This judgment was given in private. The judge gives permission for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of this judgment the anonymity of the members of their family must be strictly preserved. All persons, including representatives of the media and legal bloggers, must ensure that this condition is strictly complied with. Failure to do so may be a contempt of court"
Neutral Citation Number: [2025] EWFC 129
Claim No: 1676387688121146
IN THE FAMILY COURT AT BIRMINGHAM
Birmingham Civil and Family Justice Centre
Date: 3 January 2025
Before :
Fiona Hay
sitting as a s.9 Deputy High Court Judge
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Between:
BM
Applicant
-and-
MB
First Respondent
-and-
GM
Second Respondent
-and-
X
Third Respondent
BM v MB and others (Financial Provision: Identification of Marital Assets/Avoidance of Disposition Order)
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Nicholas Wilkinson and Calum Smith (instructed by HCR Law) for the Applicant
Craig Vickers (instructed by Nelsons Law) for the First Respondent
Andrew Day (instructed by Rayden Solicitors) for the Second Respondent
Ewan Murray instructed under the Bar Direct Access Scheme for the Third Respondent
Hearing dates: 25 November - 4 December 2024
Submissions as to costs made in writing
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Judgment Approved
This judgment was handed down remotely on 3 January 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives
This judgment is organised into the following sections:
3. Evidence
5. Determination of wife's s.37 applications.
6. Assessment of marital assets.
7. Assessment of wife's needs.
8. Findings as to sharing and needs.
9. Conclusion.
1. Introduction/Background/Description of Assets/Chronology of Asset Acquisition and other relevant issues.
1. This case well illustrates the capacity of litigation to exacerbate family conflict and to make vast inroads into the financial resources available to a family. The case has grown out of all proportion to its issues. It could and should have been resolved without the dissipation of £1,110,229 in legal costs [1]. I am grateful to Mr Day for reminding me of the observations of Baroness Hale in Sharland v Sharland [2015] UKSC 60 which seem entirely apposite:
"It is in everyone's interests that matrimonial claims should be settled by agreement rather than by an adversarial battle in court. The financial resources of the family are not whittled away by the often substantial legal costs involved. The emotional resources of the family are not concentrated on conflict. The future relationship between the adult parties is not soured, or further soured, by that conflict. This is not only good for them but also for their children, whatever their ages, and for the wider family".
The question of who is to blame for the above described situation has been much explored in this trial. My conclusion, which I expand upon in the final section of this judgment, is that both parties are to blame.
2. This is a reserved judgment being delivered by email on the 8th day of this hearing which was initially listed for 10 days. I have had provided to me a Bundle that is nearly 2000 pages long (the wife's s.25 statement alone is 312 pages long including its exhibits). I have heard evidence from one expert, from the two main parties and from four other witnesses. I have received extensive and thorough skeleton arguments, position statements, schedules and closing notes and submissions. In this judgment which is already too lengthy I have only referred to the evidence where it is necessary to explain my reasoning or conclusions. It would be impossible in any proportionate manner to deal with all the arguments that have been relied upon by each party, many of which have turned out to be irrelevant to outcome.
3. The court is required to determine two issues. They are (a) whether either or both of the transactions carried out by the husband in April 2022 should be set aside pursuant to s. 37 MCA 1973 and (b) what orders the court should make on the husband's application for financial remedies. The parties are agreed that the husband will retain the family business so this second issue is really "what award should the court make to the wife?"
4. At the commencement of the final hearing there were four parties to this litigation. They are:
(i) The applicant husband.
(ii) The first respondent wife,
(iii) The husband's mother "GM"
(iv) Mr X who is a trustee (along with the husband) of the Children's Trust (the "trust"). The parties' children K and E are the current discretionary beneficiaries of the trust.
5. K (28) and E (25) were joined as parties by HHJ Ingram at a directions hearing on 15 March 2024. They were joined on the husband's application and the husband argued at hearings on 16 July 2024 and 21 October 2024 that they should remain parties. I discharged them as parties at the Pre Trial Review on 21 October 2024. I did that with E's consent. K was represented on that occasion by Mr Jonathan Todd who argued that he should remain a party.
6. I have referred to the parties in this judgment as the "husband", the "wife", "the husband's mother" and "Mr X". I mean no disrespect by calling the main parties the husband and the wife and I hope they will forgive me. I have called the husband's mother (and "K" and "E") by the names to which they have been referred to throughout this hearing.
7. The husband is represented by Mr Wilkinson of Counsel and Mr Smith of Counsel The husband's solicitor, Ms. Morris of HCR LAW has been unable to attend this final hearing. The wife is represented by Mr Vickers of Counsel and Ms. Bridgen of Nelsons Law. The husband's mother is represented by Mr Day of Counsel and Rayden solicitors. Mr X is represented by Mr Murray of Counsel on a Direct Access basis. The quality of the oral and written representation has been exceptional. No stone has been left unturned. The parties can be satisfied that nothing that could have been said on their behalf has been left unsaid.
8. The wife is 60. The husband is 61. The date of cohabitation is in dispute, but for reasons set out later in this judgment I find it to have been in 1991. The parties married on 5 August 1994. They separated in September 2022 although it is common ground that the marriage was in difficulties from late 2020. The petition is dated 29 September 2022 and Form A is dated 28 February 2023.
9. K sees things more from his father's point of view and is estranged from his mother. E sees things more from her mother's point of view and is estranged from her father. It was a very unsettling spectacle to see E and K each cross examined on the instructions of one of their parents (this is no criticism of counsel who conducted themselves completely appropriately in the light of their instructions). Tragically, I fear that the rifts caused by this divorce and this litigation are likely to be irreparable, although I hope I may be wrong about that. The children have played far too prominent a role in this litigation in several ways - as temporary protagonists, as witnesses and as individuals whose best interests I am urged to consider by both parties. Section 25 MCA 1973 requires the court to treat as a first consideration minor children of the parties. K and E are not minor children.
10. There are before the court allegations and cross allegations about inter familial behaviour. Perhaps the most upsetting example of the poor relations between the two halves of the family is the fact that K was arrested by the police in relation to an allegation that he threatened to kill his mother. It is no part of my role to determine what really happened. Indeed I refused to read the section of the wife's s. 25 statement entitled "conduct". Conduct is not formally alleged and has not been formally pleaded. There is no need for me to make any findings on any of these issues (which have seeped into other parts of the wife's statement and the husband's statement and the children's statements). I only observe that it is very sad to observe the effect of this litigation on the members of what was clearly once a very happy family.
11. For the benefit of the parties I set out that (as the law currently stands) allegations of conduct are not relevant for the purpose of determining the division of assets on divorce unless they meet the hurdle established by s. 25 (2) (g) in that they are so gross that they are inequitable to disregard. This has always been a high hurdle, and its height has been emphasised in two recent decisions of Peel J in Tsvetkov v Khayrova [2023] EWFC 130 and N v J [2024] EWFC 184. It is for this reason that I have sought to curtail the evidence when it strayed into these types of allegations.
12. I also point out for the benefit of the parties that for many years now the court has not distinguished between the endeavours of the breadwinner and those of the homemaker. In this case the wife's role was not only that of mother and "home-maker" (which would in any event have been more than sufficient to found her claim); it is conceded that she worked in the business but the degree of that work is disputed. This has been a very emotive issue and one in which the husband's mother and the children have become involved. I tried to prevent evidence on this point on the first day of this hearing, but Mr Vickers' case was that it was important feature in the light of GA v EL [2023] EWFC 187 and Mr Wilkinson therefore said he needed to defend it. As I said at the time evidence on the issue was likely to be completely irrelevant to my decision making. I remain of that view notwithstanding Mr Vickers' reliance on Peel J's observation at paragraph 29 of GA v EL:
"It is commonplace for issues to arise about the distinction between marital and non-marital acquest, a feature which may impact upon the court's overall exercise of its dispositive powers. In the case of businesses, the issue generally arises in one or both of two scenarios:
(i) The extent to which the business was established, and already had a value, at the date of marriage or (if earlier) settled cohabitation. That pre-acquired value, if found by the court, may be relevant to the distribution of assets. I say "may" because of the conventional factors which need to be taken into account as part of the s25 exercise, including the length of the marriage/relationship when compared to the length of the pre-marital endeavour, the contributions by each party inside and outside the business, proportionality, whether the asset has been mingled in, or deployed to sustain, the family economy, and so on.
I do not believe that Peel J intended the section in bold to upend the previously well-established principle that (save in special contribution cases) it is not part of the court's obligation in determining financial remedy cases to explore the role that the parties played in asset generation as opposed to other roles within the family. It seems to me that this reference does no more than refer to the s.25 issue of contributions which may be (by either party) inside or outside the business. There might (although I doubt it) be outlier cases in which the involvement of the parties in a business may be relevant, but this was certainly not one of them.
13. The circumstances surrounding the breakdown of the marriage have vastly increased the heat of these proceedings. The wife's case is that she felt bullied out of the family home. I make no finding about that. It was of course reasonable for her to leave, and when she left, she also left the environs of the business. She could not therefore have continued to contribute either to the business or the home. As I have said later in this judgment, I do not consider that her inability to do so renders any uplift in value of the asset since her departure non-marital.
14. The wife has had interim maintenance (some added to her DLA) of £4,000 per month. She has incurred debt. She said many times in evidence that she feels it unfair that the husband still has access to the assets and income of the business. This also has been a significant feature of the evidence. It has made no difference to my decision because all debt must be repaid, and the wife's future needs must be fairly assessed.
15. As a result of the disagreements between the family, and the number of parties and witnesses there have been extensive special measures in place. I would like to pay credit to my court clerk Leah Jesson-Smith who has managed the complex logistics in such a way as to accommodate the complexities of the family dynamics.
16. I make it clear that although I have not set out each s. 25 criteria below, I have made my determination in consideration of the terms of s. 25 MCA 1973.
The Family Home
17. The family home is an extensive property of 6,405 square feet situated in land extending to 124 acres. It is within half a mile or so of the business proper and it adjoins land owned by the business. The property has an agreed gross valuation of £4,250,000; its agreed net value is £4,122,500. This agreement as to value came at a cost. The property was valued by Savills prior to the FDA. Their value of £4,145,000 was agreed for FDR purposes. The final agreed value was arrived at following a Daniels v Walker application and a meeting of two experts. I have referred to this in a little more detail in the valuations section later in this judgment.
18. There are two further issues about the family home. The grounds contain half a lake, the other half is situated in land belonging to the business. The wife argues that if the whole lake were in the grounds the value would be enhanced. The husband disagrees. The final issue is that an annexe is being built in the grounds. The wife's case is that this is a 4-bed property for K and that the husband has used cash siphoned through the business to pay for the building work (this is part of her wider case that the husband has access to undisclosed funds). The husband's case is that he has broken ground to preserve a planning application; that the materials used are all materials that were on the site and that K and his girlfriend have done the labour.
HM
19. The husband owns a property that he inherited from his grandmother who died on 6 May 1995. That property is HM. Its agreed net value is £305,130. There is a dispute about whether it is marital or non-marital. The property is situated close to all the other properties/land. It is tenanted. It is the husband's case that it must be retained to ensure control of the business boundaries and to reduce the chance of complaints. In my view the property is plainly non-marital. It is derived from a source external to the marriage, and it has never been mingled with marital assets. I do not find that it needs to be preserved for the reasons given by the husband. It could be sold if the husband chose to sell it to meet part of the wife's claim.
The Business
20. The parties are both directors and shareholders of the business. The husband is Managing Director, and he owns 26% of the shares. Prior to 6 April 2022 he was a 51% shareholder in the company. On that date he transferred 25% of his shares into the trust. This is one of the transactions that the wife asks the court to set aside [2]. The wife holds 25% of the shares. The final 24% of the shares are owned by the husband's mother. She is a party to these proceedings (at a costs of £162,200). She was joined on the application of the husband, although her case is that that was in response to the wife's open offer made on 13 March 2024. Whether she needed to be a party is a matter that will no doubt arise in relation to costs arguments. The husband's mother is 89. I am sure she could have done without the anxiety and stress caused by these proceedings.
21. The business has two subsidiaries. A summary of the chronology of acquisition of shares and land is set out below. I do not think it helpful to try to separate the chronology in relation to the business from the chronology in relation to the acquisition of land (some of which is still held in the husband's sole name or in the name of the LLP established on 6 April 2022) and so I have merged the chronology of the land and the business. In addition it has become clear during the course of the hearing that some land has been divided and that titles may have altered. It is not necessary to seek to identify with complete accuracy each title number. I have set out title numbers in order to tie this judgment in with ES2 but in my view descriptions are likely to be more helpful to the reader. Finally I have included relevant dates in relation to the s. 37 application in order to provide a clear sequence of events.
(i) From 1951 the husband's grandfather and father traded in partnership. The business traded from a site that the husband's grandfather bought in 1948. Two parcels of land were purchased. On one was the "site" (now owned by the LLP and also known as Plot 3) and the other is land (now owned by the business) that was later gifted to the husband in order for him to build his first house ("HV"). Plot 3 remained in the husband's grandfather's name until he died in 1991 when it was devised to the husband and his father as tenants in common. This is the land on which the main business is situated. It (or an approximate equivalent) was transferred to the LLP in 2022.
(ii) In or around 1959 the husband's parents were gifted a piece of land adjacent to the business on which they built a property called BT in which the husband's mother still lives. I have not been told the title number of this land nor when it was acquired. The proximity of family homes to the business is a generational pattern; the husband's grandparents lived in HM which is situated on the border of the business, and the husband and wife lived in HV and then the family home both of which are close to the business. The extent and opulence of the family home (and to a lesser degree HV) marks a shift in generational pattern but the geographical proximity is a common feature. BT in fact belongs to the husband's sister who has not played any significant role in the management/ownership of the business. The husband's mother has a life interest. These arrangements came into effect on the husband's father's death.
(iii) In 1984/5 the husband purchased another piece of agricultural land.
(iv) In 1987 the husband became a partner in the business with a 47.5% share. His father also had a 47.5% share and his grandfather 5%. The reorganisation that led to the husband receiving a share of the business was the age of his grandfather and a family decision that the business would be run principally by the husband's father and the husband.
(v) In 1988 the husband's grandfather gifted the husband the land on which the husband built HV. This land was later sold to the company for £975,000. HV was demolished in or around 2009/2010 in order that the business could expand. The HV site now contains buildings for the business and an amenity area with two lakes.
(vi) In October 1990 the husband purchased Plot 5 which is adjacent to the land on which HV is built, the purpose of the purchase was to enhance HV.
(vii) The parties began to cohabit in 1991. This is my finding. It accords with the initially agreed chronology and on this point, I prefer the evidence of the wife.
(viii) When the husband's grandfather died in October 1991 the husband's father inherited his father's 5% share of the partnership. Plot 3 was left equally to the husband and his father. The total estate value was £75,000 for the land and £7,003 for 5% of the business. By my calculations and assuming no minority interest discount this means that the whole partnership had a value of £140,060 (not including the land). In his statement the husband has said that "after my grandfather's death my father and I grew the business".
(ix) In 1992 the husband acquired another piece of land (now owned by the LLP) for £35,000. This piece of land which is also referred to as Plot 2 now contains some on site ameneties which benefit the business. The parties do not agree about whether this piece of land is marital or non-marital. My finding is that it is non-marital because I consider that the money to buy it almost certainly came from pre-marital endeavour. Nothing turns on this finding.
(x) In 1995, the husband's grandmother died. The husband inherited HM. As I have said there is a dispute about whether this is marital or non-marital and I find it to be non-marital.
(xi) In due course the shares in the partnership were redistributed as to 25% to the husband and 25% to the wife and 25% to the husband's father and 25% to the husband's mother. The husband has said this was in 1998. The wife says it was more likely to have been 1994. In the course of submissions 1997 was alighted upon as the date suggested by documentary evidence. Nothing turns on the date. A great deal of time has been devoted to examining whether this allocation of the business was due to work that the wife has done or whether it was merely tax advantageous. In my view it is irrelevant for what purpose the allocation was agreed.
(xii) On 5 January 1999 the business was incorporated. The shareholdings reflected the partnership shares (25% each). At the same time the husband received from his father the rest of the "property at [OC]". When asked by me to what this phrase referred the husband was not clear. He thought that it might be the site, but that by 1999 there may have been changes to the land. In any event it is tolerably clear from the contemporaneous letter exhibited to the husband's statement that a decision was made to transfer the main site to the husband.
(xiii) I have been provided with an undated and unsigned shareholders agreement which provides that in consideration of the use of the husband's land the other shareholders (the husband's father, the husband's mother and the wife) agree that if they intend to transfer their shares, they must first offer them to the husband at £1 a share. The agreement refers to a lease granted in 1999, and it would make sense that this agreement was entered into at the same time. I assume this agreement was signed because it is referred to in email correspondence in 2020.
(xiv) In 2002 the husband acquired a further plot of land ("Plot 4") (now in the LLP). It is the site of the extended business. This land is conceded to be marital.
(xv) In 2007 the husband acquired another plot of land ("Plot 5"). This land is conceded to be marital.
(xvi) On 28 June 2009 the property at the family home was bought. The funds to buy it came from the sale in 2008 of HV to the business. According to the husband the funds to develop it, which appear to have been £805,000 came from large dividends declared by the company over the two years of the build. This does not correlate with the evidence of dividends declared which is that they were £200,000 over the two years of the build. This is one of the issues that is relied upon to support the wife's case that the husband has access to undisclosed funds. For the husband's part he says that the records are unclear and that it is not his fault that he has been unable to clarify the issue.
(xvii) On 22 February 2010 more land was acquired by the business for £102,500.
(xviii) On 19 November 2011 the husband acquired more land. This was in fact a swap or partial swap with another land owner of an earlier acquired piece of land. I have not been able to ascertain when the original parcel of land was purchased.
(xix) On 20 March 2014 the husband's mother transferred one of her shares to the husband. The husband's mother has told the court she did this because the husband asked her to - he wanted to be the single largest shareholder.
(xx) When the husband's father died on 23 July 2016 the husband inherited a further 25% of the business taking his share to 51%. It is his case that his father always wished these shares to be passed on to the next generation (K and E). The estate accountants valued the business at £6.4m for probate purposes. Mr Dodge has valued 24% [3] of the shares at £1.438m; 25% would be valued at £1.5m.
(xxi) Between 2020 and 1 February 2021 the businesses acquired several large tracts of land. These have become "FV". In 2020 the small ancillary business (which was operating from the family home) moved to the FV site and was expanded to include state of the art buildings, stock and equipment.
I set out the acquisitions for completeness:
a) On 22 December 2020 more land was acquired for £421,650.
b) On 12 February 2020 more land was acquired for £518,280.
c) On 23 March 2020 another parcel was acquired for £2,171,000.
d) On 1 February 2021 a final parcel was acquired.
(xxii) At some point the business acquired a property at DJ. There has been no evidence as to when this was acquired.
(xxiii) On 12 February 2020 the husband and wife had a meeting with Mr CH of TBW. The content of this meeting is not agreed between the parties; the husband asserting it related to the issue of putting shares into trust and the wife saying that it was focussed on IHT issues with regard to the family home. I have seen a letter from Mr CH which reports that the meeting was to discuss "concerns around exposure to Inheritance Tax and succession of assets to their two children". He said that at that stage the thinking was that the house might pass to E and the business to K. Mr CH reports that there was a desire to move on the transfer of shares to K "sooner rather than later".
(xxiv) On 18 May 2020 the husband forwarded the wife an email from his accountant Mr R that addressed the potential transfer of land to an LLP. The email also addresses the potential sale of a plot of land to the company. The email attaches an email trail between Mr R and Mr CH. None of the emails specifically refer to placing shares in trust. The concept of a partnership is discussed but I note that in an undated email in the chain there is reference to plots of land being transferred into joint ownership with the wife "with the hope of creating a partnership which could qualify for the stamp duty exemption for possible transfers in a number of years' time".
(xxv) On 27 November 2020, 4 January 2021, 2 August 2021 and 31 January 2022 Mr CH met with the husband.
(xxvi) On 1 October 2021 the husband met with members of GS LLP, a firm specialising in non-contentious trust and tax advisory work in relation to the matters referred to in their correspondence of 23 February 2023 (see below). The wife's case is that the husband lied to her about the purpose of this meeting.
(xxvii) On 19 January 2022 the husband received a report from TBW. It is accepted that the report was not shared with the wife. The report sets out the background as follows:
a) The husband wished to address his IHT position both in relation to his 51% share in the company and in relation to the land held separately.
b) The husband wished to give his shares to K or put them in trust for K.
c) The husband wished to transfer the land held by him into the company but in the interim, he wished to hold these in partnership with K or (if the partnership has significant value) in trust.
d) It is recorded that provision has been made for the family home to pass to E and the company to pass to K. It is said that if a trust is used for the shares or the partnership then E can be included as a beneficiary. I am not aware that any provision was ever made for the family home to pass to E. This certainly could not have been done without the wife's cooperation.
(xxviii) On 17 February 2022 the wife caused her solicitors (Nelsons) to write a letter to the husband. That letter referred to difficulties within the marriage and the lack of trust. It said that the wife wished to be reassured that the advice the husband was seeking did not "relate to the setting up of Trusts with a view to ring-fencing assets out of the matrimonial pot."
(xxix) On 23 February 2022 GS wrote to Nelsons. The letter stated that Ms. H of GS had been introduced to the husband in Autumn 2021 by a family friend. She reported that "the husband" was concerned to explore on a "preliminary basis" how part of his shareholding could be structured tax efficiently for the benefit of the children and how the IHT profile of the land owned by the husband could be improved. In relation to any trust to pass on the shareholding it was said that it has been suggested to the husband that there should be a meeting with "the husband and the wife" to discuss that proposal. In relation to the partnership it was said that this was still being discussed with the accountant but that the plan was to transfer it to the company via a "short-term partnership arrangement".
(xxx) On 31March 2022 Mr CH has said that he "had a final call with the husband and wife ...to run through draft documentation before completion".
(xxxi) On 4 April 2022 the husband created the Children's Settlement. The trustees are the husband and Mr X. The discretionary beneficiaries are the children. On 6 April 2022 the husband placed 25% of his shares in the business into the trust.
(xxxii) On 6 April 2022 the husband placed three parcels of land into an LLP. They are Plot 3, Plot 2 and Plot 4. They are all parcels that are integral to the business. They are the original site (as modified), the car park and the land on which HS (see below) and the large warehouse 1 are situated and the land on which the part of the business is situated. The members of the LLP and the husband and Mr X. The husband retains the interest on the land placed into the LLP plus 1% of any uplift. Any further uplift belongs to the trust.
(xxxiii) It is the wife's case that she found out about the nature of the trust and the LLP on 28 September 2022.
(xxxiv) On June 9, 2023, the wife's solicitors asked Mr CH for the wife's file. On 11 July 2023 Mr CH said he did not have a file relating to the wife.
(xxxv) On 13 March 2024 the wife applied to set aside the transfer of the shares to the trust. That application was amended on 23 October 2024 to include the LLP land.
2. Chronology of Valuations
22. The assets/liabilities are:
(i) The family home,
(ii) HM
(iii) The parties' interest in the business.
If leases are agreed to be treated as collapsed there is no need for any further analysis as to the value of the land owned by the husband or the LLP. If the land is to be treated separately and a notional lease value attributed, then it would be necessary to separate out the relevant land and its value from the business.
(iv) The trust interest in the business.
(v) Some modest bank account interests and investments.
(vi) Pensions with an overall value of some £1.2m.
(vii) Debt that exceeds £1m. This includes both parties' DLAs which stand at £251,638, the wife's litigation loan, the husband's outstanding costs and a liability that the husband has to a friend for money borrowed for costs.
23. The valuations required to establish the value of the assets were (a) valuations of the real property held by the business - i.e FV, HS and a property known as DJ (b) a valuation of the business and (c) a valuation of HM and the family home. The parties might also have required valuations of the assets in 1991 and in 2016. The parties have paid for many more valuations than these. I set out below the chronology.
24. The husband commissioned a valuation of the business prior to the FDA. The letter of instruction to Mr Walters (a Chartered Surveyor) of Knight Frank is dated 14 April 2023. Mr Walters was instructed to value the business "in isolation from the corporate entity of which it forms part". The valuation of Mr Walters produced with the husband's Form E gave the "market value" of "the business" as £11.8m. Mr Walters observed that the "freehold is under titles in different but related names and companies. We have valued the whole site as if a single freehold entity, controlled by a single owner". In relation to tenancies an assumption is made that "any internal leases between connected parties have been collapsed". The report valued HS (which is the staff accommodation on the site) at £300,000. HS is subject to a worker's tie.
25. Prior to FDA the parties had jointly instructed Savills to carry out a SJE appraisal of the family home and HM.
26. The FDA took place before HHJ McCabe on 15 June 2023. It was recorded that the valuations of the family home and HM were agreed for FDR purposes. The Knight Frank report was allowed into evidence. The parties were given permission to raise questions of the report. The court also directed an SJE valuation by Jon Dodge, a chartered accountant, of FRP. Mr Dodge was to value the entire corporate entity. I have to say I have not really understood why the parties proceeded with both the report of Mr Walters (valuing the business) and a report from Jon Dodge (valuing the entire enterprise including the business). In order that Mr Dodge could value the whole enterprise a report was necessary in relation to FV. The FV valuation was to be carried out by Brown & Co. I have received a chronology from the husband's solicitors that states that the instruction of Brown & Co was always intended to be a joint instruction but that there was no initial cooperation from the wife and so a sole instruction was sent. The wife has not responded to that assertion.
27. I am told that although it does not appear in the order, the parties at FDA agreed that there would be a valuation of the business entity on the basis that the leases were not collapsed. On 19 September 2023 Mr Walters was asked by the husband's solicitors to provide a value in respect of those notional leases if they were not collapsed. Mr Walters concluded by letter of 21 September that the hypothetical lease value was £700,000 per annum. On 5 October Mr Walters provided a further report setting out his opinion of the value of the business subject to the lease. This calculation was completely unnecessary as Mr Dodge was valuing the entire enterprise. It is accepted that there is no provision in the FDA order for this additional expert evidence; the parties simply agreed to cooperate in its introduction.
28. By the time Mr Dodge prepared his report the wife had commissioned a shadow expert in relation to Mr Walker's valuation. Christie & Co prepared a "critical review" dated 29 August 2023. I assume that this review was used by the wife to raise questions in respect of the Knight Frank report which she did on 12 September 2023. I am again not clear as to how the Christie & Co report was entered into evidence. I am also not clear why this was necessary as Mr Dodge was valuing the entire business. In any event, and by agreement between the parties, Mr Dodge considered both reports when he prepared his report dated 8 December 2023. He relied on neither. He did use Knight Frank's valuation of HS (he valued DJ at mid-way between the parties' valuations at £325,000).
29. Mr Dodge's initial comprehensive and helpful report is dated 8 December 2023. He valued the business on the basis that internal leases had been collapsed. He concluded that the Enterprise Value of the business was £17.2m, that the surplus cash and assets were negative £2.53m and that freehold properties were £5.59m (these properties are HS, the house at DJ and FV) This led to a Final Equity Value of £20.26m. The parties' combined interest (51%) was £10.33m gross and £8.57m net. He stated that quasi-partnership matters were not for him but if there were a minority discount it would be no more than 10%. The Trust shareholding was valued at £5.05m before tax and £4.16m after tax. I deal with liquidity issues and sustainable income when I deal with Mr Dodge's updated report. In relation to the 1991 value of the group he said that the best valuation would be a property valuation at that time. The wife's case is that it was this valuation that stimulated her s. 37 application, after the failed FDR.
30. A pFDR took place before Nicholas Allen KC on 8 February 2024. It was not successful.
31. Following the failed pFDR the wife issued a D11 in relation to s. 37 MCA (directed at the trust) and three Daniels v Walker applications in relation to (a) the family home (b) HS and (c) planning at FV. She exhibited to her application three unilaterally obtained expert reports; two from Fine & Country in relation to the family home and HS and a planning report by Mr Piggott of PDP.
32. These applications came before HHJ Ingram on 15 March 2024. On the application of the husband four parties were joined. They were the husband's mother, Mr X and both children. Directions were made for statements from wife and husband in relation to the s.37 application (by 12 April and 10 May respectively). Directions were made for statements in the final hearing. It was directed that Mr Dodge should meet with Mr Walters and they should provide a concise summary report. It was directed that Savills should provide an updated report as to the value of the family home taking into account the unliteral report that the wife had obtained from Fine & Country. It was directed that any Part 25 orders or Daniels v Walker applications should be made by 4pm on 29 March and should be listed with the s. 37 applications.
33. Mr Dodge and Mr Walters met on 1 May 2024. Their report records that they have both (as instructed) "valued the business assuming any internal leases between the companies and the owners have been extinguished". They agreed EBITDA of £1,393,000 and a multiple of 9. On the basis of the discussions the values of the parties' interests were modestly revised to £9.528m gross (parties) and £4.67m gross (trust).
34. Savills prepared an updating report dated 10 June 2024. The valuation of £4,125,000 was updated to £4,180,000.
35. The applications then came before me on 16 July 2014. It was clear by then that the husband sought (and had in fact already sought) valuations on a non-collapsed lease basis. The parties had agreed that:
(i) There should be a revaluation of HS by Mr King of King West on a SJE basis and that the experts should then meet to seek to agree the value.
(ii) That Mr Dodge was to be asked to update his report but that he was on this occasion to be asked to value the LLP and the company and to advise on the value on the basis that the leases were not collapsed using Knight Frank's estimate of lease value (there is a typographical error in the order, which refers to Brown & Co but it is accepted that this is what was meant). He was also to be asked to comment on open proposals.
(iii) That the wife's planning report should be admitted, the husband should obtain a planning report and that the experts should meet to seek to agree as to any planning potential on FV.
(iv) That Brown & Co should update the value of FV and should review any planning evidence.
(v) That Mr Skipworth was to value the land owned by the LLP.
36. The parties had not agreed the issue in relation to the family home. I allowed the wife's Daniels v Walker application in relation to the family home for several reasons, one was the significant potential uplift argued for, and another was its status as the family home (i.e an asset that can have a different status in arguments about marital/non-marital assets). With hindsight the permission granted did not clarify anything of import.
37. I was concerned about the joinder of the husband's mother and the children. It was forcefully argued that the husband's mother should remain a party to advance her position in relation to the potential impact of orders on her shareholding. I acceded to that argument. I listed the issue of the children's joinder to be dealt with on submissions at the PTR.
38. On 24 September 2024 Mr West provided a report to the effect that the value of the family home was £4,250,000. A joint meeting between the experts resulted in the agreement that the value was £4,250,000. All that can safely be said about that agreement is that it is almost certainly not the price for which the house will sell if placed on the market and the expense of the Daniels v Walker application and other costs associated was not justified.
39. Mr King valued HS at £350,000. The valuers met. Neither revised their view. The parties agreed to proceed on the basis of the middle figure of £325,000. Once again, the costs have not proved justified.
40. The planning experts (Mr Mullins and Mr Piggot) met on 18 September and 10 October 2024 and provided a joint report. That report has not led to any adjustment to any of the valuation figures in the case. Once again, the additional evidence did not change matters.
41. At the PTR on 21 October 2024 I discharged the children as parties. I asked whether the wife wished to amend her s.37 application to make an application in relation to the LLP. She did wish to do so, and I granted permission. I expressed concern that the court had no evidence as to the value of the shareholding in 1991 and 2016. It was directed that Mr Dodge was to file an addendum report dealing with the value of the shareholdings in 1991 and in 2016. Mr Skipworth's instruction was extended to value the LLP land as at October 1991 and 23 July 2016.
42. Brown & Co provided updated valuations of the land (15 October 2014) and the farm assets (14 November 2024).
43. The report of Mr Skipworth has not been prepared. The reasons for this were never entirely clear. However as it happened evidence from Mr Dodge given on the first day of the hearing exposed the lack of necessity of Mr Skipworth's evidence in relation to the current or 2016 value of the LLP land. It was agreed that the court could proceed without Mr Skipworth's evidence both in relation to current value and historic values.
44. Mr Dodge provided his updated report as promptly as possible on 19 November 2014.
The updating figures are as follows:
(i) Enterprise value - £16.2m
(ii) Surplus cash and assets - negative £3.113m
(iii) other business assets - £5.93m
(iv) Equity value - £19.02m
(v) 51% interest - £9.7m gross and £7.78m net. Alternative figures are provided for a minority interest deduction on 10%.
(vi) Trust interest - £4.75m gross and £3.74m net. Again alternative figures are provided.
(vii) Mr Dodge reduces the value of the entity to £12.72m on the basis of rental payments of £700,000. (N.B The notional rental yield is £613,000 for the LLP land and the rest is attributable to land owned outright by the husband).
(viii) In order to demonstrate the other side (as it were) of the lease argument Mr Dodge has provided a calculation that the land notionally leased at £700,000 would have a capital value of £8.75m.
(ix) Mr Dodge observes that the "Petitioner" (as a willing seller) would maximise sale value by packaging to yield the best outcome.
(x) In relation to liquidity Mr Dodge found current liquidity of £600,000 - £700,000. He found that as surplus stock unwinds there would be additional liquidity over the next 12 months of £800,000.
(xi) Continued pre-tax income is estimated at £265,000 for the parties and £71,000 for the trust.
(xii) Mr Dodge was asked, at the behest of the wife, to investigate in some detail the cash operations in the business. He was asked to examine company till reports and to investigate bulk payments. He carried out this work insofar as was proportionate and found no discrepancies.
(xiii) In relation to the open offers Mr Dodge observed that the wife's offer (sale of business assets comprising FV, HS and DJ) would reduce the value of the business on a £1 for £1 basis. In relation to the husband's proposals he observed that a loan of £1,850,000 from HSBC to buy back shares would have an impact on income and he advised that a CPOS (the amount was not specified) would result in capital taxation as envisaged by him in his report. He suggests that detailed tax advice will be needed.
(xiv) Mr Dodge's addendum report (dated 21 November 2024) values the equity value of the business in July 2016 as £6m. A 25% shareholding would be worth £1.5m.
3. Evidence
45. I heard evidence from Mr Dodge, from E, from K, from Mr X, from the husband's mother and from the parties.
46. I have not recorded evidence in detail save where it is relevant to my decision making. I have recorded my overall impression of the parties.
47. Mr Dodge confirmed that Mr Skipworth's valuation of the LLP would be very unlikely to make any difference to his opinion unless it were so high that an enterprise valuation became inappropriate. In answer to Mr Day he confirmed that the husband's mother's shareholding need not be affected on the disposal of assets providing that arrangements were made to preserve the value of her shareholding by (for instance) a Company Purchase of Own Shares arrangement. In answer to Mr Murray's question as to whether Mr X's position as trustee would increase any minority discount Mr Dodge thought that any effect would be minimal and would not create a discount any higher than 15%. This final point illustrates one potential impact of the trust and LLP on assets available for distribution in these proceedings.
48. I found both E and K to be engaging, intelligent and honest individuals. They have been placed in an invidious position and they conducted themselves with grace and dignity. It is a great pity to see them cross-examined on the instructions of the parents who up to now have clearly done such a splendid job in bringing them up. I did not find that either child had anything of relevance to tell me in relation to the issues in the case. My decision in relation to the s. 37 application is not influenced by any issues of potential preference between the children (which was a significant part of the wife's written case) and as I have already said I am not assisted by an examination of who did what over the 30 years of this marriage. I also do not find (for the reasons set out below) that K's industry and acumen, impressive as it is, is material to my decision making.
49. Mr X is another individual reluctantly caught up in this litigation. He joined us (both as a party and a witness) from holiday. He is a successful businessman. He is a very good friend of the husband and used to be a friend of the wife. He knows K well, and E less of late. I have no doubt that he would take his task of trustee seriously and conscientiously. He told me that the idea for protection of generational wealth is much discussed at a group of business owners of which he and the husband are part. He said that he and the husband had talked about trusts generally for about 10 years and about specific provision about 5/6 years ago, although this was revised in parts of his evidence to 4/5 years ago. His knowledge of the actual setting up of the trust/LLP arrangements was sketchy as he conceded.
50. The husband's mother is another very impressive individual. She seems to me a gentle matriarch. I think her presence at the business is a very important cog in its engine. She is steeped in the history of the business and quite rightly very proud of the industry of her generation and the one before. She wishes to see it continue into the next generations and way beyond. She was good enough to tell me of her testamentary plan to leave her shares to K [4]. It is a further consequence of this litigation that that fact which the husband's mother would have preferred to keep from K was told to K in the course of cross examination. She told me that she transferred a single share to the husband in 2014 because he asked her to. I gained the impression that at that stage the husband was very much in the driving seat of the operation. This impression is enforced by the nature of the shareholders' agreement. From the evidence as a whole, and in spite of K's much emphasised contributions, I am clear that that situation has not changed. The husband remains very much in charge of the business. The husband's mother told the court that she was not aware of the decisions to move 25% of the shares into the trust or of the decision to set up the LLP until after the relevant events.
51. The husband gave evidence on 28/29 November. In respect of many aspects of his evidence he was hesitant and slow to respond. He did not appear to have a very good grasp of the detail of financial matters. I would conclude that at times this lack of comprehension/recall was honest but at other times I find it was a refuge from a difficult question. He first stumbled over the date of cohabitation. Having said in the agreed chronology that it was 1991 he had said in his s. 25 statement that it was 1994. I am satisfied that he was well aware that it was long before 1994.
52. He told the court that the marriage was in difficulties from late 2020. That is relatively close to the time adopted by the wife, and I think it is correct.
53. The husband was very unclear as to the source of the money used to refurbish the family home. He could not explain why the dividends in the accounts were so low (£200,000). He brought to court evidence on the second day of his evidence (which I allowed to be admitted) that establishes that the sums spent were £805,000. He accepted that the family had some sets of curtain that may have costs £30,000. He could not say where the money came from. He insisted that he had a relatively modest standard of living and (after some havering in cross examination and re-examination) he fixed upon a net income need of £60,000. This is a sum that includes the £1,500 or so that he receives in cash each month.
54. The husband was adamant that his decision making in relation to the "trust" and the LLP was not related to these proceedings but was to achieve a tax advantage in relation to the transfer to the next generation. He accepted that he did not discuss the advice received from Mr CH or from GS LLP with the wife and that he did not (save in a very cursory way) discuss it with his mother. He said he was very upset by the letter of February 2022, but it did not stimulate him to remove assets from the pot. He said that the wife was involved in the call on 31st March 2022 and was aware of the issues.
55. I do not accept the husband's evidence that the wife was throughout aware of his activities in relation to the trust and the LLP. I accept that the initial meeting (on 12 February 2020) was a cooperative one as is evidenced by the forwarding of emails in the spring of 2020. From the winter of 2020 I find that the husband was determined to keep the nature and detail of the transactions he was carrying out from the wife. There is otherwise no explanation for the change in process from joint discussions to unilateral ones. I accept that the wife was called into a call on 31 March 2022. I am not persuaded that there was any detailed discussion with the wife at that meeting as to the nature of the plans and the dispositions the husband intended to make a few days later.
56. The husband wishes to retain the family home. He said that the lake did not affect its value (there is another lake on the land) and that the footings on the property are the bare minimum attempt to preserve planning and were conducted with materials that were already on the site. He said that, if necessary, he and K could live in HS.
57. The husband's case in writing is that he did not need a property the size of the family home. He built it as part of the overall family endeavour and for future generations. I accept this to a degree, but I formed the view that the husband has a taste for luxury and some of the better things in life and that to this extent his lifestyle differs from that of the generations that went before. This in my view applies to his living arrangements and to his outgoings.
58. The wife's evidence was emotional at times. I accept that she was giving an honest account of the history and events as she saw them. Her evidence both written and oral dwelt on many issues that are not relevant to the decision I have to make. I set out below only her evidence in relation to the relevant issues. Her clear evidence was that the parties cohabited from 1991. I accept that evidence which accords with the initially agreed chronology. I accept her (written) evidence that the marriage was in difficulty from November 2020 which in fact accords with the husband's evidence. I accept her evidence that the parties had a lifestyle out of kilter with their apparent income. It is argued on behalf of the husband that there is no evidence for this, but I find that there is. The expenditure on school fees alone would have been £37,000 per annum. The house and grounds are very extensive and, even with the facility of the business alongside would be expensive to run. I accept that the parties went on expensive holidays and that the wife generally wanted for nothing.
59. The wife insisted that she had not understood the detail of the discussions on 12 February 2020. She said she mostly recalled the discussion to be about IHT planning in relation to the family home. She said that the husband had lied to her about the meeting on 1 October 2021. She accepted that she was called into a phone call on 31 March 2022, but she said that it was a very cursory discussion, and she did not know the details of what was being discussed. Her case is that she found out about the nature of the transactions in September 2022. I accept the wife's evidence on all these issues. It seems to me highly likely that the discussions on 12 February 2020 would have been very preliminary. It is clear that IHT issues on the house were discussed. I think it probable that a transfer/trust of the shares were discussed but it does not surprise me that (in the context of an apparently happy marriage) no alarm bells sounded for the wife at that stage. I accept the wife's evidence that she was only tangentially involved in the phone call of 31 March 2022, and I find that the husband did deceive her about the meeting on 1 October 2021. By this stage, as I find, the husband was actively seeking to conceal the detail of these transactions from the wife. I am satisfied that the wife discovered the nature of the transfers in September 2022.
60. The wife said that she would have had less objection to the transfer of funds if they had gone to both children directly or if she had been a trustee. This is a concession that is relied upon by all the other parties in relation to the s.37 application.
61. Once again late evidence was produced from the wife about the refurbishment of the property. On her case the cost was higher than £805,000. Nothing turns on this.
62. The wife wants to live in the South East close to E, E has not yet determined the location in which she wishes to live. The wife provided a wide range of properties in the £2m to £2.3m range, some in London. I formed the view that the properties were selected on a price basis, rather than a detailed amenity basis– her view being that her housing should be within a better margin in the family home than was suggested by the husband. The wife revised her schedule of outgoings (from £159,000 to £199,000) with her s. 25 statement. For some reason the schedule is not in the Bundle. She defended the new schedule on the grounds that it reflected her lifestyle during the marriage.
4. Computation issues
63. The issues in relation to the business are (a) should the business be valued on the basis that the leases are collapsed or on the basis that a buyer would buy subject to the lease (b) will there be a minority discount and (c) should there be further discounts for (broadly) illiquidity, risk and dynasty issues. There is also an issue about extraction tax.
64. It is clear from the valuation chronology that both the unliteral instruction to Knight Frank and the initial joint instruction to Mr Dodge were carried out on the sensible basis that the valuation should assume sale of the whole and collapsed leases.
65. I have described above the process by which (without apparent leave of the court) Knight Frank were directed to prepare a value of the leases and a valuation of the businesssubject to the potential leases. It was then agreed at the July directions hearing that Mr Dodge should advise on both bases. This was at the instigation of the husband who wished for forensic purposes to reduce the value of the business. The husband's case is that the court should now address valuation on the basis of Mr Dodge's second report and conclude that there is a reduction in value as a consequence of the land being held by separate entities. In relation to this I do not agree with the husband's figures in that he asserts that the land revalued by Mr Dodge at £8.75m is otherwise valued at £4.43m. As far as I can tell the £4.43m figure relates to the valuation of the FV land and not the notionally leased land which has not been separately valued save at the value at which it was introduced to the LLP which was £246,868. It seems to me therefore that it could be argued that the husband's revised approach is in fact capable of increasing the value of the overall pot but, as I conclude that the original collapsed lease value, is the most appropriate valuation, I have not recalculated the figures.
66. The obvious and straightforward approach is to value the business with the leases collapsed. As observed by Mr Dodge there are no competing interests. If it were to come to a sale, whether it be the husband and the husband's mother or the husband, the LLP, the trust, and the husband's mother, all would be motivated to sell in a manner to maximise the overall value.
67. The same position applies to minority interests. The business runs fluidly between family members. If it were to be sold it would be as a unit and in the manner most likely to maximise the sale price. There is no rationale at all for a minority discount which is a discount that reflects a difficulty in realising a shareholding at its assessed value.
68. The husband's case is that other discounts should apply. Mr Wilkinson refers me in particular to Bodey J's decision in Chai v Peng [2017] EWHC 792. In that case a 10% discount was applied to reflect a risk in the valuation of real property flowing from a desk top valuation. The risk was explored in evidence and found to exist. A further 20% discount was applied to reflect a potential difficulty in realising the shares. The shares in Chai v Peng were valued at £153m and the court factored in a risk in relation to "realising the underlying value" which was also addressed in evidence. A Wells discount reflecting the difference between copper bottomed assets and risky assets was also applied. In my assessment none of these issues arise here. Whilst I accept that valuations of businesses are of course imprecise and uncertain, the valuation here may be considered sounder than many in the sense that Mr Dodge and Mr Walters reached a consensus in their joint report. Furthermore no evidence has been adduced as to any difficulties in achieving a sale should that be a course decided upon by the shareholders. Finally I do not think that the continuation of the businessis an inherently risky venture; no evidence at all has been adduced to that effect and Mr Dodge has expressly considered these issues in his updating report.
69. Finally, it is urged on me that this is a "dynasty" case which I infer to mean there is a brake on sale in order to preserve assets for future generations. Whist I understand the strength of feeling in relation to the fact that this business started with the husband's grandfather two generations ago and that there is a fourth generation family member who wishes to preserve it, I do not think that this factor operates as a separate "circumstance" of the case that would cause me to alter my s. 25 conclusions.
70. For the reasons I have already set out the LLP does not have a separate value. Mr Dodge in his short evidence to the court gave evidence that a higher valuation of the LLP land would make no difference to his valuation unless it were of such value that an asset valuation would outstrip the enterprise valuation.
71. I do not find that either the lake or the footings will increase the value of the family home. The parties have agreed the valuations, and I do not intend to go down any further valuation rabbit holes.
72. I do not find the husband has any hidden assets such as may make a difference to computation.
73. I find that the husband must pay £40,000 to his friend. This is the figure in ES2. Insofar as he said in evidence that funds had moved around, and it was now £80,000. The evidence was very unclear and at least one tranche of £40,000 was said to have been received in cash. I am not satisfied that I have sufficient evidence on which to base a finding that he owes £80,000.
74. I am also urged by Mr Wilkinson to account for extraction tax. It is agreed that the shares should be valued after CGT and costs of sale. In the ES2 Mr Wilkinson makes a full additional discount at dividend tax rates. In submissions he conceded that this would only apply to any part of the wife's award extracted as dividends. Mr Vickers says the double deduction is unprincipled. I agree that the generic double deduction is unprincipled. The difficulty here is that I have no evidence as to the precise tax that would be payable in relation to any particular means of raising funds to pay a capital award to the wife. In addition the level of tax will depend on the extent to which the husband elects to meet the award through the business as opposed to other assets. I return to this issue later in this judgment.
5. S 37 Application.
75. The Law
All parties are agreed on the relevant legal principles.
S37 MCA 1973 provides"
1) For the purposes of this section "financial relief" means relief under any of the provisions of sections 22, 23, 24, 24B, 27, 31 (except subsection (6)) and 35 above, and any reference in this section to defeating a person's claim for financial relief is a reference to preventing financial relief from being granted to that person, or to that person for the benefit of a child of the family, or reducing the amount of any financial relief which might be so granted, or frustrating or impeding the enforcement of any order which might be or has been made at his instance under any of those provisions.
2) Where proceedings for financial relief are brought by one person against another, the court may, on the application of the first-mentioned person—
(a) ...
(b) if it is satisfied that the other party has, with that intention, made a reviewable disposition and that if the disposition were set aside financial relief or different financial relief would be granted to the applicant, make an order setting aside the disposition;
(c) ... and an application for the purposes of paragraph (b) above shall be made in the proceedings for the financial relief in question.
3) Where the court makes an order under subsection (2)(b) or (c) above setting aside a disposition it shall give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payments or the disposal of any property).
4) Any disposition made by the other party to the proceedings for financial relief in question (whether before or after the commencement of those proceedings) as is reviewable disposition for the purposes of subsection (2)(b) and (c) above unless it was made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any intention on the part of the other party to defeat the applicant's claim for financial relief.
5) Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or with respect to a disposition or other dealing with property which is about to take place and the court is satisfied—
(a) in a case falling within subsection (2)(a) or (b) above, that the disposition or other dealing would (apart from this section) have the consequence, or
(b) in a case falling within subsection (2)(c) above, that the disposition has had the consequence,
of defeating the applicant's claim for financial relief, it shall be presumed, unless the contrary is shown, that the person who disposed of or is about to dispose of or deal with the property did so or, as the case may be, is about to do so, with the intention of defeating the applicant's claim for financial relief.
Per Mostyn J in Kremen v Agrest [2010] EWHC 2571 in connection with s.23 MFPA:
'This is the Part III counterpart to the more familiar s 37 of the MCA 1973. It is entitled 'Avoidance of transactions intended to defeat applications for financial relief'. For W's application to succeed the following has to be demonstrated:
(i) That the execution of the charge was done by H with the intention of defeating her claim for financial relief. This is presumed against H, and he has to show that he did not bear that intention. See s 23(2)(a) and s 23(7). The motive does not have to be the dominant motive in the transaction; if it is a subsidiary (but material) motive then that will suffice: see Kemmis v Kemmis (Welland and Others Intervening), Lazard Brothers and Co (Jersey) Ltd v Norah Holdings Ltd and Others [1988] 1 WLR 1307, [1988] 2 FLR 223.
(ii) That the execution of the charge had the consequence of defeating her claim. This means preventing relief being granted, or reducing the amount of any such relief, or frustrating or impeding the enforcement of any order awarding such relief.
76. In the light of the section and the guidance of Mostyn J I need to determine the following:
a) Does the disposition affect the likely claim by preventing or reducing the amount of any financial relief which might be so granted, or by frustrating or impeding the enforcement of any order which might be made.
b) Was the disposition made with that intention?
c) Should I in my discretion set the disposition aside.
77. I cannot pay adequate credit to the thorough and helpful submissions made by all parties on this issue. I set out only a summary. Mr Murray has provided written submissions. He argues that the wife's concession that she would not have applied to set aside a transaction gifting shares to the children is fatal. He argues that the family has a tradition of handing down assets from one generation to the next, he argues that the professional evidence (that of the tax advisor and the solicitors) and the evidence of Mr X, the husband's mother and K all support the contention that the transfer was a long held plan. He argues that the wife was fully informed. Mr Day adopts Mr Murray's points. He emphasises that the husband's mother spoke eloquently of assets passing down the generations. In relation to the issue about the discharge of the presumption (see below) Mr Day said that little turned on it and the court should be able to come to a clear conclusion that the transfer was not carried out with the requisite intention.
78. Mr Wilkinson emphasised the chronology I have set out above. He argued that the presumption does not come into play because the transaction has not had the effect of defeating the wife's claims. His point here is that the 25% transferred to the trust was inherited and Mr Wilkinson's case is that it is therefore fully non-marital and would in any event be excluded from division. He adopted Mr Murray's point in relation to the wife's evidence as to the transfer to the children direct.
79. Mr Vickers for the wife says that the presumption is in play because of the timing. His case is that all assets are effectively marital. He does not address any means of calculating marital/non-marital assets. He also relies on the chronology but for different reasons. He points to the fact that the trust was not discussed with the wife as was suggested it might be in GS's letter. He says the timing of the transfers are "no coincidence". He argues that the estate planning is effectively a cloak to the real intention.
80. I am in no doubt that both transactions satisfy the first test which is whether they have the effect of "defeating" the wife's claims. The transfer to the trust reduces the business assets by just under a third. As I will find there is a non-marital element to the shares transferred into the trust, but they are not fully non-marital. Their absence from the assets available for division affects both the sharing assessment and the needs assessment (because the extent of the assets will sound in the needs analysis). It also affects the husband's income against which the wife's income claim is assessed. In relation to the LLP the husband has transferred the bedrock of the business land out of his immediate control. He has also deployed the argument that the land owned by the LLP is a feature that should reduce the value of the business. I therefore find that both transfers satisfy the first test. For that reason, and given the timing, the presumption that the transfer was intended to defeat the wife's claims comes into effect.
81. In my view and in spite of the forceful submissions made to the contrary the husband has wholly failed to rebut the presumption in relation to motive. I accept that the transfer of assets to the next generation is central to this family's history. I also accept that in 2020 (and possibly long before) and no doubt all the way through to the present the husband had a genuine motive to pass assets on to the next generation in a tax effective and operationally effective way. However, had this been the husband's only motive I can see no reason at all why he would have changed his modus operandi from the inclusion of the wife to her exclusion at exactly the point at which the marriage foundered. I find that he knew (as was clear from the Nelsons February letter) that the wife would not agree to the transfer of assets in the manner executed on 6 April 2022 and would in fact have sought to prevent it. He therefore kept her deliberately in the dark. In my view the only possible reason for the secrecy was because he wished to transfer the shares and the land beyond the wife's reach in any potential litigation. My finding is that the defeat of the wife's claims was a strong and certainly material part of the husband's motivation. If a party intends to make a completely innocent transaction and then that party separates from a spouse, and it occurs to them that the transaction they intended to make has an additional useful effect of defeating the other parties' claims and the transaction takes place that is in my view a transaction that falls within the section; the defeat of claims is a material motive. The party cannot hide behind the previous innocent intention. However, to be clear my finding is that the husband's conduct went beyond that just described; I am of the view that he expressly addressed his mind to the way these transactions might best be arranged to defeat the wife's claims (or as he may have seen it, to protect the business from the wife).
82. There is a further point in relation to the LLP. The LLP is a vehicle through which the husband hopes to transfer the land into the business tax effectively. It was, at one stage, mooted that this might have been done in partnership with the wife. I can see why this plan changed with a marriage in difficulties, but the change of plan points again to part of the husband's motive being to defeat the wife's claims.
83. In relation to Mr Murray's point, I do not find that this affects the position. The issue is the effect of the transfer and the husband's motive. The fact that the wife might have been more sanguine if a different transaction had been carried out is not material.
84. In relation to discretion I can see no reason not to exercise my discretion. It has been urged on me that delay is fatal to the exercise of my discretion, but I accept that the wife's application was stimulated by the valuation of the trust assets and the failed pFDR. It was reasonable for her to attend the FDR before making her application.
85. I have no evidence that the husband is not now in good health in spite of his heart attack in 2020/2021 (he was not able to remember the precise date). As soon as these proceedings are resolved and assets distributed, he will be free to make such plans as he wishes in relation to the next generation.
86. Having said that, if the husband wished to satisfy the wife's award as I have found it to be with the Trust and LLP structures still in place, I would be prepared to consider (with proper safeguards) a form of order that would not set aside the transactions. This does not undermine my decision; it is merely a concession to the estate planning aspect of the husband's motive.
6. Marital/Non-marital Assets
87. In relation to the business there are two distinct aspects. The first concerns the pre-marital contribution and the second the later contribution of 26% of the shares from the husband's family.
88. I deal first with the assets that were brought into the marriage. I have found that the parties started cohabiting in 1991.
The husband brought the following into the relationship.
(i) He had a 47.5% share in the business. According to probate records the value of the 5% share of the partnership left to the husband's father was £7,003. The husband's 47.5% share was therefore worth £66,528.
(ii) He had the land at HV which had been gifted and the land he had bought adjoining HV. The land on which HV was built was sold to build the current family home. The adjoining land has been retained and forms part of the business valuation.
(iii) He inherited from his grandfather half of Plot 3 (the original site). The value of the land at that date was £75,000. The husband's half share of the land was worth £32,500.
(iv) I have also found that the land bought in 1992 is non-marital on the basis that it was almost certainly bought with pre-acquired assets.
89. The parties cohabited in HV even before its decoration was completed. It was the marital home for most of the first decade of the marriage. It was sold to enable the purchase of the family home. I intend to treat the family home as entirely marital. However I think there is force in Mr Wilkinson's submission that the introduction of HV must play some part in the overall determination of fairness.
90. I have no expert evidence of the value of these assets in 1991. The probate value was £66,528 for the business and £32,500 for the land. In addition there were two other pieces of land, one purchased for £35,000 and one for £24,000. Total assets were £158,000. The business has been transformed from the one that the husband inherited in 1991.The present value of 50% of the business net of CGT and costs of sale is now £7,255,600. The site has grown from a few acres to 500 acres. An ancillary business has been developed. A business with extensive amenity has been created.
91. Indeed that is the husband's case, he has said that "he and his father" together "transformed" the business from 1991. He also relies on his mother's contribution and his further position is that from 2015/2016 he and K have carried on the transformation. His case is effectively that the growth in value is attributable to the wider "family endeavour" and that this takes the case outside the usual case in which uplift would be attributable to the work of the "breadwinner" and therefore shareable. (As I have said there has been a lot of time spent examining the contributions of the respective spouses and I have found that this is completely irrelevant. The wife is a fully entitled wife and that is that. It does not matter whether she worked as a nurse (as indeed she did), in the home or at the business).
92. The wife's case is that all these assets are marital having been transformed so much beyond recognition during the marriage that the original contribution is effectively irrelevant. Her case is the same in relation to the 2016 inheritance.
93. In relation to the "family endeavour" I have concluded that the parties should be attributed the uplift in their half share. It is agreed that by 1997 or thereabouts the family was trading as a partnership with 50% owned the parties and 50% by the husband's parents. Very soon this became a company with the shares distributed in the same manner. It seems to me that the simplest and most appropriate way to reflect the "family endeavour" is to assume that each family contributed to their half of the business. I have asked myself whether the acquisition of land alters this analysis. The personal land was all acquired in the husband's name and not in his father's name, but land was purchased with funds raised from the business (there is no other source). It is clear that the two families pulled together, and funds were made available from the business for what was necessary. (If evidence of this were needed it can be found in the uneven declaration of dividends, favouring the husband and the wife over the husband's father and the husband's mother in relation, in particular, to the building of the family home). Notwithstanding the uneven purchase of land, my finding is that each family effectively contributed to the uplift on their half share of the business. I have considered the additional fact that in 1999, the husband was gifted his father's 50% share in the land at OC (Plot 3). This gift was clearly non-marital. However I do not think it alters the picture of each family having essentially a half share.
94. It follows that my conclusion is that the historic "family endeavour" does not have a material effect on the assessment of the marital uplift in relation to the parties' half share.
95. A further argument is raised in respect of K's contribution I have listened carefully to arguments that K's endeavours somehow change the position. I accept that he has been paid less than most people in jobs with the responsibility that he has, and I accept that his contributions have significantly enhanced the profit of the business. However, K is not an owner of the business, and he is not a shareholder or a director. If K were any other employee, it could not be argued that their contribution should affect the analysis or marital acquest. In my view his contributions do not alter the position in relation to marital acquest. K has a reasonable expectation that he will take over the business. He appears to have the skills to achieve that. A fair distribution of the marital assets will not affect his future significantly and even if it did, I am not persuaded that that would be a factor that I could take into account under s.25 MCA 1973.
96. The 50% of the business with which I am dealing at this stage has a net value of £7,255,600 after costs of sale and CGT. How should I then reflect the assets that the husband brought into the marriage which I have assessed had a value of £158,000 in 1991.
97. I have been referred to Standish v Standish [2024] EWCA Civ 567, Jones v Jones [2011] EWCA Civ 41, Robertson v Robertson [2016] EWCA Civ 1866 and Martin v Martin [2018] EWCA Civ 2866. Mr Wilkinson has suggested that I could take a Jones approach, and, on his case, I should inflate the initial contribution to £1,660,000, take that as an historic value and then uprate it by inflation to £4,774,976. On top of this I should then make a springboard allowance. Mr Wilkinson has also carried out a Martin (straight-line) calculation taking the line back to 1948. I am grateful for Mr Wilkinson's figures and his attempt to provide a structure for an analysis, but I can see no justification for the £1,660,000 figure and I also do not think that I could fairly apply a straight line deduction back to 1948.
98. All historic business valuation approaches are accepted to be arbitrary and subject to criticism of one sort or another. My view is that the fairest approach here, given that I have no reliable 1991 valuation or uplift criteria is to take the Robertson intuitive approach and to ask myself to what extent does it seem reasonable to apportion the current value between the value of the bedrock/seed in 1991 and the value today? In my view the right deduction to make is one of 25% of the current value. This is significantly higher than the base probate value but, in my view, fairly reflects the importance of the original site and the original concept and the already established family commitment to pulling together to build a solid business and it also reflects the introduction of HV. I think that the fairest approach is to treat the introduction of the assets as worth 25% of the current value. In other words of the £7,255,600 represented by the 50% share I treat 75% or £5,441,700 as marital. My finding is that this fairly reflects the value of the husband's initial contribution.
99. I have not made any further deduction to reflect post separation growth. It is absolutely plain that these parties could not live together or in proximity. The husband could not leave the location so that obligation fell to the wife. It would be wholly unjust in those circumstances to make a deduction for post separation accrual.
100. I turn then to later gifts. In 2014 the husband's mother gifted the husband a share. This again is a non-marital contribution. It is perhaps not vastly significant in its own, but it is part of the 26% of the shares which I would treat differently in terms of calculating uplift. In 2016, when the husband's father died, he left his 25% share of the company to the husband. The value attributed to a 24% share these shares by Mr Dodge is £1.438m. If I uprate this to represent a 26% share, then the figure comes to £1,557,833.
101. Mr Wilkinson argues that no element of these shares can be marital. His case is that they were inherited and kept separate from other assets and then passed into the trust. He says it is well established that such assets could not acquire a marital element. In relation to this issue I deal first with the facts. The majority of these shares were received by the husband in 2016. At that stage husband and wife became the owners of 76% of the company. By then the business was a thriving business and expansion since 2016 has been part of a continuum. The uplift since 2016 that applies to the 50% already owned also applies to the 26% later received. By this stage the husband's mother was working less (although still meaningfully) by reason of her age and the growth since 2016 has been largely due to the acumen of the husband. For the reasons I have already articulated I do not find that K's contribution alters the nature of this acquest.
102. As I understand Mr Wilkinson's submission it is that the inherited shares were non marital and had not been "matrimonialised". In paragraph 160, 161 of Standish v Standish Moylan LJ said as follows:
160 "I consider that it would be wrong to state that, as a matter of principle, property which has a non-marital source can never be subject to the sharing principle. There may well be situations when, as referred to above, fairness justifies this. However because, as Mr Bishop submitted, it is a derogation from the principle that sharing applies to matrimonial property and does not apply to non-matrimonial property, it should be applied narrowly. This is so that it is not used by parties in a way which would undermine the clarity of the sharing principle, namely that it is the sharing of property generated by the parties' endeavours during the marriage.
161. In my view, therefore, it would be helpful to make clear, expressly, that the concept of matrimonialisation should be applied narrowly. This is not a hard and fast line but remains a question of fairness, reflecting, as Wilson LJ said in K v L at [18], that "the importance of the [non-marital] source of [an asset or assets] may diminish over time". With some diffidence, I would propose the following slight reformulation of the situations to which Wilson LJ referred in K v L, having regard to the developments that have taken place since that decision as follows: (a) The percentage of the parties' assets (or of an asset), which were or which might be said to comprise or reflect the product of non-marital endeavour, is not sufficiently significant to justify an evidential investigation and/or an other than equal division of the wealth; (b) The extent to which and the manner in which non-matrimonial property has been mixed with matrimonial property mean that, in fairness, it should be included within the sharing principle; and (c) Non-marital property has been used in the purchase of the former matrimonial home, an asset which typically stands in a category of its own".
103. I have highlighted part of paragraph 160 because it seems to me that the issue of uplift created by marital endeavour is not a "matrimonialisation" issue. If this were so, then if a party inherited a small business at the beginning of the marriage (as in fact occurred here) and the parties grew that business into a behemoth then it could be argued that the entire business was outside the sharing principle.
104. In my view therefore the husband is entitled to ringfence his inherited shares and passive growth upon them. I have not been provided with any suggested index for the inherited shareholding. In relation to the pre-marital shareholding the husband relied on an RPI inflation rate. I have applied the Bank of England CPI inflation calculator to arrive at £2,089,523. The current net value after CGT and tax of 26% of the shares is currently £3,772,912. That rest of the uplift is in my view marital. The relevant marital share is therefore £1,683,389.
105. The marital acquest in relation to the business is therefore £1,683,389 and £5,441,700 or £7,125,089, half of which is £3,562,544.
106. The wife is also entitled to half of the value of the family home and half of the other net assets excluding HM. I see no reasons why the pensions (which are marital) would not be equalised in specie. According to my calculations half of the other capital assets is £1,710,812. In order to arrive at this figure I have removed the chattels which will be shared, and I have removed the minimal amount owing in respect of the joint account (£89). The wife's total award would therefore be £5,273,356 (£3,562,544 and £1,710,812).
107. The wife has net liabilities of £357,449 so the additional capital required by her to ensure that she receives her sharing award is £2,068,261. If the husband takes responsibility for the wife's DLA that sum will become £1,816,623. The net effect insofar as the wife is concerned is that she will have an overall lump sum of £5,379,167. These figures are set out in the attached ES2.
108. The wife's total capital award is £5,273,356. By my calculations the total capital assets are £14,901,155. The husband will retain £9,627,899. If I check the award against the overall assets the wife would have 35%. That percentage seems to me to satisfy the cross check and meet overall fairness. I have attached a second ES2 to this judgment setting out my analysis of the overall assets.
109. I deal here with the open offers. The wife's open offer until she gave evidence was that she should receive a lump sum of £8,167,658.40 and that her DLA should be repaid (it was lower at that stage). Until payment of the lump sum the husband was to pay periodical payments at a rate of £250,000 per annum. She was to receive a 9% pension share. That offer was made on 13 March. The wife revised her position in the witness box to a lump sum of £6m together with the discharge of her debts. In closing her case was as in the witness box with the addition of periodical payments of £199,380 until payment of the full lump sum.
110. The husband's open offer of 24 April was a lump sum of £3,669,769. From which the wife's DLA should be deducted. The wife's salary (£1,650 per month) was to continue until the lump sum was received. There was to be a pension share of 15%. On 19 July 2024 the husband increased his offer to £4,059,769; the balance of his offer remained the same.
7. Housing Needs/Income Needs
111. The wife's property particulars are in W11 (£2.3m) Hadley Wood (£2m), Blackheath (£2m) and Buckhurst Hill. The husband has produced particulars in at prices ranging between £1,200,000 and £1,395,000. They are situated in various regions including Kent, the East Midlands and the outskirts of London.
112. As the wife doesn't know where she wishes to live none of the particulars are as much help as they otherwise might be. Furthermore the standard and price of the marital home is also less helpful than it otherwise might be. The family home (in particular its extensive grounds) does not represent the usual benchmark. On the other hand I think I have to reflect to some extent the quality and size of the family home itself. In my view a reasonable budget including stamp duty would be £2.1m. This would permit the purchase of a property at just below £2m. This seems to me to be a reasonable aspiration for the wife. The precise nature of the property will depend upon where she decides to live. She will have flexibility to live in London if she so chooses. I do not accede to Mr Wilkinson's case that I should assess the wife's needs in the light of the fact that the husband might choose to live in HS. This will be a choice if the husband makes it. On the basis of the award to the wife the husband will be able to purchase another property at a similar value although I accept it may take some time to organise his affairs so as to do so.
113. The wife's first income needs schedule was exhibited to Form E in the sum of £157,000. She increased this to £199,380 in her s.25 statement although inexplicably a schedule was not attached. Quite properly (and inevitably as it was not in the Bundle) it has not been the subject of detailed cross examination but rather a broad brush challenge. The overall income available to the husband (if there is no trust) is £336,000 gross. Extracted by dividends at a maximum rate this would be £203,784. Very little turns on it, but I assess the wife's income needs at £100,000 net. I consider the s.25 figure to be wholly untenable and although I find the standard of living higher than indicated I think the figure must bear some relation to the available income.
114. I have carried out a Capitalise calculation treating the pension as capital and on the assumption that the wife can earn £15,000 per annum. The required lump sum would be £1,423,000. The wife's needs claim is therefore lower than her sharing claim, so the latter prevails.
8. Sharing/Needs
115. As I have said the sharing claim exceeds the needs claim so the sharing claim will prevail. I point out here that I have considered the question of whether there should be any adjustment to reflect the husband's ability to continue to draw income from the company while the wife must amortise her award (to some extent). I do not consider that any further adjustment is necessary.
9. Conclusion
116. The husband will need to raise £5,379,167 and he will need to pay off the wife's DLA. How will the sum be raised? This will largely be a matter for the husband, but I address it here to the extent of timing and tax issues.
117. The wife will need a lump sum to pay her litigation loan and to provide her with the wherewithal to meet her outgoings. I assess that at £500,000. I would direct that this be paid within three months and that in the meantime the wife continue to receive interim maintenance of £4,000 per month. This initial sum may have to be raised by borrowing. There is evidence that the husband has the capacity to raise sums significantly greater than £500,000 by mortgage or borrowing. The balance may be raised by sale of the family home, sale of HM and/or by a CPOS mechanism. There is some liquidity within the company and the company also has assets and land that could be sold. It seems to me that the most prudent and tax efficient way to raise funds through the company would be by a CPOS mechanism utilising the wife's shares. This is the mechanism identified by Mr Dodge and it would not incur dividend tax. On the basis of the lump sum awarded and the assets available to meet it, I do not think that there is likely to be taxation beyond the capital taxation identified by Mr Dodge and I have therefore not made any additional deductions for extraction tax.
118. I would expect the parties to work together to raise the funds in the quickest, most tax efficient manner and the one that impacts the business the least. I anticipate that accountancy advice will be needed and I will hear submissions on whether that should be joint or commissioned by the husband. I will hear submissions on timing, but my initial view is that I would allow 6 months to raise a further £2m and a further 6 months to raise the balancing lump sum. There will be provisions for sale of the family home and of HM in default. I will hear submissions in relation to whether any further provision is necessary.
119. I have said I will address the issues of litigation conduct. In my view this case has been conducted on a reactive basis by both parties. One party has behaved in a certain way and the other has considered that if they fail to react in the most comprehensive and aggressive manner they will be outmanoeuvred.
120. The husband placed assets into trust and an LLP when the marriage was in difficulties. He also instructed sole experts in relation to the valuation of the business. He asked questions of Knight Frank that were not permitted (although I am aware they were agreed), and he introduced the conclusions into evidence. He changed the basis of his instruction to Mr Dodge for forensic purposes and he introduced arguments in relation to family endeavour and dynasty that have not had an impact on outcome. The question of the appropriateness of his position in relation to joinder of parties is a matter that will have to be considered when I have received submissions on the point.
121. The wife applied for Daniels v Walker valuations that were unnecessary. Throughout she has refused to accept SJE valuations and has introduced without leave independent valuations commissioned by her. She has raised an enormous number of irrelevant issues including conduct. Her s. 25 statement is of unacceptable length. The irrelevant issue as to the nature of her work in the business was introduced by her and advanced all the way to the final hearing. She introduced sham at one stage and, although she agreed not to pursue sham it should never have been raised. She also sought to rely on conduct in her s 25 statement. She caused extra expense in relation to the main expert by seeking to explore the minutiae of the conduct of the business. Her open offer was completely unrealistic in the light of non-marital resources, and she did not at any stage engage in any analysis such as might have assisted the court as to how to reflect non marital contribution.
122. These are my conclusions. The order is as follows:
1. I set aside the transfer of the 25% of the shares to the trust and of the three parcels of land to the LLP (unless the husband wishes to find a way to pay the lump sum without these transactions being set aside).
2. The husband will pay the wife a lump sum of £5,379,167. This will be paid as to £500,000 within 3 months, and I will hear submissions in relation to the balance.
3. The wife will transfer her shares to the husband in the most tax efficient fashion. (if the husband can find a mechanism to keep the family home and to keep tax liabilities at a reasonable level he is free to do so).
4. The husband will discharge the wife's DLA.
5. There be a pension share of 16% of the husband's pension.
6. The husband will pay £4,000 per month interim maintenance until the payment of the first lump sum at which point there will be a clean break.
7. The chattels will be shared, if necessary, by the mechanism (coin toss) proposed by the husband.
8. The joint account will be closed. The parties shall contribute equally to the overdraft.
Addendum/Costs
123. Since the draft judgment was disseminated, I have received comprehensive edits on behalf of the husband and some from Mr Day. I am very grateful, and I have incorporated the vast majority of the corrections. I have not made the alteration urged on me in relation to any potential additional extraction tax for the reasons already set out in my judgment.
124. I am also grateful for the comprehensive submissions that I have received in relation to costs. I propose to deal with costs in this order:
(i) As between husband and wife,
(ii) Mr X's costs,
(iii) K's costs (on a provisional basis as I have not heard submissions on this issue).
(iv) The husband's mother's costs.
125. I am told that the husband made a proposal in relation to costs after receipt of the draft judgment. He correctly divined that my observations at paragraphs 120 and 121 above were intended as a steer towards the parties each bearing their own costs. The husband proposed that the main protagonists should each bear their own costs, that he would pay Mr X's costs and that the parties should meet the husband's mother's costs equally (I am told that this was initially a WP position but was later made an open offer). Having been obliged to defend the wife's open costs position the husband's revised open position is that the wife should meet his unpaid costs (£152,599 or 38.86% of his costs), that she should pay the husband's mother's costs and that she should pay 50% of Mr X's costs.
126. The wife's open position is that the husband should pay her costs of the s. 37 application (£52,578.44), that he should pay costs associated with her litigation loan and that he should pay 10% of the balance of her costs. In total she seeks a contribution to her costs of £116,828.65.
127. In relation to the position between the parties there are in my view three main considerations that need to be balanced to arrive at a fair outcome. The first is that the wife succeeded in her s. 37 application. The s. 37 application does not fall under the general 'no order as to costs' rule pursuant to FPR r.28.3(5). The second is the nature and impact of the wife's only open offer. The third is the general litigation conduct of both parties as described at paragraphs 120 and 121 above.
128. The wife's only open offer was made on 13 March 2024. I summarise the offer below:
(i) It was said to be a long marriage "where there should be equal sharing of assets".
(ii) The family home was said to have been undervalued. A revised valuation of £5.25m was applied.
(iii) HS was said to have been undervalued and FV was said to have planning potential, although no uplift was applied for these factors.
(iv) A lump sum of £8,167,658.40 was to be paid. An additional sum was to be paid in respect of any ancillary items (such as garden furniture, ornaments, plants and statues, tools, machinery, contents, fixtures and fittings in relation to any property sold).
(v) The wife's Director's loan was to be paid by the husband or the business.
(vi) There would be a PSO of 9.93% of the husband's pension.
(vii) Periodical payments of £250,000 per annum were to be paid until the lump sum was received in full.
(viii) The sum was to be derived from sale of the following assets in the following order: The family home, FV, HS, HM, DJ.
(ix) The wife would have sole conduct of all sales.
(x) The offer would remain open until 4pm on 15 March.
129. The husband had made an initial offer on 5 March 2024. He made a revised open offer on 24 April when he increased his previous offer to £3,669,769 and offered a 15% PSO. The lump sum was to be reduced £1 for £1 for costs incurred after 1 May. The husband made a further open offer on 19 July in which he revised the lump sum up to £4,059,769.
130. I have set out below the husband's submissions in relation to this issue:
In OG v AG [2020] EWFC 52, Mostyn J stressed:
31. It is important that I enunciate this principle loud and clear: if, once the financial landscape is clear, you do not openly negotiate reasonably, then you will likely suffer a penalty in costs. This applies whether the case is big or small, or whether it is being decided by reference to needs or sharing...
93. ...I hope that this decision will serve as a clear warning to all future litigants: if you do not negotiate reasonably you will be penalised in costs.
Mostyn J also emphasised §4.4 of FPR PD28A, which requires parties to negotiate openly in a reasonable way, stating at §30 that it was "extremely important". §4.4 provides:
In considering the conduct of the parties for the purposes of rule 28.3(6) and (7) (including any open offers to settle), the court will have regard to the obligation of the parties to help the court to further the overriding objective (see rules 1.1 and 1.3) and will take into account the nature, importance and complexity of the issues in the case...The court will take a broad view of conduct for the purposes of this rule and will generally conclude that to refuse openly to negotiate reasonably and responsibly will amount to conduct in respect of which the court will consider making an order for costs...
In WG v HG [2018] EWFC 70, Francis J stated:
93. ...People who engage in litigation need to know that it has a cost...people who adopt unreasonable positions in litigation cannot simply do so confident that there will be an indemnity for the costs of the litigation behaviour, however unreasonable it may have been.
In my view these points are well made. The wife has wholly failed to negotiate reasonably. She made one open offer that was on the table for no more than two days. That offer was absurdly high and totally impractical. It took no account of the non-marital source of the assets; it relied on an uplifted valuation of the family home and it incorporated obviously impractical requirements in relation to additional lump sums and management of sale. It required the sale of FV and the potential sale of HS which it need not have done. The husband made two further offers after the wife's offer had been withdrawn on 15 March. The wife took no further steps to negotiate openly and reasonably. Indeed it is my view that she took no steps to negotiate openly and reasonably at all. I do not treat her offer from the witness box as such a step - that was far too late. Of additional relevance is the litigation conduct I have referred to above in paragraph 121. I have criticised both parties' litigation conduct but there is no doubt that, leaving aside the transfer of assets and the s.37 application, the wife's litigation conduct was more serious than the husband's. I do not repeat these factors but weighty among them was the wife's failure at any stage to recognise that there was a clear non marital source of the assets and her failure to reflect in her presentation the substantive and procedural guidance of the higher courts.
131. The wife's defence is that the husband had transferred assets outside the marital pot and that he had therefore created an atmosphere of distrust. In my view the transfer of assets by the husband and the successful s.37 application can be and should be considered separately. I do not consider that the fact of the transfer accounts for or justifies the wife's failure to negotiate. In my view the husband showed a willingness to negotiate openly by negotiating against himself in April and August 2024. Had the wife engaged appropriately in negotiations there must have been a prospect of avoiding the trial. The wife could and should have negotiated on the basis that the transferred assets were in the marital pot but that there was a non-marital element that should have been recognised.
132. In my view the wife must pay a proportion of the husband's costs to reflect the lack of open negotiation. If such a sanction were not to apply in this case, it is hard to conceive of a case in which it should apply. In my view a fair figure is 25% of the husband's costs. I have extrapolated the figure provided for unpaid costs to arrive at a figure of £98,172. I have alighted on 25% doing the best that I can to assess how likely it was that agreement could have been reached if the wife had adapted her position. The costs can be subject to detailed assessment, or the parties can accept my summary assessment of £77,102 (80%). I must make it clear that I have not carried out a proper summary assessment. I use the phrase only to mean that I am offering the parties a route to agreement to avoid the necessity for detailed assessments.
133. As against this finding the wife has a reasonable case in relation to the s.37 application. That is an application in relation to which the "no costs" rule does not apply and in relation to which I must apply a clean sheet. I cannot find that there is any reason why the husband should not pay the wife's costs limited to the costs incurred in the s. 37 application. I have an N260 stating that these costs amount to £52,578. I have applied the same logic to the summary assessment of these costs at £42,064 (80%). Once again, the costs can be subject to detailed assessment, or the parties can accept that "summary" assessment.
134. I do not consider it appropriate that the husband should compensate the wife in relation to the costs of her litigation loan. I note the points made on both sides about this. I am persuaded however by the fact that both parties have equivalent director's loans, and both have been taken into account (together with the wife's litigation loan) in the sharing analysis.
135. In summary therefore the wife will pay 25% of the husband's costs and the husband will pay the wife's costs of the s. 37 application. These decisions can be subject to detailed assessment, or the parties can accept my calculation of a net payment of £35,038 to be deducted from the lump sum to be paid by the husband.
136. In relation to Mr X, the husband will pay Mr X's costs. Those costs were occasioned by the s. 37 application. The "no costs" rule does not apply. They can only be the husband's responsibility. These can be subject to detailed assessment, or the parties can accept a summary assessment of £35,940 (90% - which reflects the Direct Access arrangement).
137. My provisional view in relation to K's costs is that they also were occasioned by the s. 37 application (the children were joined as beneficiaries of the trust). In my view the husband should also meet K's costs (which I would "summarily" assess at £21,854 (80%)).
138. In relation to the husband's mother's costs the correct outcome in my view is that the husband's mother should pay half of her costs, and the husband and wife should each pay a quarter. The husband's mother was joined by HHJ Ingram at a hearing after the failed FDR and following the only open offer made by the wife. I am told that at that stage her joinder was considered by the judge to be essential in the light of the wife's open offer which proposed the sale of business property (in particular FV and HS).
139. The court had no power in my view to make orders that would have affected the value of the husband's mother's shareholding whether or whether not she was a party. As was made clear by Mr Dodge her shareholding could have been enhanced to retain its original value if assets were to be sold. Having been joined and having received advice as to the court's powers it was largely a matter for her as to whether she wished to remain a party and take part in the final hearing. I offered to discharge her at the directions hearing in July, but it was argued forcibly on her behalf that she wished to remain a party to protect her position. I could understand why the husband's mother wished to be a party, and I did not therefore discharge her. However she did not need to remain a party to protect her shareholding and therefore I consider that she must bear some of the cost of her participation. In relation to the parties it is clear to me that the husband was of the view that the joinder of parties "on his side" would be likely to place pressure on the wife and advance his case. It is also clear to me that the court when it joined the husband's mother was very influenced by the wife's open offer. The wife could at any stage have reformulated her offer which could potentially have led to the withdrawal of the husband's mother from the litigation arena. The husband and wife will therefore each pay a quarter of the husband's mother's costs. Once again these can be subject to detailed assessment, or the parties can accept a broad brush assessment that each party should pay £28,262 (25% of 80%) to the husband's mother in respect of her costs.
140. I have also received submissions on the form of the order. The husband offers to pay the first lump sum within 7 days. That is in accordance with the order sought by the wife. In relation to the subsequent instalments I will direct payment by 31 May 2025 (prior to the expiry of the wife's tenancy) and by 28 February 2026.
141. I have made a preliminary decision in relation to K's costs. If the parties are prepared to accept that decision, then K need play no further role in this litigation. I will hear further submissions, if necessary, which can be sent to me by email.
[1] £480,248 [W], £392,642 [H], £163,222 [The husband's mother] £46,800 [Mr X], £27,317, [K]. There may be some reduction in these figures due to the abbreviated hearing. The court has already been told (for instance) that Mr X's costs are less than anticipated.
[2] The other is the transfer of three plots of land to the LLP. This is dealt with later in the judgment after the acquisition of the land has been described.
[3] I have not been able to ascertain why Mr Dodge believed the husband had received 24% of the shares.
[4] There is in fact a reference to these intentions, although more widely expressed (at times reference is to the "next generation" and at times to trusts) in the TBW report.