England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd September 2006

Mr Justice Singer:

1. Over five and a half days between 25 April and 4 May 2006 I heard evidence and submissions in this ancillary relief application made by Mrs S ('W') upon the termination of her marriage to Mr S ('H'). By common consent the delivery of this judgment has been deferred until after the decisions of the House of Lords in the conjoined appeals of and Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 1 FLR 1186, have become available, since when I have received further written and oral submissions from counsel, Mr Cusworth and Mr Carter for W and Mr Moylan QC and Miss Phipps for H.
2. H and W are respectively almost 54, and 51. H comes from a Mediterranean family which removed from North Africa to England in 1959. H was educated here and is fully integrated into English life. He met W in 1973 or 1974 when she would have been 18 or 19 and shortly thereafter (H puts it in 1975) they commenced cohabitation in rented accommodation in South west London. They were married in September 1977. Notwithstanding a number of medical interventions it transpired that they were unable to have children, a fact which continues to be a cause of considerable regret to both of them. Passing for the moment over the intervening years, they separated in March 1996 when H moved out of the final matrimonial home (LM House) where W continues to live. He rented accommodation until August 2001 when, with the assistance of significant mortgage facilities, he purchased his current home.
3. In broad terms, therefore, these parties cohabited before their marriage for a year or two, and as a married couple for a further 18 ¹/₂ years. I am asked to have regard to what W, in particular, asserts was or might have been the absence of finality about that separation in March 1996, an uncertainty which continued she suggests until some time late in 2000. But on any view of the matter their physical separation took place ten years ago, and during the intervening period it is the fact (and in no sense a recrimination) that H has developed his business without any form of support or contribution from W. She however argues that as he has not until now had to deal with her capital claims he has in effect had the use of money or assets which should be regarded as hers, and thus that her contribution has continued.
4. This is a submission with which I will deal in due course, but for the moment I simply observe that although (as correspondence produced by H evidences) some desultory requests for financial information with a view to settlement negotiation were requested from him in 1998 and 1999, the reality is that neither party felt emotionally able to face up to the unpleasantness of divorce and ancillary relief resolution until, in March 2003, H presented a petition relying on five years' separation. Decree absolute was pronounced in September 2003, and W initiated these financial proceedings in November 2003. They were to have been heard by Baron J on 13 June 2005 but were adjourned until this April because of late developments in the valuation dispute concerning H's shares in his company T Ltd.
5. For reasons which will become apparent that was, to say the least, unfortunate, and must be a significant feature of the development of the costs bills on each side. These were in round figures estimated at £361,000 for H and £207,000 (revised in July to £235,500) for W, a total therefore of just short of £600,000. By 20 September the aggregate costs bill was about £650,000. These amounts are wholly disproportionate in the context of the parties' present liquidity, the value of their assets (excluding pensions and H's T Ltd shares) amounting to something under £2M.
6. H accepts that throughout the course of their marriage W contributed to the fullest extent, and makes no criticism whatsoever of any aspect of her conduct. They did not initially seek to have a family. W found her work as a teacher (at which she had commenced just prior to the marriage) fulfilling, moving as necessary from one school to another when the parties came to live north of London at a time when H started to work with his brother in a civil engineering contracting company which I shall refer to as YD. That was in 1979, and W continued teaching until 1988 or 1989 when she branched out into writing educational books. Although she still derives some very modest income from that source, since the early 1990s she has developed an interest in antiques which, again, over the years has brought her in some relatively small income. She still has some stock but no or no secure trading premises. H recognises that nothing she earns or which it would be realistic to anticipate she might earn from these or any other sources is of significance in the context of the issues before me.
7. By 1991 H had a shareholding in YD and was chief executive of that company while his brother was chairman. Between them they had come to hold all the shares. H's financial situation had improved significantly over the previous decade when in November 1991 LM House was purchased in joint names for £540,000 with a considerable mortgage. It is a very extensive property indeed, and is now to be valued, in my view, at £1,310,000, which disregards notional sale costs but takes into account £60,000 which was the price H recently paid for the acquisition of some adjoining land to resolve a dispute with neighbours. The property is subject to a mortgage standing currently at just over £298,000.
8. LM House stands in almost five acres of grounds. It is a substantial three floor Victorian building with eight bedrooms and a variety of reception rooms. It has attractive formal gardens and a tennis court. W lives there alone and wishes to continue to do so. It is H's desire that she should be left in a position where she owns the property free of mortgage and may have the means to continue to live there indefinitely.
9. Although brief reference is made in documentation filed prior to the hearing to the fact that work needed to be done to the property to bring parts of it up to the extremely high standard of the rest, it was only at a late stage in the hearing before me that W produced her own detailed list of the repair and renovation works which she regards as essential. There is no professional estimate of what these works may cost, but something of the order of £150,000 to £175,000 would not seem untoward. What has been happening to date, over the years since separation at least, is that maintenance and refurbishment works to the house and garden have proceeded piecemeal at an average annual cost of about £16,000. This has been met by ad hoc contributions from H supplemented by W's income from all sources including the disposal of quite a number of items of household furniture (as opposed to her trading stock). She has also taken bank loans to help defray the refurbishment costs which debt stood at £30,000 by July 2005.
10. In June 2005 Baron J decreed that pending the outcome of this hearing H should pay W at the rate of £2,000 per month and should in addition discharge the monthly mortgage payments. He was also to pay outgoings and utilities, to include £300 a week towards the wages of the cleaner and gardener employed at the property. In fact, the cleaner and the gardener cost more than this, and W contributes a further £105 per week from her own resources. Thus staff costs at LM House are running at £21,000 annually. H has also since June 2005 paid W some £30,000 on account of her ongoing legal fees.
11. No very great scrutiny was directed during the course of the hearing at the detail of W's historic annual expenditure. She produced a schedule in early 2004 which threw up a total of £81,300 per annum, but when the mortgage interest and ongoing fees for a dispute which is now resolved are stripped out this reduces to about £65,000. Almost £10,000 of that is put down to repairs, decoration and maintenance of the property. As against that staff costs were then running at about £6,000 less than they now are. H's approach to resolution of the case assumed that W would be able to live at LM House with a net annual income, currently, of about £70,000. In his final submissions for W, in which he put forward a significantly revised proposal for the appropriate outcome, Mr Cusworth contended for ongoing maintenance at the rate of about £107,500 per annum net.
12. As for the husband's career and current circumstances, during the period of cohabitation he too clearly contributed fully. He would from his own description appear to be something of a workaholic, and indeed W suggested that his inability to take time off work for domestic life may have been a factor in their estrangement. I have no doubt that he has put and continues to put very considerable effort and commitment into his business endeavours. He told me that he lives for his work and that the reason why he has so few outside interests is largely because he takes so little time off work for them.
13. Another striking feature of the case is what I regard as his genuine continuing sense of regret that the marriage did not continue (a sentiment shared by W). This finds expression in his oft-repeated determination to ensure that LM House should be hers free of mortgage, and that she should have the means to continue living there. I repeat that to live there long-term has been her long-held expectation and remains her aspiration but these are aims which, if (as I would hope to do) I am to find a solution which achieves them, seriously limit the fair options available having regard to the quantum and structure of the parties' wealth and the balance between solid and realisable assets and those which are currently unrealisable and carry risk.
14. In the light of this mutual identical intention as to the ownership and occupation of LM House it seems to me not to matter whether (as H asserts) there was some express agreement that he would not put the property at risk to support any business ventures. The parties do seem throughout the separation to have acted on the basis the house would be W's and indeed she seems to have taken that for granted. But in any event I do not accept that I should approach the case on the basis that some sort of partition of assets has had the effect that in return H's shares in YD or T Ltd were to be treated as immune from inclusion in the assets falling for consideration in this application.
15. H's first employment was in 1977, at the time of the marriage, when he went to work for a petrochemicals firm as a management trainee. In 1980 the parties decided that H should leave that employment and go to work with his brother at YD, initially as services manager. His role expanded as did YD. H became a director of the company in the following year. In 1989 he became a shareholder in the company which by then was wholly owned by himself and his brother. It was then that he took on the role of chief executive.
16. Civil engineering was YD's principal activity, engaging in a series of one-off contracts in the construction industry. But in 1994 it started to diversify, on the initiative as I am satisfied of H, into longer-term contracts taking on aspects of local authority responsibility for such works as road repairs. By 1995 there were two such contracts which had been secured by YD. It was in that year that H and his brother redistributed their shareholding to reflect his importance and contribution to the success of YD and thereafter he held 40% of the shares. Mr Nedas, the forensic accountant instructed on behalf of H, has estimated that at the time of separation in March 1996 that shareholding can fairly be valued at £533,600 gross, £304,000 net. In the ten years from March 1996 to March 2006 the Retail Prices Index has gone up from 151.5 to 195.0, an increase thus of broadly one third. I simply note, therefore, that taking £304,000 as the shares' realisable worth in March 1996 indicates that in money's worth the equivalent value in March 2006 would be £391,000. Another indicator would be to postulate that H had at the time of separation held a portfolio of quoted shares worth £533,600 gross which had risen in line with the FTSE All Share Index. Their gross value would in March 2006 have risen to £882,500. The realisable value of those shares would be £754,500 (after deducting 5 per cent dealing costs and, at best, 10 per cent capital gains tax if maximum taper relief applied to the whole portfolio).
17. What has been described as the local authority outsourcing work undertaken by YD is said by H to have increased and substantially changed in nature from the date of separation until the next significant event in June 1999, In that month the two constituent and increasingly diverse elements of YD, its conventional civil engineering contracting and the local authority contracts, were separated. The company de-merged and the local authority contracts were taken over by T Ltd, the company which (with its associated and subsidiary companies, and its joint venture partners) H has run since. H explained and I accept that his philosophy and that of his brother diverged, the latter preferring the cut and thrust, in and out, and absence of sustained longer-term risk inherent in shorter-term civil engineering contracts, which the construction part of YD retained.
18. H therefore followed what he regards as his star, the philosophy that has led him to develop T Ltd's business on the course which it has taken Since 1999. In order to achieve the management buyout, T Ltd had to find £16M of which £12M was borrowed from its bankers and a further £4M was raised by the issue of preference shares to a lending institution. The preference shares were to have been repaid in three equal annual tranches commencing in June 2005. None of this financing involved jeopardising the parties' other assets, principally LM House, as neither charges nor personal guarantees were provided by H.
19. By the time of the de-merger the outsourcing work represented a significant proportion, about 40 per cent, of YD's turnover. W points to that as evidence that the business which is now T Ltd was acquired virtually fully-fledged from YD in 1999, and that its seed and indeed its early roots date back to before the 1996 separation. She also seeks to lend weight, or rather length, to this submission by suggesting that for the period from separation until sometime late in 2000 the marriage should to some extent be regarded as effectively continuing (in the emotional rather than the practical or just the legal sense) because she remained hopeful of a possible reconciliation. As it happens I prefer on balance H's evidence to the effect that this hope, if indeed it has more to it than subconsciously distorted hindsight, was wishful thinking without objective foundation. But whichever of them is right, or indeed if the reality is somewhere between the two, I cannot for my part accept that it adds to the merits of W's claim that she should receive at some unascertainable future date a capital sum to reflect the value, if and when realisable, of H's shares in T Ltd. A principal issue in this case is the fairness of that ingredient of her claim judged in the light of the accumulated guidelines on the principles which underlie the discretionary ancillary relief exercise.
20. In the first three periods for which audited accounts of the T Ltd group are available turnover increased significantly from (to the nearest £1M) £52M (annualised) to £162M to £217M. Then it is said to have 'plateaued' and thus although turnover increased the increases have been very much less significant. The profit before taxation has fluctuated significantly, more than halving between 2002 and 2003 despite a £16M increase in turnover. Profitability before tax dropped a further 58 per cent over the two subsequent years to 2005 notwithstanding £46M of increased turnover over that period, and inroads were made into the profits retained from previous years. This is because the overheads of the business remain relatively constant, whereas the flow of work for which charge can be made is dependent upon the spending budgets of the client local authorities whose priorities may change from year to year and indeed during the year. In 2005 and, it was anticipated, in June 2006 T Ltd's bankers will not have been prepared to afford it facilities to redeem the first two-thirds of the £4M preference share debt, which has been rescheduled.
21. H is entitled to dividend income on T Ltd preference shares which he owns, yet the company has not been able to pay him since 2002. The net sum involved is between £719,000 and £647,000, but neither of the forensic accountants suggests that he is likely to be able to receive these sums imminently, nor that this is anything other than a genuine as opposed to a contrived situation. Although there was talk about the possibility of flotation in 2002 that soon evaporated. Neither accountant suggests that the company is ripe either for a trade sale or flotation in current circumstances, or in reasonably imminent circumstances which can be said to be more likely than not to eventuate. Whether such a time will ever come must be speculative. If it does then it will most likely have been achieved in large measure by dint of H's energy and acumen, not only past but prospective, as well as more favourable market forces than exist at present when (I am satisfied on the evidence) there is some stagnation in the company's development. There is no other avenue whereby H could release capital from his shareholding, neither does either accountant suggest how he might do so.
22. Before I turn to the vexed question of the attempts to ascribe a current value to H's shareholding in T Ltd, I should refer to his acquisition in 2001 of his present property for which he paid just short of £1M and upon which he expended over a period very considerable sums in improvement and furniture and equipment. In order to purchase the property he took a mortgage of £855,000. That mortgage fluctuates as it reflects his overdraft and other liabilities to his own bank. It goes down when he receives a bonus and increases again when he pays tax, by way of example. At the date of the hearing it stood very near its limit, at £852,000. The property has six bedrooms and is a substantial home created by the subdivision of the wing of an eighteenth century country house. It comes with a half acre garden. It is clearly very desirably situated although it suffers some of the defects to which new conversions can be subject. H lives there alone.
23. H's income has fluctuated significantly. He reached a peak for the year which ended in April 2002 of~938,000 net. For each of the two subsequent years his net income was between £350,000 and £370,000. For the year ended April 2005 it was just short of £300,000, declining to £255,000 to April 2006. Until dividends are restored his only source of income is his salary plus a variable bonus. H does not have control over the amount of the bonus, and T Ltd is kept on a relatively tight rein by its bankers and no doubt also under close scrutiny by the outside preference shareholders. Monthly management reporting regimes are in place.
24. There is very little difference in the overall view of the parties' assets (other than the T Ltd shares) which each presents. Excluding the shares and the value of their pension entitlements (but including what H at the date of the hearing was owed in preference share dividends) the spread is between £1 .9M and £l.93M, and that £30,000 is too insignificant in the overall context to warrant investigation or comment. Apart from his interest in his home (itself subject to the mortgage of £852,000 already referred to) H's most significant but currently illiquid asset is those accrued but unpaid dividends, the value of which I have already stated. He owes £50,000 to his brother, which he anticipates may soon be £100,000 to enable him to pay the balance of his own costs. He accepts that he will be under no pressure to repay this amount, but regards it as a matter of honour that he should in due course do so. It is therefore apparent that he is burdened with debt and has at this time little if any capacity to produce capital other than by the sale of his property. This no one suggests he should do (although H in evidence did say that to comply with the requirements of a deferred clean break order which he seeks he would if necessary sell this property to honour his obligations), and in any event a sale would produce only some £360,000 net which it would be entirely reasonable for him to reinvest to buy somewhere else. The only source for payments to W as circumstances now stand is his income from the company.
25. W for her part stands in no better stead. The equity in her property would be of the order of £970,000 if sold subject to the mortgage, but neither party suggests it should be tapped. She has no assets of any significance whatsoever, although she retains those original contents of the home which she has not sold (thought to be worth about £80,000) and has £12,500 worth of stock in her antique business. She owes £30,000 on a conventional bank loan account, and just short of £127,000 in respect of loans which she has taken from BB Bank partly to meet expenditure in relation to LM House but which amount, far more significantly, includes about £105,000 with which she has made payments on account of her legal costs.
26. It is one indication of the nature of H's lifestyle that the car he runs is his rather than the company's, and that it is eleven years old. That said there have certainly been times when he has spent freely, probably mainly in connection with his move into his present home and the period thereafter when he was equipping it. Analysis of his expenditure was initiated at a very late stage in the case and despite prodigious efforts to deal with a detailed schedule which is its fruit I remain of the view that the picture is far from clear and that the allegation pitched high on behalf of W is far from made out: this is not a case like Norris v Norris [2002] EWHC 2996 (Fam), [2003] 1 FLR 1142, where reckless excessive expenditure should be written back into the balance sheet.
27. Happily the parties are agreed what should be done in respect of their respective pension entitlements. W has and will keep her teacher's pension with a modest CETV of £56,000. W's advisers have had no option but to accept the evidence that, despite fluctuations in the CETV figures given from time to time, those currently presented on behalf of H have been professionally and independently arrived at, and do not result from some chicanery on his part. His two schemes have a combined CETV of just short of £2.1M. Ihe parties have agreed that W will receive a pension share from H's T Ltd scheme which will equalise the CETVs which each has at their disposal. It has been estimated that when W is 60 in nine years' time she will receive some £3,800 gross from her teacher's pension, increasing at 3 per cent per annum thereafter. If at the same age she commenced drawing her pension share under this arrangement then an estimate is that it would produce for her £78,700 per annum gross, upon the basis that at age 60 she commuted the capital sum of £431,000.
28. I observe in passing, in relation to the proposed pension share, that the documentation seems to show that all but £141,000 worth of H's overall £2.086M worth of CETV derives from the T Ltd scheme, which he did not join until June 1994. Although therefore contributions made during the YD years between then and the incorporation of T Ltd in 1999 will be included in the total, it seems tolerably clear that a great deal of this pension entitlement has been built up since physical separation of the parties. Therefore a very large proportion of the pension share with a CEIV of just over L1M to be transferred to W will have been earned since their separation.
29. It seems to me very likely that a very significant proportion of the disbursements (other than counsel's fees) shown in the costs estimates put in at the hearing, an aggregate of £137,000, will relate to expenditure on attempting via forensic accountants to value the T Ltd shares. W has throughout been advised by Mr Peter Lobbenberg. The accountant first instructed on behalf of H retired, and Mr Nedas succeeded him. Both gave evidence over a full day before me. The bundle containing the reports filed by the accountants together with schedules runs to over 200 pages. Yet back at page 32 in a joint statement dated July 2004 Mr Lobbenberg and Mr Nedas' predecessor were able to agree:

'that [T Ltd's] high levels of borrowings and goodwill render the valuation exercise more than usually open to debate. Accordingly, whilst there are a number of aspects on which we have been unable to narrow out differences, in the circumstances of this case (and in particular having regard to paragraph one above) we have formed the view that a detailed analysis would be unlikely to assist the court and would thus be inconsistent with the principles of proportionality. We therefore confine ourselves to a broad outline of the areas in which we disagree.'

30. The comments in paragraph one of the report to which reference is there made record the accountants' agreement 'that there is insufficient liquidity in the company to assist in providing cash towards a clean break settlement of this matter', but that they were 'not aware of any bar to the husband transferring a proportion of his shares (equity or otherwise) to the wife, should the parties so agree or the court in its discretion so order.'
31. Notwithstanding the clear common sense of those observations the valuation exercise has proceeded apace throwing up what have been, in effect, increasingly divergent figures, based upon extrapolations from information which for the most part relate to year-to-date figures for the current year, and what can only be a best guess at budgeted turnover and other results hoped for in the year to come. It is inevitable (particularly in a business where turnover may surge towards the year-end as local authorities strive not to under-spend the budgets grudgingly accorded them by central government) that forecasts however conscientiously prepared will prove wrong. Indeed in the two years since accountants first offered valuation opinions upon H's shares in T Ltd this has proved to be the case.
32. In April 2004 the accountants were a mere £14M apart, weighing in for W at £24.75M and for H at £10.61M. They briefly narrowed their differences when they reported jointly in July 2004, each moving about £1.4M towards the other. Mr Nedas, in his first report shortly before the abortive hearing before Baron J in June last year, retreated to a value of £4.66M to which Mr Lobbenberg responded the following month with a revised valuation of £23.5M. But when they met to see what common ground there was they discovered that there was less even than had been apparent, Mr Nedas reducing his valuation to £4.35M while Mr Lobbenberg increased his to something over £30M (revised on the eve of the hearing down to £27.2M). By then however Mr Nedas valued H's shares in T Ltd at no pounds at all. For the purposes of the hearing, however, (and for reasons which do not matter for present purposes) the application proceeded upon the basis that H's advisers took H's shares to be worth either £4.35M or £3.73M (to include the value of his own preference shares).
33. I said something about the difficulties which confront the parties and the judge in such a situation in my first instance decision in the case now revealed as Miller: M v M (short marriage: clean break) [2005] EWHC 528 (Fam), [2005] 2 FLR 533, at [59] to [61], from which I forbear to quote in this judgment. There the valuation differential was between £12M and £18M, a mere 50 per cent of the lower figure, whereas here the £23.47 difference between £3 .73M and £27.2M is 630 per cent of the lower figure.
34. It is true, as Mr Nedas who was one of the Miller accountants reminded me, that relatively shortly after that judgment they were proved wrong and I was in a sense proved right when the value of Mr Miller's shares became much more readily ascertainable in the market which put a tag of around £60M upon them. Thus the substratum for any assessment of my order against equality's yardstick would have been invalidated wherever within the accountants' parameters I had alighted. In this case, as I shall explain, H's shares will only have a tangible value if and when their value can be extracted from them in the event of flotation or trade sale. That of course is true in every unquoted share valuation exercise. But in this case for either of those events to happen T Ltd will first have to have established a record of increasing size and profitability which sadly it now lacks. It will not then be a company of the same scale as it is now, and if this outcome is achievable at all then (as I have already indicated) it is likely to be in large part as a result of H's continuing endeavours stretching from now into the future and therefore from a point commencing a full 10 years since the parties' separation. In the particular circumstances of this case I regard that as a highly significant factor which cannot be sufficiently satisfactorily offset whether by limiting the proportion of the value payable in the future to W, nor by putting an arbitrary cap of £8M upon what she might receive as was Mr Cusworth's final proposition.
35. Mr Cusworth opened the case on the basis that a fair outcome would be for W to receive LM House unencumbered, and the share of H's pension to equalise the pension fund available to them. In addition H should pay W a lump sum of L1M payable by instalments over a three to four year period, and out of which she would meet her outstanding costs. Furthermore, the net proceeds when realised of H's T Ltd shares should be divided so as to leave him with the first £2M plus 60 per cent of any surplus, she therefore receiving 40 per cent of any surplus.
36. Mr Cusworth suggested that these first three elements (house, pension, £lM lump sum) would amount to three quarters of the non- T Ltd assets available to the family but that overlooks the fact that the 25 per cent left with H would be represented by his pension fund which, as explained by Ihorpe U in Martin-Dye v Martin-Dye [2006] EWCA Civ 681 (albeit there dealing with pensions in payment), is not the same currency as cash or real estate. A perhaps more refined analysis is to point out that W would receive in the house and mortgage and the lump sum a capital award some £400,000 in excess of 100 per cent of the current value attributable to the non-pension non- T Ltd assets, even taking the presently uncollectable arrears of dividends as though they were cash. In addition W's pension funds would be equalised with a share from H which can be regarded as very largely the product of his endeavours since 1999. Furthermore, subject to their net proceeds exceeding £2M, he at the outset of the hearing argued that W should receive an unquantifiable but uncapped further tranche of capital on realisation of the T Ltd shares, if and when that takes place.
37. W therefore must be taken to have contemplated as fair an outcome which would leave H with less than nothing in terms of net current capital, a diminished pension fund of value equivalent to her own, and the prospect of an indeterminate amount of free capital only on realisation of his shares at some date which might be far in the future.
38. This opening proposal was on the basis that H would have no ongoing maintenance obligation. But over a three to four year period he would have to find £l.3M (to include repayment of the LM House mortgage which, in addition, he would continue to service until redemption) from his earnings (including bonus, and any preference share dividends past and future paid within that time-scale) and any additional borrowing capacity he might obtain.
39. Furthermore if W chooses to spend at the rate of Mr Cusworth's suggested figure of £107,500 p.a. then (after paying her costs and making some allowance for cost-inflation on the one hand offset by income derived from the lump sum instalments pending their draw-down to meet her income needs) W would be likely virtually to have consumed the suggested £lM over the nine years to age 60 which she is likely to wish to wait before she commutes and/or draws her pensions. She was therefore proposing to take a very considerable gamble on whether, when and how much she would on this proposal receive on realisation of the T Ltd shares. It is of course a matter for her whether to take this chance if, but only if, such a solution achieves fairness for both parties.
40. W's position had become significantly modified by the time the first round of closing submissions were made in May, and remained unchanged in the light of the House of Lords decision in Miller. She proposed now to take LM House subject to its mortgage, on the basis that she would not anticipate redeeming it until she received further capital from the T Ltd share realisation. A lump sum instalment of £200,000 meanwhile would enable her to deal with her costs and the bulk of her accrued liabilities. Together that would leave her at this stage, Mr Cusworth calculates, with fractionally over 50 per cent of all assets save the T Ltd shares. But on this basis H would be left £1.07M worth of currently inaccessible pension fund, some £720,000 due to him for an indefinite period re unpaid dividends, and about £200,000 worth of tangible assets in effect represented by his home subject to (at least) its existing substantial mortgage. Future earnings apart, his ability ever to improve his tangible capital base (apart from receipt of the unpaid dividends and any others to which he might in the future become entitled) would depend on the feasibility of realising the T Ltd shares. W's ability ever to discharge the LM House mortgage would similarly depend on a share realisation.
41. W in addition now seeks ongoing periodical payments, until a share realisation, at the rate of £107,500 p.a. Out of this she would service the LM House mortgage interest (currently £16,700 p.a.), spend about £15,000 each year on ongoing renovation and improvement costs to the property, and meet annual staff costs of £21,000. She would have £55,000 net p.a. left for her other needs and outgoings. In arriving at this figure, however, unless I am mistaken there is an element of double-counting as it seems to include £15,000 for LM House improvements twice, once as an element of past expenditure and then again as an ongoing annual requirement. I do not regard £30,000 as a reasonable amount to expect H to pay under this head on an ongoing annual basis but I do take a budget of £15,000 into account for this purpose.
42. W calculates that if H's income and bonus henceforth amount to about £287,500 net (the figure he suggested) he would be left with £180,000 after meeting the maintenance order and could meet his needs reasonably generously assessed and have a £30,000 or so margin of surplus each year. This ignores any borrowing costs he may need to incur to raise the initial £200,000 lump sum she would expect to be paid within a short period.
43. As to the T Ltd shares, it is now suggested for W that she should take a charge over the entirety of his shareholding for whatever amounts to 25 per cent of their net disposal proceeds, enforceable only on disposal. Unlike the earlier proposal H would receive no guaranteed first tranche of £2M. Instead W would at that point reimburse him for 75 per cent of all maintenance payments meanwhile, with an overall cap of £8M on the payment to W thus calculated. At that point a comprehensive clean break should take effect. On the rival share valuation extremes of £3.73M net and £27.2M net the payment to W would range between £853,000 if disposal took place at the lower figure after one year, to £6M at the higher figure after 10 years.
44. It is of large significance that neither party's outcome suggestion depends on a finding as to the shares' current value. Both parties' counsel acknowledge this. That did not however prevent vituperative contention between Mr Lobbenberg and Mr Nedas over many aspects of their respective approach to the exercise.
45. They did agree that the appraisal should be on the basis of T Ltd's net sustainable earnings. They disagreed as to the accounting periods to be taken (Mr Nedas relying more on forecasts than did Mr Lobbenberg); the multiple to be applied to arrive at an Enterprise Value for the company (a capitalisation of its earnings); the net debt position of the company; what if any other companies might be illustrative comparables; and the effect of differing assumptions as to the timing of repayments to the outside shareholders. All of these taken together significantly contributed to the divergence in the value each attributed. But the major disagreement and the one which gave rise to the most serious exchange of epithets related to the depreciation charges in T Ltd's accounts and forecasts. Mr Nedas contended for an evaluation known as EBITA as the basis to establish maintainable earnings. The acronym signifies 'earnings before interest, tax and amortisation' and involves writing back these three items. Mr Lobbenberg maintained strenuously that the appropriate methodology was to evaluate on the basis of EBITDA, writing back in addition the depreciation charge in the accounts which he took as £6M. If he is mistaken in that view, on the multiple he adopted of 4.5 his valuation would reduce by £27M, although on this changed basis he would have been entitled to reconsider the appropriate multiple.
46. Emphasising as I do that in the event any adjudication by me of this dispute does not affect the outcome of the case, I confess that I am not persuaded by Mr Lobbenberg on the depreciation point. This company tends to spend each year on new and replacement plant and equipment an amount broadly equal to (and in 2001 to 2004 more than) the depreciation charged in the accounts in line with accounting and fiscal requirements. I am satisfied that the nature of its business requires this expenditure, and that it is imperative if the company is to continue to generate the 'maintainable earnings' which are a basic constituent of each accountant's methodology. In the context of T Ltd, as it seems to me, incurring the cost of necessary renewal and maintenance of plant and equipment is as much a prerequisite to bringing in the turnover and the profit as paying the work-force. Mr Lobbenberg agreed that anyone interested in acquiring the company would take the depreciation into account, recognising it as a recurring reality. He suggested that this would form part of due diligence enquiries. Due diligence would show the expenditure as real and necessary, and I do not understand why it should not be treated as a legitimate expense of the business, and thus not to be added back in the search for a maintainable earnings figure.
47. If it had been necessary to do so I would therefore have rejected the higher range of results adopted by Mr Lobbenberg. This is not to say that I would have been persuaded by every other disputed aspect of Mr Nedas' approach. H has for some time suggested that his T Ltd shares might be worth £8M, and persisted in that view despite Mr Nedas' more pessimistic opinion. Plus or minus a million pounds or two H may be nearer the mark.
48. The other focus for investigation by the accountants related to the veracity or otherwise of H's presentation of T Ltd, both historically since it was spawned from YD and as to its future prospects for growth and potential flotation. H's case is that although the seed for what has become T Ltd's core business was germinating by the time of separation in 1996, so that by the date of demerger in mid-1999 about 40 per cent by turnover of YD's business related to local authority outsourcing, the development of the company and the expanding diversity of the functions it contracts to perform have been achieved by his endeavours as undoubtedly the leading light of the company, without any relevant contribution whatsoever from W notwithstanding their continued status till 2003 as spouses.
49. Mr Cusworth asserts that the expansion of outsourcing within YD and T Ltd's activities since then were more than a glimmer in H's eye at the time of effective separation, which I have already found did end the substance of this marriage notwithstanding W's assertions to the contrary. It is true that by March 1996 YD had two local authority contracts, both road- and construction-related, and thus in the same line of endeavour as YD's historical civil engineering activity. By the time of the 1999 buy-out by T Ltd, entirely financed by external funds, one major contract secured was with a London local authority, and since the parties' separation outsourcing work has not only increased but has become more diverse. By 2000 turnover had increased from £28.SM in 1997 (the last year for which YD accounts are available) to £200M but thereafter the rate of increase slackened. Activities had expanded into building and grounds maintenance, and refuse and cleaning services. Thereafter what are now thirteen or fourteen separately organised enterprises around the country, each separately managed, have taken over transportation, recycling, quantity surveying and project management services. The company has moved into white collar operations, for instance undertaking payroll functions. Some contracts have been joint ventures with other service providers.

50. Meanwhile in 2002 H was quoted in the specialist press as saying that the long-term strategy was to float T Ltd independently 'which might be next year, the year after, or even the year after that'. By 2003 the market sector was in downturn, and by the end of the year a flotation was said to be no longer on the cards.

50. Mr Cusworth submits that realisation of the shares is inevitable and points out that in ten years H will be approaching normal retirement age at 63. But neither accountant asserts that such an event is either imminent or likely to be achieved in the short to mid-term. It is agreed that prerequisites are a period of sustained growth and profitability. Anyone's predictions can prove right as well as wrong, but I do not believe that flotation for this company or (as seems less likely to H) a trade sale will by any means necessarily prove viable within any specified time-scale.
51. This is in part because I accept the burden of H's assertion that the company is currently languishing in doldrums, notwithstanding an anticipated return to not insubstantial profit for the year to June 2006. Debate ranged about the veracity of H's assertion that there had been a significant slowdown in the number and potential value of new contracts, exacerbated by the loss of some regarded as key to T Ltd's activities and turnover. His prediction is that in the year to June 2007 the company's results are likely to revert as a result of these factors to something nearer the less healthy 2005 year picture.
52. I accept the broad thrust of H's explanations about this and that the company is at present fighting to survive. Moreover I recognise that the nature of the relationship between the company and the local authorities it serves is volatile in terms of profitability: as already pointed out budgets can be reduced and projects cancelled, yet T Ltd to be in a position to cater for the potential volume of work must keep its staff and equipment paid, purchased and maintained.
53. I also accept that in this industry the bidding and contractual process is expensive, time-consuming and highly technical and long drawn-out in its processes. Significant expenditure of time and effort in all but a few instances lead nowhere. Over about the last two years only three out of 169 bids have proved successful. Even quite confident predictions (including public statements) do not guarantee that a deal is clinched. A number may not generate profits for a year or more because of significant start-up costs both in terms of taking on existing public-service staff and acquiring plant and equipment.
54. Some commentators have recently taken a bullish view of the sector's prospects, but I do not consider H to be insincere in his much more cautious view of the state of and prospects for T Ltd. Ihe scale of W's enquiry on these issues has been fuelled by a belief that H has been adept to down-play and indeed to misrepresent major aspects of the company's profile, past present and prospective. This led to Mr Cusworth's submission that aspects of H's evidence which he criticised should lead me to conclude that the picture of decline in T Ltd which H presented cannot have been genuine. Although Mr Cusworth and Mr Lobbenberg in terms accepted that there had indeed been a decline, I was invited to take the view that H's gloomy and risk-laden forecast concealed a degree of optimism, and that this in turn must mean that he had covered up some salient factors which, however, despite their best efforts, W's advisors had not managed to unearth.
55. It cannot be controverted that T Ltd is going through a difficult patch. Its future fortunes are indeed highly speculative and emergence from this depression cannot be guaranteed. The company, H told me, is his life and he clearly has a sense of vocation about the contribution it can make to the efficiency and quality of the local authority functions it performs. He is very highly motivated. But he is not blind to the risks and future uncertainties.
56. Mr Cusworth submits that I should view as a marker of cynical scare-mongering, and thus as an indicator that H's presentation is not a true bill, events which led to and followed a letter written on his instructions by H's solicitors on 13 July 2005, and upon what transpired to be a fruitless negotiation over the same period to acquire a competitor's highways and maintenance division.
57. Anticipating that T Ltd would be unable to pay £l.33M to the outside preferential shareholder in June 2005 (the first of three similar annual obligations), in June 2004 the company agreed with its bankers in the context of renegotiating its loan facilities, and with the investor, that the latter would accept deferment if the bank would not sanction payment when due. H's March 2005 affidavit omits reference to that agreement, suggesting instead only that deferment had been requested as T Ltd would be unlikely to meet the obligation.
58. In May 2005 T Ltd commenced discussions to buy out the relevant part of its competitor's business.
59. No reference was made to either of these developments in the June 2005 report of Mr Nedas the late production of which led to the adjournment of the June hearing fixed before Baron J.
60. On 12 July 2005 H learned that (for reasons later explained by the bank as based upon uncertainties regarding T Ltd's performance at that point) it had indeed declined to sanction the £1.33M payment to the outside investors. Next day his solicitors wrote to W's informing them of the bank's refusal, but then went on to describe how this would put the company in default vis a vis the preference shareholder and that that default might lead the bank to intervene in the running of the company and to appoint an executive chairman in place of H. H says that when giving instructions for that letter to be written he was so disappointed and concerned at the bank's refusal that he completely overlooked that terms had the previous year been agreed for deferral in the event of the bank's veto.
61. In his July 2005 report Mr Lobbenberg highlighted the implausibility of the particular doom-laden scenario painted in that letter. He was right to postulate that the advertised default-driven sanctions did not sit easily with concurrent negotiations for a significant acquisition by T Ltd. Mr Lobbenberg in his report went on to voice the further suspicion that the apparent default situation had been engineered by H in collusion with the preference shareholder and/or the bank. lo that suggestion H through his solicitors responded with great vigour, but unfortunately without in the first instance correcting the error and the absence of reference to the June 2004 agreement in the affidavit and the letter. It took until early October 2005 for details of the deferment terms agreed in June 2004 to be divulged, but I am prepared to accept that the delay of itself may well have been significantly due to vacation and other absences rather than prevarication.
62. The acquisition discussions in fact foundered by the end of September 2005, and therefore Mr Lobbenberg's fear that Enterprise Value calculations to date would be understated as a result proved to be unfounded. H said that even if the purchase had gone through there would have been a negative effect on the company's profitability for a couple of years.
63. As to the non-disclosure of the 2004 agreement coupled with the unfounded anxieties expressed in the 13 July letter H apologised, saying that it had been a genuine lapse of memory which caused him to overlook the safety net of the June 2004 tripartite agreement, and not a wilful attempt to deceive.
64. I believe that H may have been in part motivated by his disappointment that W had (overcoming his opposition) secured an adjournment of the hearing before Baron J in June 2005. I am not prepared to exculpate him from responsibility for the misrepresentation of the position concerning the default in payment of £1.33M. He could and should have set the record straight earlier, but the truth was bound to and indeed did emerge long before the final hearing. I regard the likelihood that any settlement which might have been reached would have been tainted by this error as remote, as the case has always centred on what has proved to be the non-negotiable issue whether W should at some future date participate in what may be realised from H's shares.
65. Of course I accept that an episode such as the misrepresentation of the preference share repayment position gives rise to suspicion and leads to an investigation in deeper depth. Ihis episode apart I am satisfied that H has not perpetrated the other alleged stratagems and sleights of hand of which he has been accused. Ihere is no substance in the allegations of improper manoeuvring in relation to a Report of the Pension Scheme, nor of significant understatement of its value. I accept that the final version of an article as printed (which differed significantly from a draft earlier supplied) was included with correspondence sent to W's solicitors within a reasonable time. H said that in relation to the provision of financial information to accountants he had stood aside and given instructions that they should be afforded full facilities by the company. I have seen nothing to contradict this.
66. My conclusion is that H is essentially a conscientious individual and that (irrespective of what may be the present or prospective value of his shares) I can rely on the overall trend of his evidence and of the picture that he presents of T Ltd's position. I do not accept that it has become established that there is some nugget of concealed information which, if uncovered, would transform that picture.
67. I accept that he remains genuinely well-disposed to W whose ultimate ownership and continuing occupation of LM House he has, so far as I know, never contended. He has contributed significantly to the improvements and repairs she has carried out over the years to LM House, and financed to the tune of nearly £90,000 the dispute which culminated in the purchase of the additional plot of land there. He told me that he appreciates and has appreciated how very much it means to W to retain the property as her home. She seems as devoted to it as he is to T Ltd.
68. H's case is that T Ltd's business has no historical base in pre-separation YD and that they are different animals. The genesis of T Ltd's public service business is clearly discernible in the closing years before the 1999 demerger, and to a smaller extent before the 1996 separation of the parties, and so I do not entirely accept his view. Since 1999 however the nature and scale of the business has evolved dramatically. Just one other illustration of that is that the average number of T Ltd's employees doubled from 1,467 in the 18 month period to June 2000 to 3,053 in the year ended June 2005.
69. During the five years of separation until 2001 when he bought his present home H lived in rented accommodation, no doubt at least in part because of restraints in his financial position and caution concerning the company's future. During these years W lived in and was more or less wholly maintained by him in LM House. She therefore enjoyed the use of effectively the only non-business capital asset, to his exclusion.
70. What then is a fair view of her entitlement to participate in the future if and when capital becomes available from T Ltd? This question can only fairly be answered in the context that both parties invite me to assure LM House for W long-term.
71. Assuming for the purpose of this analysis that H paid off the £300,000 LM House mortgage now (rather than within three years as he has offered) and raised the £200,000 first instalment of lump sum which W seeks within a short period to deal with her own costs and other liabilities, I allow for the fact that H has to pay or borrow his own unpaid costs of £50,000 (likely now to be more), owes his brother £50,000 (which he says he is honour bound to repay while acknowledging that he will not be put under time-pressure to do so), and has a £14,000 deficit of liabilities over current assets. These items total £614,000. Taking the equity of his home at £400,000 (and thus disregarding for this purpose notional costs of sale and a liability of £70,000 suggested for latent capital gains tax), then his position would be that he would be in overall deficit to the tune of over £210,000. He would be left with his future income from T Ltd, and the deferred preference share dividends if and when paid, plus the future value if and when realisable of his T Ltd shareholding.
72. I am not prepared to bring the preference share dividends into this calculation because there is at the end of the day no suggestion that H has deliberately held up their payment, nor any clarity as to when he may be allowed to draw them. If he were able to receive them now in the sum of £719,000 net (the higher figure which his advisers suggest as their net after tax product) he would still only have net assets of about £550,000 as contrasted with W's net capital of about £l.3M (represented by LM House free of mortgage and after paying off her debts and outstanding costs). I do not regard W as entitled to share in these dividends per se but treat them rather as unpaid income which H has earned as part of his overall remuneration from T Ltd, notwithstanding that they represent a return on capital and that when paid they can be used by him to meet capital requirements.
73. I appreciate that other formulations could be adopted, but it is difficult to sustain an argument to disprove the proposition that (subject always to H paying off the LM House mortgage and paying W £200,000) she would receive value equivalent to more than the totality of the assets available to the parties which can be described as copper-bottomed.
74. In addition W will via the agreed pension share provision receive some considerable return on H's post-separation endeavours which in due course can secure for her additional capital (if she chooses) and an income for life.
75. I recall that H's YD shareholding has been valued in 1996 at £304,000 net, a sum which in terms of present value would in line with the Retail Prices Index now equate to £391,000. If their gross value of £533,600 had at that time been invested in shares performing in line with the FISE All Shares Index they would now be worth £882,500 gross, and £754,000 net after deduction of dealing costs and the minimum amount of capital gains tax which could be payable if full taper relief applied to the whole portfolio. If I notionally took £755,000 as a current realisable value representative of the value of the shares H had in YD in the year of separation he would on the formulation I have adopted now still only have net realisable assets worth about £545,000, to balance against her £l.3M once the mortgage has been redeemed and £200,000 paid to her to discharge liabilities. Ihis would represent a ratio of division of slightly more than 70:30 in W's favour.
76. Arguably therefore, as it seems to me, W's capital entitlement would be amply met on such an award unless it is fair that she should receive a share of the growth in value of H's shareholding in YD till 1999 and subsequently in T Ltd. Clearly receipt of any such share would have to be deferred.
77. But such an award would make no provision for W's income needs. On the basis that H should as he has hitherto directly service the LM House mortgage (currently costing about £16,700 pa) until he redeems it, I regard it as reasonable that H should pay W periodical payments at the annual rate of £75,000. Such provision would leave W with £40,000 net spendable if she decides to continue to meet staff costs of £20,000 and to proceed with her restoration programme at the suggested rate of £15,000 per annum.
78. I appreciate that leaves H with a significantly larger amount from his suggested net income of £287,500, some £196,000 after meeting the maintenance and LM House mortgage servicing liabilities. But this does not seem unfair to me for a number of reasons. These parties' lives and endeavours have developed tremendously and have diverged over the last ten years. H has worked and will need to work hard for his income with no domestic or other contribution from W. He has a lot of debt to sustain, including repaying the LM House mortgage in due course, and is left in net terms only with the intangible and (in this case I am satisfied) risk-laden capital tied up indefinitely in his T Ltd shares. He has his own £850,000 mortgage to service. For reasons such as these this is not a case for any traditional proportional division of H's income.
79. Because of the disparity in their currently tangible capital situations, and in the light of the additional obligations I intend to impose upon H to secure a clean break, I would not expect W to succeed on an application to vary this maintenance figure upwards based on increases in his earned income or bonus from T Ltd, or upon payment to him of any of the preference share dividends past or future.
80. This is a case where a clean break will only be achievable if and when H's £4M worth of preference shares are redeemable and/or when T Ltd is floated or his ordinary shares are otherwise rendered realisable for cash.
81. H's advisers supported his offer of a £500,000 lump sum (in addition to the other elements I have already dealt with) by reference to a Duxbury calculation showing that on the assumptions there incorporated if he paid W £60,000 per annum maintenance till a further payment of £500,000 in four years' time when a clean break would operate, W would have a sustainable income from that amount (together with her pensions when in payment and in part commuted) commencing at £69,000 net and continuing for life with inbuilt 3 per cent annual increases to protect against inflation assumed to be at that rate. I have re-run the calculation on an only slightly adjusted basis (details of which together with a copy of the full calculation were circulated with this judgment in draft). The calculation which I have performed takes account of £75,000 annual maintenance payments pending the introduction of a further capital sum of £650,000 at the same point, when W is 55. The result is broadly that W might expect to receive £74,750 net in the first year, and that amount plus three per cent per annum for the next thirty-six years till the fund would expire when she is 88. If she lives on and beats the relevant life table her income would thereafter drop to the level of her pension income as it will then be.
82. I conclude that in addition to the provision to which I have already referred (and as well as a £200,000 first instalment of lump sum, to be paid as speedily as can reasonably be achieved) H should pay W a further £900,000 in due course: a total lump sum of £1. 1M. Ihis will bring her capital to £2.2M (after meeting the bulk of her liabilities including costs, and once he has discharged the mortgage). This together with the agreed pension share which I will order will provide W with the capacity to produce an income for herself for life. She can expand her free capital investment base if she chooses to do so by commuting part of her pensions. Nor can I ignore the fact that a time will come as she grows older when she may find LM House and its upkeep too onerous and liberate mo:re free capital by moving to a more compact home.
83. Mr Cusworth has advanced different formulations as to how W might receive a percentage share in the value of the T Ltd shares. He does not suggest that H should transfer any to her, although he has invited me to consider securing her interest by means of a charge upon them. He has conceded that there should be some departure from equal division for a number of reasons. First to compensate for the disparity of distribution of current tangible assets so markedly, indeed completely, in W' s favour once H has redeemed the LM House mortgage and paid the first £200,000 lump sum instalment, Second, to reflect the fact that there is in this case no equivalent nor indeed any compensating contribution to match H's efforts to achieve T Ltd's future development. There is, in addition, the problem that with such impenetrable doubt concerning the value, actual but unrealisable and only potential but unascertainable, of the illiquid shares there is no process whereby they can be weighed or valued against the liquid assets retained by W, so that this is not a case where it is feasible to carry out any arithmetical check against the equality yardstick.
84. I reject the proposition that in this case a fair solution can be devised by fixing, it would need to be arbitrarily, upon a proportion of the value which may one day be released from these shares. I find myself unable to find a formula which would fairly reflect the fact that H is prepared to cede to W their current tangible wealth, and to enhance her pension fund so as to achieve equality, while at the same time taking the whole of the risk which in my assessment is not slight. In the special circumstances which here exist it does not seem to me to be unfair that in return he should retain, if he can steer the company to a successful outcome, the whole of the reward which if it is great will be so largely as a result of his post-separation endeavours. W for her part does indeed wish to retain LM House and thus the bulk of the current tangible wealth which carries no appreciable risk.
85. At any time after the separation if W had instituted divorce proceedings she would have been entitled to invite the court dealing with her ancillary relief claims to take into account the value and to some degree the potential of H's shareholding in YD and subsequently T Ltd. But as the years have passed since then it seems to me that it has become less and less fair that she should be entitled to ask for a share in that potential having regard to what she will receive in tangible assets. That H could himself have taken the initiative earlier but chose not to do so does not make such an entitlement any fairer.
86. I have considered the relevant judicial pronouncements as to whether ancillary relief applications should be approached on the basis that valuation of the relevant assets should be undertaken as at the date of the hearing in 2006, rather than by looking back to the date of separation in 1996 and fixing the parties' fortunes at that date. I will refer to these passages at a later stage. I accept, contrary to Mr Moylan's contention, that I should look at the disposition of available assets and (so far as practicable) at their value actual or potential as at the hearing-date. Whether the T Ltd shares should be regarded as a matrimonial asset in the same way as, for example, LM House is another matter which I will consider when I come to deal briefly with the applicability to these circumstances of the House of Lords speeches in Miller in due course.
87. But to view the financial circumstances as they are at the hearing date can, in what I regard as the exceptional circumstances of this case, in any event only be a starting-point. What has happened in the intervening years may be very significant, as I find in this case is the case, as is the extra factor that if this company is to be brought to market at all it will be by dint of H's endeavours for an indefinite future period to be counted in years rather than months.
88. Wells v Wells [2002] EWCA Civ 476, [2002] 2 FLR 97, was a case with a number of factual elements mirrored in those with which I have to grapple. There the first instance judge (Wilson J as he then was) had achieved a division of assets which left H with a very modest tangible capital fund by reference to that allocated to the wife, and with the whole of his shareholding in the company he ran and in which the wife for her part had a very modest shareholding. The Court of Appeal adjusted the division of the assets which were readily saleable at stable prices by increasing the husband's share, but replaced the clean break outcome ordained by Wilson J so as to defer absolute finality by introducing a mechanism enabling the wife to apply in the event of the sale of the husband's shareholding within the following five years. In arriving at this conclusion Thorpe LJ, giving the judgment of the court, canvassed what it clearly appears would have been that court's preferred solution, although in the absence of both parties' agreement an outcome which the Court of Appeal could not impose for the reasons given at [25] of the judgment. I set out the passage where at [24] the merits of a substantial increase in the wife's shareholding were canvassed:

[24] Having read the skeleton arguments and the judgment we were at once struck by the security of the result that the wife had achieved in contrast to the risks confronting the husband's economy. The family's standard of living has throughout been dependent upon the fortunes of the husband's business. Had the marriage survived the family would undoubtedly have shared adversity as it had shared prosperity. The years of marriage comprise the years of the husband's commercial vitality between his late 30s and his mid-50s. The harvest of those years is represented by the concrete assets totalling £1,823,000. But the future years look hazardous. It seems unlikely that the husband will restore the pattern of prosperity and savings from income in the years ahead. After all, if it is reasonable for him also to seek to retire at 60, he has only 5 years in which to recover the profitability without which Soundtracs will not be easily realisable for significant value. In principle it seems to us that the separation of the family does not terminate the sharing of the results of the company's performance. That is easily achieved in any case in which the wife's dependency is met by continuing periodical payments. It is less easy to achieve in a clean-break case. In that situation, however, sharing is achieved by a fair division of both the copper-bottomed assets and the illiquid and risk-laden assets. After all, the wife was already a shareholder in Soundtracs and a substantial increase in her shareholding would at least have enabled her to participate in future prosperity by dividend receipts or capital receipts on sale or a cessation of trade. An increase in her share of the illiquid and risk-laden asset would have allowed a reduction in the Duxbury fund, if not in the housing fund. If profitability were not recovered then both parties would share the experience of a marked reduction in standards of living.

89. The first instance hearing in that case seems to have taken place about two years after the parties' separation, and there is nothing to indicate that the company concerned had been through rapid expansion or development during that time: rather the reverse. Furthermore the range of outcome in relation to concrete assets was not so constrained as in this case, where both H and W wish to secure her ownership and occupation of LM House, and to achieve that end and a deferred clean break H is prepared to shoulder future capital commitments, albeit less onerous than my order will impose upon him.
90. In N v N (Financial Provision: Sale of Company) [2001] 2 FLR 69, a decision of Coleridge J, the question arose whether, in the face of opposition from the wife, the husband should make a deferred payment calculated by reference to and linked to an eventual sale of the shares in the company there involved. Coleridge J decided against that outcome, largely because the husband would need 'plenty of time to re-arrange his financial and business affairs by way of borrowing and/or sale to meet the sums' which he awarded to the wife in a case where extracting cash from what was essentially the only available asset was fraught with obstacles and problems. Although he envisaged that the husband would need to liquidate his shareholding in the company in order to meet the order he was to be given several years in which to sell that shareholding. He accordingly made an order for a lump sum payable over a period, while leaving the parties with the ability to apply in relation to the terms of security and as to the timing of the payments, observing that he would be slow to make any alterations in the absence of significant change of circumstances.
91. N v N was also a case where the husband suggested that account should be taken of what was described as a huge increase in the company's turnover since separation just under four years prior to the hearing, and that the wife's entitlement should be discounted to reflect it. As to this Coleridge J said (at page 78):

"I am quite sure that even now in most cases that [the date when the hearing takes place] is the correct date when valuation should be applied. But I think the court must have an eye to the valuation at the date of separation where there has been a

very significant change accounted for by more than just inflation or deflation; natural inflationary pressures on particular assets, for instance, the value of a house moving up or down in the housing market.

In this case the increase in value is attributable to extra investment of time, effort and money by the husband since separation and I do take into account the exceptionally steep increase in the turnover figures since the date of the separation. However, having done so it must be put in the context of the wife's continuing contribution too which similarly did not cease at the date of separation. She too has continued to play the valuable part that she had done throughout the marriage, in looking after the home and the children.

[Counsel for the Wife] asked the hypothetical question: what would the position be if the value had similarly declined significantly since the date of the separation? In my judgment that too, in an appropriate case, could be a factor to be taken into account, particularly perhaps where the decline was as a result of action or inaction by the

paying party. But that is not the situation in this case and I am not making a

statement of general application or anything of that kind.

92. In GW v RW (Financial Provision: Departure from Equality) Mr Nicholas Mostyn QC sitting as a Deputy High Court Judge cited Thorpe LJ's dicta in the last four sentences of the passage from Wells which I have cited. Ihere Mr Mostyn applied the same distribution ratio (60 per cent to the husband and 40 per cent to the wife) to both the 'copper-bottomed' and the 'illiquid and risk-laden' assets. At [64] the Deputy Judge said:

[64] That this was the only viable route became plain during the evidence. Both

W's accountant and H agreed that it was impossible to attribute anything other than a wild guess to the value of H's options. H would extend this uncertainty to the rest of his deferred assets. It therefore follows that a Wells sharing is the only way of

achieving fairness. Indeed, it would seem to me that this should become standard

fare where a case has a significant element of deferred or risk-laden assets. For why should one party receive most of the plums leaving the other with most of the duff?

93. He is of course correct that to adopt such a course disposes of controversies over recent valuations of currently unrealisabie assets, and indeed about what is the 'right' discount to apply to reflect deferred receipt and the element of risk. As it happens in GW v RW these issues arose as to deferred stock and option plans earned and owned by the husband post-separation. But this is not an approach of universal application (as indeed Coleridge J had pointed out in the passage cited from N v N). Here (at the risk of repetition) the distinguishing features are that H and W want W to have far more than a half-share of the plums and an enhanced albeit only partially tangible pension share which reflects in part H's post-separation endeavours; and W recognises that H should retain something greater than half of what could yet turn out to be disappointing duff. Ihe issue here is therefore by how far and by what mechanism should the outcome depart from the (in this case elusive) yardstick of equality. This must quintessentially be an exercise in discretion within the legitimate boundaries of which I must of course strive to land.
94. I have also had regard to the approach adopted by Baron J in M v M (Financial Relief: Substantial Earning Capacity) [2004] EWHC 688 (Fam), [2004] 2 FLR 236. She adopted Thorpe LJ's approach as by then already expressed in the case of Cowan v Cowan [2001] EWCA Civ 679, [2002] Fam 97, at [70] that 'the assessment of assets must be at the date of trial or appeal'. The parties had been separated for only 27 months by the conclusion of the hearing. During that time the husband had received substantial bonuses based in part on a fiscal scheme which he had devised during the marriage. In a passage commencing at [62] Baron J stated:

[62] In this case, the post-separation accrual does not arise from the trading of capital which existed at separation, rather it has accrued from the husband's own

hard work post-separation, albeit that part of his bonus is referable to a scheme that was 'invented' during the marriage.

[63] Moreover, the bonus is also due to the husband's personal work in fulfilling

ABC Co's current policy of developing its overall business. This takes up about 50% of his time albeit that it is not currently profitable. Such undefined part of his bonus as is referable to this aspect cannot be seen as relating to his earlier 'invention'.

[64] These factors are relevant and I take them fully into account.

95. In the event Baron J included the assets resulting from the post-separation bonuses within the equal division of assets which she regarded as fair in that case where there had been no significant development in H's mode of operation and the pattern of his income receipts over what, by comparison with this case, is a very short period indeed. She gave these as her reasons:

[81] The assets that have been built up since the parties have separated fall to be considered in this case because the litigation has not been unduly delayed and the parties have been financially linked throughout. In addition, the husband failed to make adequate interim provision.

96. It by no means follows that the same outcome is appropriate to the circumstances of this case. For instance, M v M was a case where the wife would continue to make future contributions to the welfare of the family which (at [75]) the judge described as 'a different qualitative contribution [which] does not give rise to a continued entitlement in a share of future wealth unless there are special circumstances'; one where the judge was able to make an award which exceeded the wife's needs; and where (at [74]) she had found that the parties' contributions beyond separation to the date of the hearing had been equal. At [78] the judge commented in relation to that case:

[78] The husband may receive substantial bonuses in the future but to do so he will have to work a very punishing schedule. I do not consider his future earnings to be a marital asset which falls for division in this case. There may be cases when needs will dictate that future income must be shared because the parties' capital is insufficient. This wife's claim for 'inchoate lump sums' is effectively a claim for maintenance by another name. It is not justified.

97. I have already referred to and will elaborate upon the distinguishing features which persuade me that any attempt at equal (or other proportional) division of the value inherent in the T Ltd shares would be unfair in this case: to identify but two, the transformation in the size and scope of the company's business and the bracket of likely value of the shares, and the length and potential duration of the period when H's contributions will have been unmatched.
98. I do not believe that my approach and decision depart from the principles laid down in the House of Lords decisions in White v White [2000] UKHL 54, [2001] 1 AC 596 and Miller, nor that it is inconsistent with the more recent authorities.
99. The overarching principles expounded by Lord Nicholls in White are now well-known and can be summarised as two-fold in a case where the assets available exceed the parties' financial needs for housing and income. In relation to the first — avoiding gender-discrimination — I believe that my award contains no element of it, but fully takes into account W' s commensurable contributions until separation, and the necessarily disparate contributions thereafter which have successively resulted in the pattern of the assets now within the court's purview. That it was these parties' mutual misfortune which deprived W of the opportunity to make any domestic post-separation contribution by caring for children cannot make it discriminatory to recognise that reality, and not to treat her as though she had. If I have understood Mr Cusworth correctly that was indeed a submission which he made.
100. Furthermore (at [25]) Lord Nicholls said that:

25.... Sometimes, having carried out the statutory exercise, the judge's conclusion

involves a more or less equal division of the available assets. More often, this is not so. More often, having looked at all the circumstances, the judge ~ decision means that one party will receive a bigger share than the other. Before reaching a firm

conclusion and making an order along these lines, a judge would always be well

advised to check his tentative views against the yardstick of equality of division, As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination. [My emphasis]

101. Again, I trust I have sufficiently explained why I do not regard W's entitlement as extending to a proportional interest in the value which may one day be unlocked from T Ltd, while tapping appropriately H's ability to make payments to her which secure her position and at the same time reflect the embryonic state at about the time of the 1996 separation of T Ltd's subsequent growth. Whether and to what extent I have departed from equality cannot sensibly be assessed in current money terms in these circumstances, and may only be capable of some assessment if and when the T Ltd shares' value is released. Even then it would of necessity be subject to what could only be a subjective judgment to reflect the contribution to that outcome to be made henceforth over an uncertain period by H.
102. The House of Lords decision in Miller is complex. I do not see it as my function nor as necessary in this judgment to seek to elucidate its refinements or to attempt to resolve the apparent divergences of opinion in the speeches of Lord Nicholls and Baroness Hale.
103. An analysis of the principles in Miller was made by counsel in the second round of their written and oral submissions to me. They included reference to the as yet (as far as I know) unreported decision of Mr Mostyn QC sitting as a Deputy High Court Judge in Rossi v Rossi and Rossi [2006] EWHC 1482 (Fam). That judgment is of considerable assistance to me in evaluating the effect, in a case where the spouses had been separated physically as also in their business interests for over 25 years, notwithstanding that the refusal of any award whatsoever to the husband claimant in that case depended more on particular aspects of his delay in pursuing the claim and on resounding factual findings against him.
104. The Deputy Judge's analysis is contained in paragraphs [8] to [24] inclusive of the judgment under the heading 'Post-Separation Accrual'. The opening paragraphs of this section contain preliminary observations which I believe accurately set the scene for the specific commentary then advanced upon Miller which commences at [19]. From those preliminary paragraphs I refer to and adopt what I regard as those most relevant to this case:

8. It is clear that a number of issues arising from the opinions of the Law Lords in Miller and McFarlane [2006] UKHL 24, [2006] 2 WLR 1283 ("Miller") will have to be worked out in future cases. For example, the question of whether compensation will be widely awarded (and if so for what compensable losses) or whether it will be confined to the exceptional case (as a number of comments appear to indicate) will, no doubt, be an early candidate for judicial interpretation. Equally demanding of early guidance will be the question of the application of the yardstick of equality to what Baroness Hale of Richmond and Lord Mance have characterised as "nonbusiness partnership, non-family assets", and whether or not departure therefrom in relation to such assets is confined to short marriage cases,

9. In this case there has been a very substantial passage of time between the separation of the parties and the hearing of H's claim for ancillary relief. Quite apart from the independent question of whether delay per se is a relevant factor in the exercise of the statutory discretion there is the critical question of whether money or property that has been acquired after separation forms part of the matrimonial property (or marital acquest).

10. In all cases now a primary function of the court is to identify the matrimonial and non-matrimonial property. In relation to property owned before the marriage, or acquired during the marriage by inheritance or gift, there is little difficulty in characterising such property as non-matrimonial (provided it is not the former matrimonial home). The non-matrimonial property represents an unmatched contribution made by the party who brings it to the marriage justifying, particularly where the marriage is short, a denial of an entitlement to share equally in it by the other party: see White v White [2001] 1 AC 596, GWv RW [2003] 2 FLR 108, P v P (Inherited Property) [2005] 1 FLR 576, Miller (Paragraphs 2 1-25, 148).

11. But what of money or property acquired by one party after the separation? This gives rise to a number of conceptual problems which I have to say have not been altogether resolved by the opinions in Miller. Before I turn to those opinions I propose to examine the law, such as it was, before the House of Lords gave its views.

12. A long time ago in Lombardi [1973] 3 All ER 325 the Court of Appeal held that it was legitimate for the court to reflect in its award the fact that assets had been accumulated since separation by one party alone. Cairns LJ stated:

Another way in which the judgment is criticised is that it is said that the judge was wrong to take into account that the husband's fortune had accrued to him since the parting. Again, I think that that is a proper circumstance to pay regard to. It was never suggested in this case, as it was in Jones v Jones, that the position ciystallised at the time of the parting and that thereafter any change in the husband's means was irrelevant. The increase in the husband's means is plainly relevant; but it is also, in my view, relevant to remember that it is something which has happened since the parting. And what is of much more importance here is that it is not merely something which has happened since the parting: it is something which has been brought about by the husband in co-operation and partnership with Miss Capozzi, who has indeed played a direct part in the business in which he has been engaged and which in the past has been the main source of his income which has provided the capital which has enabled substantial assets to accrue to the husband and Miss Capozzi in the shape of premises which they are now able to let at a quite comfortable rent.

13. Thus it has always been the case that, where a party has by virtue of his own industry created further assets after separation, such sole unmatched contribution should be recognised and reflected by the court in its award. On the other hand, if a matrimonial asset has simply increased in value during the period of separation as a result of passive inflationary economic growth (such as the increase in the value of a house) then it would seem obvious that such growth is an accrual to the original matrimonial property.

105. After referring to and citing from N v N in a passage from Coleridge J's judgment which I have already largely incorporated at [92] of this judgment, at [15] the Deputy Judge posed the opposing points of view and asked:

But what of the position where a party has taken matrimonial property that existed at separation and traded with it and achieved a significant profit? Two points of view arise here. On the one hand it can legitimately be argued that the party in question has traded with the other party's undivided share and so should share with that party the profit that has been generated. On the other hand it can equally convincingly be said that the second party has not contributed to the industry or endeavour that gave rise to the profit or growth and so it is unfair that the second party should share to the same extent in that profit as the first who made all the effort. Similar controversy arises in relation to bonuses earned in the period of separation. The earner of such bonuses can validly argue that he did his work outside married life and without the support of his spouse. But the other party can equally validly argue that the ability to earn was generated during the marriage; that she was maintaining the family infrastructure pending dissolution of the marital partnership and division of the assets; and that during the period of separation the parties were financially linked.

106. He then referred to passages from the judgment of Thorpe LJ [70] and Mance LJ (as he then was), at [131] to [135] in Cowan [2002] Fam 97. These I have taken into account in agreeing that the pattern and (so far as ascertainable) the value of relevant assets are to be considered at the date of the hearing rather than of the separation of the parties, without it necessarily being the case that each party is entitled to an equivalent share of the value of each category of asset by reference to values at the hearing date. Mr Mostyn also referred to passages in GW v RW and to Baron J's judgment in M v M upon the latter of which I have already commented.
107. The Deputy Judge then turned to the opinions in Miller, commenting at [19] that the speeches of Lord Nicholls, Lord Hoffmann and Baroness Hale did not expound upon these issues arising from post-separation accruals, and that Lord Hope had limited his observations to comparison with aspects of Scottish law. The Deputy Judge commented upon what I agree is the apparent rather than any real inconsistency between what Lord Mance had said in Cowan and his observations at [174] of Miller which reads:

174 Sixthly, if account is taken of the increase in the value of the parties' assets during the marriage (the matrimonial acquest), a question may arise about the date up to which one should measure it. Should this be up to date when the parties ceased effectively to live as married partners (here April 2003), as Mr Mostyn considered in his judicial capacity n GW v. RW (Financial Provision.' Departure from Equality) at paragraph 34? Or should it be up to a later date such as the date of trial, or even, in a case where an appellate court thinks it right to re-exercise the discretion, up to the date of the appellate decision? Reference was made by Mr Mostyn to my remarks in Cowan v. Cowan [2002] Fam 97, paragraphs 130-135. The matters to which the court must have regard under section 25 include several which exist or appear likely as at the date the court has regard to them (c.f. section 25(2)(a), (b), (f) and (h)). Others of the listed matters require the court to look back at the past (e.g. section 25(2)(c), (f) and (g)). To the extent that the focus is on the matrimonial acquest, the period during which the parties were making their different mutual contributions to the marriage has obvious relevance. The present may be viewed as a case (paralleling the then unreported decision of Coleridge J in N v. N (Financial Provision.' Sale of Company) [2001] 2 FLR 69 to which I referred in Cowan v. Cowan) where the increase in value of the New Star shares between separation in April 2003 and trial in October 2004 or judgment in April 2005 was contributed to by the husband's further investment of time and effort, independently on its face of any contribution by the wife. Further, Mrs Miller had here no right to, and could not have been given, any part of Mr Miller's New Star shareholding in relation to which Mr Miller carried the risk. Mrs Miller has at all times been living in the house, which has now been formally transferred to her. Her only further claim was to a sum of money, assessed by the judge at £2.7 million (which Mr Miller paid in two instalments in May and June 2005). Mr Miller cannot easily be said in this case to have been holding on to any asset which should have been Mrs Miller's, or to owe anything other than money. Assuming that the focus is on assets acquired during the marriage, rather than on the husband's overall means, it seems to me therefore natural in this case to look at the period until separation. [My emphasis]

108. I agree with Mr Cusworth's submission that the hearing date is when ordinarily the parties' finances should be scrutinised and assessed, but I also entirely agree with Mr Mostyn in his judicial capacity when he concluded (at the end of [23] of Rossi) 'that Lord Mance was approbating emphatically the principle that independent endeavour after separation which is productive of money or property should be reflected in the division of assets.'
109. Drawing the various threads together, the Deputy Judge at [24] deduced a series of principles, as follows:

24.1 The statute requires all the assets to be valued at the date of trial.

24.2 For the purposes of establishing the matrimonial property in respect of which the yardstick of equality will "forcefully" apply the value of assets brought into the marriage by gift and inheritance (other than the former matrimonial home), together with passive economic growth on those assets, should be excluded as non-matrimonial property.

24.3 Assets acquired or created by one party after (or during a period of) separation may qualify as non-matrimonial property if it can be said that the property in question was acquired or created by a party by virtue of his personal industry and not by use (other than incidental use) of an asset which has been created during the marriage and in respect of which the other party can validly assert an unascertained share. Obviously, passive economic growth on matrimonial property that arises after separation will not qualify as non-matrimonial property.

24.4 If the post-separation asset is a bonus or other earned income then it is obvious that if the payment relates to a period when the parties were cohabiting then the earner cannot claim it to be non-matrimonial. Even if the payment relates to a period inunediately following separation I would myself say that it is too close to the marriage to justify categorisation as non-matrimonial. Moreover, I entirely agree with Coleridge J when he points out that during the period of separation the domestic party carries on making her non-financial contribution but cannot attribute a value thereto which justifies adjustment in her favour. Although there is an element of arbitrariness here I myself would not allow a post-separation bonus to be classed as non-matrimonial unless it related to a period which commenced at least 12 months after the separation.

24.5 By this process the court should, without great difficulty, be able to separate the matrimonial and non-matrimonial property. The matrimonial property will in all likelihood be divided equally although there may be deviation from equal division (a) if the marriage is short and (b) part of the matrimonial property is "non-business partnership, non-family assets" (or if the matrimonial property is represented by

autonomous funds accumulated by dual earners).

24.6 The non-matrimonial property is not quarantined and excluded from the

court's dispositive powers. It represents an unmatched contribution by the party who brings it to the marriage. The court will decide whether it should be shared and if so in what proportions. In so deciding it will have regard to the reality that the longer the marriage the more likely non-matrimonial property will become merged or entangled with matrimonial property. By contrast, in a short marriage case non-matrimonial assets are not likely to be shared unless needs require this,

24.7 In deciding whether a non-matrimonial post-separation accrual should be shared and, if so in what proportions, the court will consider, among other things, whether the applicant has proceeded diligently with her claim; whether the party who has the benefit of the accrual has treated the other party fairly during the period of separation; and whether the money-making party has the prospect of making further gains or earnings after the division of the assets and, if so, whether the other party will be sharing in such future income or gains and if so in what proportions, for what period, and by what means.

110. I regard that formulation as a helpful and accurate analysis, and adopt it. I regard the value which the T Ltd shares now represent as more akin to non-matrimonial property. But I have given the shares weight in the balancing exercise to what I regard as an appropriately constrained extent by having regard both to the approximate value of H's separation-date holding of YD shares, and to the fact that in my view what he has since built on the back of that asset has involved only incidental use of those shares and the business then conducted by that company which have been unmatched by any contribution on the part of W since the effective end of the marriage. I have also paid regard to what is described as the 'passive economic growth' which might have been added over the relevant 10 years to those shares and to the underlying business conducted by H by reference to two published measures of economic growth in prices and share valuations.
111. I have not as such quarantined or excluded from analysis or distribution the increase in the value of the T Ltd shares, but have concluded in this case that no proportional future distribution would be fair. I have offset the impact of that growth by awarding W an overall sum which represents all the current 'hard' assets and more, and have left H (as he requests, although on more onerous terms than he suggested) with the risk.
112. My award in my view fairly compensates W for the relatively small historical contribution made to T Ltd's present position by YD's business and H's 40% shareholding in that company. I find myself unable fairly to categorise the growth that has occurred as a financial fruit of the marriage partnership.
113. I am unable to attribute responsibility for the fact that this financial application was not sooner dealt with to one party rather than the other (disregarding the year since Baron J adjourned the final hearing). I do not regard H as having treated W unfairly during the period since separation, looking at the situation broadly. My decision takes into account not only the risks which H must run before he may at some stage be able to achieve positive capital liquidity, but also the comparative absence of risk to W (subject to H proving able to comply with the terms of the order). I do not doubt his determination to comply if possible.
114. I do not regard the facts of this case as giving rise to what Baroness Hale at [140] of Miller stated was the second rationale of compensation for relationship-generated disadvantage. In that paragraph she said:

140. A second rationale, which is closely related to need, is compensation for relationship-generated disadvantage. Indeed, some consider that provision for need is compensation for relationship-generated disadvantage. But the economic disadvantage generated by the relationship may go beyond need, however generously interpreted. The best example is a wife, like Mrs McFarlane, who has given up what would very probably have been a lucrative and successful career. If the other party, who has been the beneficiary of the choices made during the marriage, is a high earner with a substantial surplus over what is required to meet both parties' needs, then a premium above needs can reflect that relationship-generated disadvantage.

115. Although it is not necessarily a pre-requisite for this consideration to augment an award that the spouse to be compensated must by agreement have foregone the prospect of 'a lucrative and successful career' I detect no scope for such an approach in the circumstances of this case.
116. I have taken into account all the statutory factors contained in section 25(2) of the Matrimonial Causes Act 1973 as amended to the extent that they are referable to this case, and all other relevant circumstances as upon my evidential findings I perceive them to be. The provision for W which this order requires deals fully with her needs in terms of accommodation and her ability to maintain her lifestyle while living at LM House, and indeed for her lifetime. Having arrived at the determination that she should not share proportionately as and when it may materialise in the liquidity which may be released from the T Ltd shares, I consider that the overall provision H is to make for her goes beyond those needs (taking the Duxbury calculation simply as a guide to the size of the income-producing element) to the extent of £250,000 or thereabouts, and that this is a fair result bearing in mind the burden of debt the order will impose on him over a number of years. Ihese arrangements strike a fair balance between the obligations and entitlements flowing from this marriage and its aftermath, and achieve the parties' shared objective of securing W in LM House. I believe that this is not only a fair outcome for W but one which should obviate and protect her from the risk that T Ltd will never be brought to market, which if her final proposal were adopted would leave her with a continuing mortgage liability of £300,000 to repay but without the resources to do so otherwise than by the sale of LM House. That is an outcome which she wishes so strongly to avoid.
117. After payment of the initial £200,000 lump sum instalment H's next obligation will be to discharge that mortgage in priority to meeting the £900,000 further payment. He will continue to be responsible to maintain W at the rate of £75,000 p.a., as well as servicing the mortgage until he redeems it.
118. I have now (on 20 September 2006) heard submissions in the light of this judgment about the timing of payments, security arrangements, and the form of the order. As to security, my provisional proposal was to suggest that lump sum payments be secured by way of a charge or equivalent arrangement over H's preference shares which (I hope I am correct in envisaging) will most likely be redeemed at latest at the time of any flotation. I can at present see no significant disadvantage to H in his management of T Ltd from this course as the preference shares carry no voting rights. Nor do I see how the financial standing of the company will be diminished in the eyes of the outside investor or of the company's bankers, given that H's personal financial substance does not underwrite any of the company's financial facilities, An arrangement along those lines has now been agreed.
119. Although my order envisages that H will make provision for W to pay her costs of the application insofar as they have not already been met, I had not of course heard any argument about the incidence of costs. To the extent that W does not recover her costs in full, or has a costs liability to H, I envisaged that adjustment by way of set-off can be made. Having now heard submissions on that topic I have determined that the appropriate order is that W should pay a contribution towards H's costs of £275,000 to be set off against the £900,000 second instalment of the lump sum. H has however voluntarily proposed that he will undertake not to enforce that costs order if W makes no application to the court of appeal for permission to appeal (I having refused her application to me for such leave). An order to give effect to this judgment, incorporating an agreed timetable for its implementation, has been negotiated between the parties and approved by me.
120. I am conscious of course that I have by no means dealt in this judgment with every point made by counsel, by whose industry in the preparation of submissions and illustrative documentation I have been very greatly assisted.