973 Act. To this end, in my judgment, the indemnity should come to an end on 6 April 2019. I do not consider it is either fair or necessary to keep the wife 'locked in' to potential exposure for an extended period of uncertainty until 2021. I have well in mind Mr Marks' arguments (and those of Mrs Chamberlain) that her exposure should last for a period of at least four years (ie. to 6 April 2019). The husband's case that it should endure for a further two years to 2021 is based on the further window which the Revenue has to take account of any carelessness on the husband's part in submitting his returns. Nonetheless, it is in my view too long a period even on the basis of the facts of this particular case and the complexities of the husband's tax position.
Timing of payment of the award to the wife and other drafting issues
Note 1 There was some ambiguity in relation to the evidence which I heard in relation to the management fees paid by Talos, but I do not regard it to be a material ambiguity. The oral evidence which I heard was to the effect that Talos is charged performance fees but (apparently) not management fees, although the husband’s written evidence was to the effect that Talos was charged a de minimis management fee. In the context of considering his personal resources, I take the view that this can be disregarded since the husband’s oral evidence was that this minimal fee went to others and not to him. Paragraph 109 of my judgment should be read in this context. [Back] Note 3 In para 47 of his closing submissions, Mr Pointer QC submitted that the husband had spent over £12m on the London property. He does not seek to argue for any formal add back in relation to either this sum or the expenditure on the Jamaican property notwithstanding potential losses of what he contends amount to in excess of US$24m. In the context of the assets in this case, I regard that as a wholly appropriate concession. [Back] Note 5 The husband referred to both 17 and 19 partners during the course of his written and oral evidence. These are partners (including some of the analysts employed by him) who participate in the profits of TCI (UK) LLP, the ‘investment manager’ entity. I accept that numbers of partners may well change from time to time and nothing turns on this point. [Back] Note 6 This sum of £25,022,394 represents sums or drawings actually paid out to members during the accounting year on account of their eventual entitlement to profit. It is represented in the accounts as a ‘claw back’ or ‘monies due’ figure purely as an accounting device in the event that sufficient profits were not made in the relevant year to cover such interim drawings. [Back] Note 7 I have not sought to overcomplicate this judgment by a breakdown of the year end figures in respect of the other TCI Group entities over and above the UK LLP since they are either property owning entities (eg. OREO) or entities which receive allocations for (eg) administrative support and back office functions. The principal vehicle of revenue generation insofar as the husband is concerned is the UK LLP. [Back] Note 9 This rate of profit is based upon the premise that if 100% profit over 10 years is ‘double’ the original investment, and 19% compounded over 10 years produces a return of 4.69% over the original investment, then 469% profit ‘returning’ 569% of the investment represents something approaching an almost five times greater profit. [Back] Note 10 This figure being the US$289,682,284 referred to in Withers’ letter dated 30 April 2014, less the percentage payable to the analysts less tax and NI of 47% payable on the husband’s contingent share. [Back] Note 12 The Court of Appeal did not deal specifically with the tax point on appeal since they upheld the trial judge’s view that the appellant husband’s award should be restricted to a sum sufficient to cover his future needs, generously assessed. [Back] Note 13 In para 5 of her written submissions on behalf of the husband, Mrs Chamberlain says this : ‘The Court is not being asked to weigh the risk or to act as a Tax Tribunal but to accept that if there is any tax risk then it must be taken into account when W’s award is made.’ [Back] Note 14 I have taken the wife’s pension share on the basis of 36.12% of the aggregate value of the three funds although I intend that this should be extracted as a single pension credit from the main Oceania International plan. [Back] Note 15 In the event that the husband wishes the US$197.3 million to be held in the equivalent sterling sum (because it is a sterling risk that is being secured), I would hope that agreement can be reached between the parties and their advisers to this effect. Absent such agreement, I will deal with further submissions in due course in the context of the drafting of the order which will flow from my judgment. [Back]
Note 1 There was some ambiguity in relation to the evidence which I heard in relation to the management fees paid by Talos, but I do not regard it to be a material ambiguity. The oral evidence which I heard was to the effect that Talos is charged performance fees but (apparently) not management fees, although the husband’s written evidence was to the effect that Talos was charged a de minimis management fee. In the context of considering his personal resources, I take the view that this can be disregarded since the husband’s oral evidence was that this minimal fee went to others and not to him. Paragraph 109 of my judgment should be read in this context. [Back]
Note 3 In para 47 of his closing submissions, Mr Pointer QC submitted that the husband had spent over £12m on the London property. He does not seek to argue for any formal add back in relation to either this sum or the expenditure on the Jamaican property notwithstanding potential losses of what he contends amount to in excess of US$24m. In the context of the assets in this case, I regard that as a wholly appropriate concession. [Back]
Note 5 The husband referred to both 17 and 19 partners during the course of his written and oral evidence. These are partners (including some of the analysts employed by him) who participate in the profits of TCI (UK) LLP, the ‘investment manager’ entity. I accept that numbers of partners may well change from time to time and nothing turns on this point. [Back]
Note 6 This sum of £25,022,394 represents sums or drawings actually paid out to members during the accounting year on account of their eventual entitlement to profit. It is represented in the accounts as a ‘claw back’ or ‘monies due’ figure purely as an accounting device in the event that sufficient profits were not made in the relevant year to cover such interim drawings. [Back]
Note 7 I have not sought to overcomplicate this judgment by a breakdown of the year end figures in respect of the other TCI Group entities over and above the UK LLP since they are either property owning entities (eg. OREO) or entities which receive allocations for (eg) administrative support and back office functions. The principal vehicle of revenue generation insofar as the husband is concerned is the UK LLP. [Back]
Note 9 This rate of profit is based upon the premise that if 100% profit over 10 years is ‘double’ the original investment, and 19% compounded over 10 years produces a return of 4.69% over the original investment, then 469% profit ‘returning’ 569% of the investment represents something approaching an almost five times greater profit. [Back]
Note 10 This figure being the US$289,682,284 referred to in Withers’ letter dated 30 April 2014, less the percentage payable to the analysts less tax and NI of 47% payable on the husband’s contingent share. [Back]
Note 12 The Court of Appeal did not deal specifically with the tax point on appeal since they upheld the trial judge’s view that the appellant husband’s award should be restricted to a sum sufficient to cover his future needs, generously assessed. [Back]
Note 13 In para 5 of her written submissions on behalf of the husband, Mrs Chamberlain says this : ‘The Court is not being asked to weigh the risk or to act as a Tax Tribunal but to accept that if there is any tax risk then it must be taken into account when W’s award is made.’ [Back]
Note 14 I have taken the wife’s pension share on the basis of 36.12% of the aggregate value of the three funds although I intend that this should be extracted as a single pension credit from the main Oceania International plan. [Back]
Note 15 In the event that the husband wishes the US$197.3 million to be held in the equivalent sterling sum (because it is a sterling risk that is being secured), I would hope that agreement can be reached between the parties and their advisers to this effect. Absent such agreement, I will deal with further submissions in due course in the context of the drafting of the order which will flow from my judgment. [Back]