Neutral Citation Number: [2011] EWCA Civ 550
Case No: B4/2010/1219
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, FAMILY DIVISION, PRINCIPAL REGISTRY
MR JUSTICE BODEY
LOWER COURT NO: FD07D01254
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 13/05/2011
Before:

LORD JUSTICE LAWS
LORD JUSTICE JACOB 
and
LORD JUSTICE WILSON
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Between :

	K	Appellant	
	- and -		
	L	Respondent	

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Mr Martin Pointer QC and Mr Geoffrey Kingscote (instructed by Family Law in Partnership LLP) appeared for the Appellant “husband”.
Miss Lucy Stone QC and Mr Duncan Brooks (instructed by Kingsley Napley LLP) appeared for the Respondent “wife”.

Hearing date: 28 February 2011
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Judgment

Lord Justice  Wilson: 
1.	The husband (as it will be convenient to call him notwithstanding the recent grant of a decree absolute of divorce) appeals against an order made by Mr Justice Bodey in the High Court, Family Division, on 13 May 2010 that the wife (as it will be convenient to call her) should make to him a lump sum payment on a clean break basis of £5m. The judge’s judgment, [2010] EWHC 1234 (Fam), is reported under the title K v. L (Ancillary Relief: Inherited Wealth) at [2010] 2 FLR 1467. The husband contends that the award to him should have been in the sum of £18m. His own assets amount to £300,000.
2.	The facts of the case, which are extreme, raise an issue about the application to non-matrimonial property of the sharing principle in the modern law of ancillary relief following divorce. We know that non-matrimonial property belonging to one spouse can be awarded to the other to the extent that the other needs it: in the present case the judge found that the wife’s assets, which are entirely non-matrimonial, had a value of almost £57m and his order for payment out of them to the husband of £5m was very largely based on his assessment of the husband’s needs. On his behalf Mr Pointer QC accepts that the award meets the husband’s needs, generously assessed. But he complains that the judge failed to make an assessment by reference to the sharing principle. He argues that such an assessment would have yielded the sum of £18m. And he rightly reminds us that “when the result suggested by the needs principle is an award of property less than the result suggested by the sharing principle, the latter should in principle prevail”: see the decision of this court in Charman v. Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246, at [73].
3.	The parties are Israeli citizens. The wife, who is aged 52, is Jewish. The husband, who is aged 49, is of a different faith. In 1986 they began to cohabit in Israel and in 1987 they there underwent a ceremony of marriage which was invalid under Israeli law in the light of the difference in their faiths. In 1991 they moved to England, where they entered into a valid marriage and have lived ever since. They have three children, aged from 16 to nine. The marriage broke down in 2007 when, with the children, the wife left the matrimonial home. Thus, inclusive of the year of cohabitation and of the years of invalid marriage, the “marriage” in the relevant, loose sense endured for 21 years. 
4.	The mother’s maternal grandfather, a scientist, had held founder shares in a company incorporated in Israel. In 1973, on the death of her maternal grandmother and in the light of the prior death of her mother, the wife, then aged 15, had inherited the shares jointly with her brother. In 1976 there had been a merger, as a result of which their holding became shares in S Ltd, which is a large public company quoted on the Israeli stock exchange and on NASDAQ. By 1999 the shares of the wife and the brother had become separated. It was, again, long before the cohabitation between the parties that the wife and the brother had also inherited two properties, which they still own; but their value is such that, in what follows, it will be convenient to refer only to the shares.
5.	As a result of numerous bonus issues the wife’s shares in S Ltd have massively increased in number; but, more relevantly, they have massively increased in value. When the parties began to cohabit in 1986, her shares (or portion of the shares) were worth £300,000; when they married in England in 1991, they were worth £700,000; when they separated in 2007, they were worth £28m; and, at the time of the hearing before the judge, they were worth £57.4m. From this figure the judge made a deduction – being the subject of a subsidiary challenge by the husband in this appeal – of £2m in respect of latent CGT payable in the UK in the event of remittance to it by the wife of proceeds of future sales of some of the shares. Even the other assets of the parties which brought the total back up to £57m – namely £1.3m held by the wife and £300,000 held by the husband – represented the proceeds of several, modest sales of shares in S Ltd on the part of the wife. So, most unusually, the entire wealth of both parties emanated from the wife’s inheritances and, for present purposes, from the shares.
6.	Throughout the marriage neither party generated any earned income. They had no need to do so. The dividends declared on the wife’s shares in S Ltd, occasionally supplemented by the proceeds of sales of shares, provided more than enough for the family’s needs. The wife is and has always been non-domiciled in the UK for tax purposes; and so it was only such of the income on the shares in S Ltd as she remitted to the UK which attracted UK income tax; and it was only such of the proceeds of her sales of shares as she remitted to the UK which attracted UK capital gains tax. The size of the dividends on the shares increased dramatically in 2002: the wife’s gross average annual income in the eight years preceding 2002 was £38,000 and in the six years which succeeded it was £180,000. In 2008/2009 the figure was £460,000.
7.	In comparison with the size of the wife’s wealth, and of the income generated by it particularly in the later years, the parties pursued an extraordinarily modest lifestyle. From 1994 until the wife’s departure from it, with the children, in 2007, the matrimonial home, which was bought by the wife and placed in the parties’ joint names, was a three/four-bedroom semi-detached property in a town in the suburbs of London. The husband remains living in the home. Its present value is £225,000. The wife has transferred it into his sole name and it is therefore the principal component of the husband’s total assets of £300,000. For many years until the breakdown of the marriage the parties ran the same modest motor-car. No chattel in the home was worth more than £500. Until very recently, when one of them began to attend a fee-paying school, all the children attended state schools. The judge found that, although neither party wished to spend lavishly, it was the husband, rather than the wife, who, on occasions, sought to restrain family expenditure, albeit that she readily concurred. At all events the family’s average net annual expenditure during the later years of the marriage was only £79,000 excluding expenses relating to the car.
8.	In that neither party went out to work, they both contributed fully to the life of the family at home. The judge found that in this regard they each made a valuable, and in their different ways an equal, contribution. In that the wife does not drive a car, one of the husband’s functions was to do all the driving.
9.	On her departure with the children from the home the wife bought another property in the same town, which they still occupy. It is situated close to the matrimonial home. No doubt she chose to make the home of the children there so that they could continue to attend their schools and move freely back to the former matrimonial home for contact with the husband. The wife’s new home is, again, semi-detached and has four bedrooms and its present value is £345,000.
10.	Following the separation the husband’s claims against the wife for interim support, made through their solicitors, reflected the modesty of the level of previous family expenditure. In July 2007 he sought £30,000 p.a. for himself, together with £12,000 p.a. for the children when with him; in October 2008 he sought an increase to £48,000 p.a. for himself. Under the various arrangements actually negotiated for his interim support during the three years until the substantive hearing the husband subsisted with comparable, if not greater, economy.
11.	For the purposes, however, of his substantive claim for ancillary relief the husband put forward very different proposals. He made clear that he wished to vacate and sell the former matrimonial home and, instead, to buy a property at a price of about £2m near Regent’s Park. He said that he also proposed to buy a second home in Israel for £450,000 and a new car for £60,000. And he put forward an estimated budget totalling £105,000 p.a. exclusive of the costs of the children when with him. He added that, in accordance with his religious views, he would probably remarry and might well have a second family; but Mr Pointer has never argued that the award to the husband should be increased on that account.
12.	The judge observed that his award of £5m, which was reflective of the open offer made by the wife at the hearing, would, when added to the husband’s existing capital of £300,000, enable him both to buy the suggested property in central London for £2m and, according to Duxbury tables, to spend upon himself a net annual sum of £130,000, inflation-linked, for the rest of his statistical life. The judge held that, in the light in particular of the modesty of the matrimonial home and of all other aspects of the family’s standard of living during the marriage, the award went further than very generously to meet the husband’s needs; and the judge therefore observed in passing that an element of the award could be regarded as a top-up referable to the sharing principle. In this appeal Mr Pointer does not dispute that the award very generously meets the husband’s needs. As it happens, I agree with the judge that the court could not sensibly make an assessment, however generous, of the husband’s needs in a sum as high as £5.3m and that, within the award of £5m, there must therefore be a top-up component (£500,000? £1m?) referable to the sharing principle. There is no doubt however that the judge’s substantive analysis was to the effect that the husband’s entitlement was to an award referable only to his needs; and in my view we should ignore the fact that the judge’s adoption of the figure propounded by the wife may be said to have yielded to the husband a bonus which, conceptually, requires explanation by reference to the sharing principle.
13.	I therefore agree with Mr Pointer that the question raised by this appeal is whether the judge erred in principle in ruling that the award to the husband should be limited to a generous assessment of his needs.
14.	Mr Pointer’s first charge is that the judge’s reasoning betrays discrimination prohibited by modern principles of ancillary relief. The judge, says Mr Pointer, attached great importance to the provision by the wife of the family’s income. But such provision, he continues, was but an aspect of a sensible division of family responsibilities upon which the parties agreed, namely that, for the benefit of the family, the wife would do all that she could by the provision of income and by the performance of some of the household functions while the husband, thus saved from needing to go out and earn, would do all that he could by the performance of the other household functions. In such circumstances it is, says Mr Pointer, invidious to rate the one contribution as more significant than the other. Albeit omitting the first sentence of it set out below, Mr Pointer quotes the following paragraph of the judgment:
“39. There was, however, one substantial particular contribution to the welfare of the family, namely the wife’s contribution of her S Ltd shares and (to a much lesser extent) the other properties in which she had inherited an interest many years before the parties met. It is a fact that the husband made no financial contribution to the marriage. It was the income on the S Ltd shares which supported the family throughout, together with very occasional share realisations enabling capital outlay to be made as required for the benefit of the family. Such financial contribution by the wife clearly goes into the melting-pot as a very important factor in deciding the outcome of the case.” [Italics supplied]
Although it is not a matter of significance, I consider that Mr Pointer misreads the paragraph. He suggests that the “contribution” which, in the final sentence, the judge describes as a very important factor relates back to the word “income” in the preceding sentence. In my view, however, it relates back to the same word, namely “contribution”, in the first sentence which, in his quotation of the paragraph, Mr Pointer omits. I consider therefore that the judge was ascribing great importance to the wife’s contribution of the shares, rather than just to her contribution of the income which they generated. The wife’s contribution of the shares as capital, rather than just as the generators of past income, was significant not least because it was only out of the proceeds of sale of them that the award to the husband could be made.
15.	More importantly, however, I consider that Mr Pointer’s complaint of discrimination is founded upon a misunderstanding. The classic exposition of the principle which outlaws a certain form of discrimination in the modern law of ancillary relief is that of Lord Nicholls in White v. White [2001] 1 AC 596 at 605 B – F, as follows:
“But there is one principle of universal application which can be stated with confidence. In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles. Typically, a husband and wife share the activities of earning money, running their home and caring for their children. Traditionally, the husband earned the money, and the wife looked after the home and the children. This traditional division of labour is no longer the order of the day. Frequently both parents work. Sometimes it is the wife who is the money-earner, and the husband runs the home and cares for the children during the day. But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party … If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets. There should be no bias in favour of the money-earner and against the homemaker and the child-carer.”
Lord Nicholls makes clear that what is unacceptable is discrimination in the division of labour within the family, in particular between the party who earns the income and the party whose work is in the home, unpaid. Bodey J. was careful to stress that, in that in the present case neither party went out to work, their work in the home, although different, should be taken to be a contribution of equal value for the purposes of the award. But the law does not abjure all discrimination. On the contrary it is of the essence of the judicial function to discriminate between different sets of facts and thus between different claims. What is outlawed is discrimination on the ground of superficial differences which, on analysis, do not reflect substantive differences – such, of course, as the grounds specified in Article 14 of the ECHR and, in the present context, on the ground that the effort made by one party to the marriage, unlike that made by the other, happens to have resulted in financial reward. To find that, on top of the efforts of equal value made by each party in the home, the wife made a financial contribution to the marriage of great importance is not to discriminate between the parties in any unacceptable way: on the contrary it correctly recognises a substantive difference.
16.	Mr Pointer’s second charge, made by reference to the 21 years of the marriage, is that the judge failed to recognise “that the importance of the source of the assets will diminish over time”. Such is a quotation from the speech of Baroness Hale in Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24, [2006] 2 AC 618, at [148]. As authority for that proposition she referred to the passage in the speech of Lord Nicholls in White, cited above, at 611B, where he said:
“The initial cash contribution made by Mr White’s father in the early days cannot carry much weight 33 years later.”
Lord Nicholls was there referring to an interest-free loan of £11,000, made to the parties in 1963 and later released, which had enabled them to purchase the farm upon which, until 1994, they had both worked and which, by the time of the trial in 1996, was worth £3.5m. Thus, on the facts in White, the importance of the source of the contribution of £11,000 diminished over time. The question is whether such justified the absolute terms of Baroness Hale’s proposition.
17.	The answer to the question, or at any rate Lord Nicholls’ answer to the question, is made clear in his speech in Miller/McFarlane, cited above, at [25] as follows:
“Non-matrimonial property represents a contribution made to the marriage by one of the parties. Sometimes, as the years pass, the weight fairly to be attributed to this contribution will diminish, sometimes it will not. After many years of marriage the continuing weight to be attributed to modest savings introduced by one party at the outset of the marriage may well be different from the weight attributable to a valuable heirloom intended to be retained in specie.”
18.	Thus, with respect to Baroness Hale, I believe that the true proposition is that the importance of the source of the assets may diminish over time. Three situations come to mind:
(a)	Over time matrimonial property of such value has been acquired as to diminish the significance of the initial contribution by one spouse of non-matrimonial property.
(b)	Over time the non-matrimonial property initially contributed has been mixed with matrimonial property in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial property or in which, at any rate, the task of identifying its current value is too difficult.
(c)	The contributor of non-matrimonial property has chosen to invest it in the purchase of a matrimonial home which, although vested in his or her sole name, has – as in most cases one would expect – come over time to be treated by the parties as a central item of matrimonial property.
The situations described in (a) and (b) above were both present in White. By contrast, there is nothing in the facts of the present case which logically justifies a conclusion that, as the long marriage proceeded, there was a diminution in the importance of the source of the parties’ entire wealth, at all times ring-fenced by share certificates in the wife’s sole name which to a large extent were just kept safely and left to reproduce themselves and to grow in value.
19.	Mr Pointer’s third charge is that the judge failed to follow the guidance given by this court in Charman cited above. The judge (so runs the argument) in effect found that the wife had made a special contribution to the welfare of the family. Thus he should have had regard to the guidance in Charman, at [90], that fair allowance for special contribution within the sharing principle would be most unlikely to give rise to departure from equality further than to 66.6% - 33.3%. One third of £57m is £19m so (suggests Mr Pointer) the husband’s claim to £18m is well-pitched.
20.	But the phrase “a special contribution” is now a term of art in the law of ancillary relief which is used to describe a contribution entirely different from that of non-matrimonial property. As this court said in Charman, at [80]:
“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 … 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.”
21.	Thus a special contribution arises in circumstances in which a spouse’s contribution, direct or indirect, to the creation of matrimonial property has been so extraordinary as to dictate a departure within the sharing principle from the ordinary consequence of its equal division. It is therefore no accident that this court’s reference, at [90], to the unlikelihood of departure from equality further than to 66.6% - 33.3% was of “division of matrimonial property”. By contrast, although non-matrimonial property also falls within the sharing principle, equal division is not the ordinary consequence of its application. The consequences of the application to non-matrimonial property of the two other principles of need and of compensation are likely to be very different; but the ordinary consequence of the application to it of the sharing principle is extensive departure from equal division, often (so it would appear) to 100% - 0%. Although Mr Pointer recognises the difference between the “special contribution” which this court addressed in Charman and the contribution of non-matrimonial property exemplified by the present case (who could be more cognisant of it than he?), his attempt to represent the difference as immaterial is entirely unconvincing.
22.	Mr Pointer’s final charge is that, in relation to the awards in eleven other reported decisions “involving” non-matrimonial property and beginning with White in 2000, the judge’s award to the husband of only 9.3% of the parties’ assets (£5.3m out of £57m) is appealably disproportionate. Mr Pointer collects the principal figures referable to the other decisions into a schedule. As by his presentation he intended, a first glance at the schedule identifies three awards of as much as 40%. But brief enquiry into the facts of those cases – White itself, GW v. RW (Financial Provision: Departure from Equality [2003] 2 FLR 108 and C v. C [2007] EWHC 2033 (Fam), [2009] 1 FLR 8 – reveals that in each there was a substantial element of matrimonial as well as non-matrimonial property. To be fair, a further perusal of the schedule does identify at any rate one case in which the award was made solely out of non-matrimonial property. It was the decision of Baron J in NA v. MA [2006] EWHC 2900 (Fam), [2007] 1 FLR 1760 and it is, as Mr Pointer stresses, an example of an award of 23%. But, in that the respondent’s assets there had a value of £40m, rather than, as here, of £57m, and in that the applicant’s needs were there estimated at £9.2m rather than, as here, at (say) £5.3m, the amount of the award to the applicant, which was no more and no less than the estimated amount of her needs, was bound to bear a much higher ratio to the value of the assets than in the present case. That it there amounted to 23% demonstrates nothing. What was much more interesting was the moment during the hearing when we asked Mr Pointer to show us a reported decision in which the assets were entirely non-matrimonial and in which, by reference to the sharing principle, the applicant secured an award in excess of her or his needs. He confessed to be unable to do so. Such a decision will no doubt be made – but not in this court today.
23.	I would dismiss the appeal. I add two postscripts.
24.	First there is no need for us to address Mr Pointer’s subsidiary challenge to the judge’s deduction of £2m in respect of latent CGT payable in the UK in the event of the wife’s hypothetical future decision to remit to it proceeds of sales of shares broadly estimated by the judge in the total sum of £10m. Tempted though I am to offer a view on it, the truth is that, in the light of my analysis of the merits of this appeal, it is entirely immaterial whether the value of the assets in the case amounts to £59m rather than to £57m. In the light of the general need for the delivery of much shorter judgments upon applications for ancillary relief (such as indeed the judge delivered), this court should therefore set an example by entirely refusing to address the issue.
25.	Second, although in the normal way the court conducted the hearing of this appeal in public, it acceded at the outset to a joint application by the parties for an order which prevented publication of the names or photographs of themselves or the children, of the name of the town in which the members of the family all currently continue to reside or of any other information likely to lead to identification of the children. Indeed, following the hearing and in the light of our order, we caused the title of the proceedings in this court to be changed so as to eliminate the names of the parties; and, for the convenience of readers of the law reports, we substituted the initials which the judge appears arbitrarily to have chosen when authorising publication of his judgment on an anonymous basis. I wish to stress that it is very rare for this court to order anonymisation of any publication in respect of an appeal to it against an order for ancillary relief. Such an order is more easily justified for the protection of the rights of children under Article 8 of the ECHR when, at the centre of the appeal to this court, whether under the Children Act 1989 or otherwise, lies an issue about the optimum future arrangements for them. 
26.	In making their application for an order for reporting restrictions in the present case counsel drew to our attention the summary of the relevant principles recently given by Lord Neuberger, the Master of the Rolls, in this court in JIH v. News Group Newspapers Ltd [2011] EWCA Civ 42, [2011] 2 All ER 324, at [21]. My colleagues persuaded me that, by reference to those principles, it was appropriate to make the order. We did so in order to protect the rights of the three children under Article 8. We considered that their rights outweighed the general interest in a publication of these proceedings which identified them, whether directly or by the identification of one or other of their parents. The fact is that the children live with a mother who is abnormally wealthy but who over many years has, together with the father, assiduously sought to create for them a normal life in which they and the family’s friends are unaware even of the broad scale of her wealth and over which she has been astute to cast no trappings indicative of it. For example, the wife does not provide, and, for reasons entirely unrelated to cost, does not wish to begin to provide, the security customarily provided for their children by wealthy celebrities. We concluded that, unless we made the order, the normality of the current lives of the children would be forfeit, with results likely to be substantially damaging, perhaps even grossly damaging, to them.
Lord Justice Jacob:
27.	I agree.
Lord Justice Laws:
28.	I also agree.