COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM PRINCIPAL REGISTRY OF THE FAMILY DIVISION
MRS JUSTICE BARON
Strand, London, WC2A 2LL
B e f o r e :
LADY JUSTICE BLACK
MR JUSTICE LEWISON
| Athelstan Michael WHALEY
|- and -
|Belinda Caroline WHALEY
WordWave International Limited
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400, Fax No: 020 7831 8838
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Martin Pointer QC & Robert Peel QC (instructed by Farrer & Co) for the Respondent
Hearing dates : 22nd & 23rd March 2011
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i) two properties in England in the wife's name with a total value net of borrowing and notional sale costs of just over £1.13 million (the wife lives in one of the properties, renting out some cottages in its grounds; the other property is also rented out);
ii) a property, El Aguilon, and a separate piece of land in Spain in the husband's name with a total value of just under £1.19 million net of borrowing, notional sale costs and, in the case of the property, CGT;
iii) the husband's share, worth just over £1.5 million, in three Spanish companies which own/manage hotels in Spain;
iv) the husband's share in SD Ltd worth £180,000;
v) each party's 30% share, worth £200,000, in a company ("the golf club management company") which manages the business of a golf club, the remaining 40% of the management company being owned by the full time manager of the golf club and the club land and hotel premises on it being owned through the Yearling Trust;
vi) approximately £66,000 in bank accounts in the wife's name.
i) nearly £400,000 owed by the wife, mostly in relation to legal costs;
ii) nearly £90,000 owed by the husband to the bank and in relation to legal costs.
The basis of the husband's appeal
Treatment of the trust assets
Approach to division of assets over-generous to wife
i) the "inherited and/or quasi inherited nature of the trust assets" and the fact that the husband had acquired certain property before the marriage;
ii) the fact that her order gave the wife the assets which were "copper-bottomed, un-risk laden, and in cash or cash equivalent" whereas the husband would have assets which were "almost entirely (save for his home) very minority interests in private trading companies and/or were held within a trust of which he was not a beneficiary";
iii) the "wholly illiquid nature of the trust assets" which would hamper the husband in raising capital;
iv) the fact that the husband would have to sell his home in order to meet the order which would have an impact not only upon him but also upon the children; and
v) the husband's needs generally.
The Farah Trust and the Yearling Trust
The Farah Trust
i) Shares worth nearly £3 million in Hostal La Pena (which owns two hotels), the husband's fund's share being 38% of the 78% shareholding held by the Farah Trust as a whole;
ii) Shares in Hotel Investments Ltd: the judge included in her schedule of assets under this heading a figure of £561,849 because although she accepted the husband's evidence that the shares, as such, had no value, she considered that the documents indicated that there was outstanding a loan of that amount from the company to the husband's fund;
iii) Humo Holdings Ltd which holds English land worth £1 million bought with a view to it being re-zoned for building in 2016 (this asset has been referred to as "Strawberry Farm");
iv) A portfolio of shares with a value somewhat in excess of £85,000.
The Yearling Trust
"I consider that the husband's portion of the trust should be augmented by the value of the golf course. I so find because (i) he can be added as a beneficiary of the sub-trust; (ii) the original tax reasons have evaporated as the husband is no longer potentially resident in the UK and (iii) the husband knew that his marriage had effectively broken down before the transaction was completed. Even though he may have hoped for a reconciliation, he knew or ought to have known that it was unlikely given that which the wife had told him. By permitting the transaction to proceed he was seeking to alienate an asset which he knew or ought to have known might be included as part of his resources. I am satisfied that he could have asked the Trustees to stop the transaction and, for reasons which are adumbrated at length elsewhere in this Judgment, I am convinced that the Trustees would have complied with his wish. In the light of this, I will add the full value to his portion of the trust. I am reinforced in this conclusion because Mr Hess wrote letters indicating that the children's school fees were in jeopardy because there was no long term liquidity to pay them. I do not believe that he could or would have so stated if the Trustees had a real expectation that the sub trust was to be used for their benefit, particularly because Yearling Management has a substantial tax free annual rental income from the Golf course which could have covered the bulk of the school fees."
The trustees and protectors
"105….I am absolutely satisfied that, after the death of Mr Whaley in 2001 and, given the sons' funds had been separated into the P, J and M funds, Mr Williamson became accustomed to doing the husband's bidding in respect of the M fund until his retirement in about 2005/6. Thus, whilst it cannot be said, nor is it being suggested, that the Trust is a sham, in reality, the husband knew and expected all of his wishes would be followed whilst Mr Williamson was at the helm.
106. I am convinced that the same was (and is) true with the chosen successor, Mr Hess, who did everything that was asked of him…."
"Mr Hess assisted the husband in his incorrect presentation about the Farah Trust. I am satisfied that, by a letter dated 12th December 2008, he gave false information. In particular, Mr Hess asserted that there had been no past 'capital or income distributions' and he stated that the loans made to the Husband 'have been fully repaid with interest'. The first assertion was plainly wrong even on the Husband's own case and the second is flawed….."
"119. There is simply no evidence of the Trustees ever failing to provide funds for the husband's needs whether in terms of business investments or assistance with the provision of homes. In addition, the manner in which Mr Hess can be demonstrated to have fulfilled his role since the proceedings began confirms that he continues to follow the husband's wishes. "
Erroneous inclusion of the trust assets as part of the husband's resources and alleged improper pressure on the trustees
"In principle, however, in the light of s. 25(2)(a) of the 1973 Act, the question is surely whether the trustee would be likely to advance the capital immediately or in the foreseeable future."
"the court will not act in direct invasion of the rights of, or usurp the discretion exercisable by, a third party. Nor will it put upon a third party undue pressure to act in a way which will enhance the means of the maintaining spouse. "
"(D) PROVIDED ALWAYS that the Trustees are hereby expressly authorised in exercising any of the powers hereby conferred in favour of any particular person to ignore entirely the interests of any other person interested or who may become interested under these presents"
Other arguments in relation to the trusts
The Hotel Investments debt
"53. Naturally, the Husband submits that I should take the low value even though he had previously put its value as high as €3 million and, in the past, has actually marketed the property for sale at in excess €4 million (albeit he now maintains that was simply a marketing ploy). As I find, the fault to obtain [sic] the relevant consents must lie primarily with him and I decline to accept the low valuation, particularly as I am confident that the Husband understands how matters work in his part of Spain where he is well connected. In my view he would not have failed to take any steps which he considered posed a substantial risk to the value of his investment.
54. The Wife submits that I should ignore the planning difficulties altogether. However it would seem to me that some deduction is merited because there must be a small risk factor given that the paperwork is incomplete. There is no evidence to assist me in this regard and so, doing the best that I can, I intend to deduct 10% from the net value (after tax and costs) to allow for this point."
The Property, if fully legal, would be very desirable being near Tarifa and its beautiful coastline and world famous wind surfing beaches. The Property is a typical Spanish "cortijo" full of style and character. Some properties in a similar legal situation have in the past been legalized but other instances of demolition have occurred although none that we are aware of in the immediate vicinity. At present steps are being taken to legalize the property and a new title deed has been prepared for presentation to the Property Registrar. The outcome, however, must be considered uncertain. To evaluate the risk factor in this valuation is very subjective but I shall give my opinion later in this report."
Despite the final sentence, the valuer did not give his opinion evaluating the risk factor later in his report. He gave a valuation on the worst case scenario and a valuation if the house were to be legalized but no indication whatsoever of which scenario was the more likely to materialise. As Mr Pointer submitted, either party could have pursued this with the valuer; it was not just a matter for the wife. In the absence of assistance, the judge was entitled to form her own view.
The golf club management company
Division of assets over-generous to the wife
"All of these points justify a departure from equality and are discounting factors which militate against a 50-50 or even a 60-40 split of the assets."
So far, I do not think Mr Howard would complain. His complaint was that the judge did not follow this approach through in assessing the award and also failed to take account of liquidity issues and of the impact on the husband's other assets of implementing her orders and therefore gave the wife too great a share of the assets.
"The resources available (inclusive of Trust assets totalling nearly £7 million) are as explained to be taken at £10.4 million. The Wife's needs are £3 million. However, in addition to that sum she is entitled to share in the marital acquest albeit that most of it has been made with the assistance and through the Husband's fund in the Farah Trust. I cannot calculate with precision how the asset base has been augmented during the marriage because I have not been presented with the necessary evidence. But I am clear that the Wife deserves a modest share in the marital resources which exceeds her basic needs. I have come to the conclusion that a fair figure for the sharing element of her award is £750,000 which is just over 10% of the trust assets (and might in a loose way be thought to equate to about half of the profit made on the property projects). Accordingly the overall award is £3.75 million which amounts to some 36% of the net assets which in the circumstances of this case is fair. In addition the Wife's debts must be met they total £331,000 and this sum will be added making the total award £4,081,000. "
"§73…..It is clear that, when the result suggested by the needs principle is an award of property greater than the result suggested by the sharing principle, the former result should in principle prevail: per Baroness Hale of Richmond in Miller at paras  and . At least in applying the needs principle the court will have focussed upon the needs of both parties; analogous focus on the respondent is not present in the compensation principle and we leave for another occasion the proper treatment of irreconcilable conflict between that principle and one of the others. It is also clear 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 result should in principle prevail: per Lord Nicholls of Birkenhead in Miller, at paras  and , and Baroness Hale of Richmond, at para . "
"The real question will generally be not what is he contributing but what ought he to contribute."
"Despite the Wife's coyness about Mr Olson I am clear that this is a committed relationship. They do not spend a great deal of time in England because Mr Olson is away for the bulk of the year but that does not lessen the quality of the relationship, particularly as the Wife often joins him on voyages. I am satisfied that he is a man of limited means although he earns at least £60,000 per annum and, whilst on duty, has his daily needs met. It would not appear that he has much capital. The Husband has asserted that, whilst he is with the Wife, Mr Olson should make a contribution to the Wife's needs. This is put by Mr Howard QC as, at least, £7,800. I am sympathetic to that submission because I do not consider, as a matter of principle, a new partner should be supported by a wealthy former spouse. However, the Wife's expenses do not seem to me to be increased by Mr Olson's ad hoc visits. Therefore the sum suggested as his contribution will cover any extra expenditure which he engenders but will not inure to the Wife's benefit. As such Mr Olson is cost neutral. "
More general observations
"the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future"
i) The trustees must decide to add him to the class of beneficiaries of that trust;
ii) The Protectors must agree to that addition;
iii) The trustees must resolve to distribute capital to the husband;
iv) The Protectors must agree to that distribution.