England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		13/03/2013

The Hon. Mr Justice Moylan :

1. This judgment follows the hearing of the wife's financial application. This is a rehearing of the wife's application for reasons that are not relevant to this judgment but for which the parties are not responsible.
2. Accordingly, the parties are not solely responsible for the costs incurred in these proceedings which have inevitably been increased as a result of this rehearing. However, to have to record that this litigation has cost a total of £2.7 million is, to put it mildly, a stark reflection of the extent to which this case has been contested. It is clear to me that this case has not been litigated in a manner which complies with the obligations imposed on parties pursuant to the overriding objective. I regret to say that I also found the approach taken by both parties during the course of the hearing to be unhelpful. Points have been pursued in a confused and confusing manner. Each side seemed to be focused largely on forensic point scoring and both put forward offers that, in my view, paid little regard to the resources which are in fact currently available.
3. In this respect I echo the observations of Munby LJ in H v H (Financial Relief) [2010] 1 FLR 1864. Also, like him, I do not propose to deal in this judgment with all the points canvassed before me but I have taken into account all the evidence and all the submissions when determining this application. Given that many of the figures have been given in pounds and/or dollars I propose to use both during the course of the judgment.
4. The resources in the case can be divided into three categories:

(a) Shares in a private company, called Confluence Technologies Inc ("Confluence") which are estimated to have a net worth of £32 million (on a very broad indicative valuation). They are currently illiquid, in that they cannot be sold.

The shares are in a company founded in the early years of the marriage. The husband has always worked for the company and continues to do so. The husband and wife currently own 34.7%. The value of these shares is uncertain. They have been the subject only of a preliminary valuation which gave a gross value of between $65 to $83 million. This is no more than a very broad indication of their possible value. Further, there is no firm date by which the value of the shares will be realised. This is one of the issues which I will have to address in this judgment. However, given the uncertainties the parties agree that the shares should be divided between the parties in kind. The issue is the percentage which the wife should receive.

5. (b) Other assets which can be valued but not all of which are currently realisable.

On the husband's case these assets are worth in total £9.3 million; on the wife's case they are worth £8.4 million, in both cases excluding chattels of £5/600,000. The difference is largely accounted for by differences in tax, the wife contending that significant amounts will be payable on the realisation of certain investments and for the tax years 2011 and 2012. The main issue appears to be the extent to which losses can be carried forward to reduce the tax which would otherwise be payable. Given the costs incurred and the duration of these proceedings (approximately 2 years), it is extraordinary that this issue has not been resolved or even properly addressed during the hearing. Following the conclusion of the hearing, I was provided with additional evidence on behalf of the husband in an attempt to address this point. I have had a brief look at this new evidence but it is, in reality, far too late.

6. (c) The husband's earned income from Confluence. The wife has no earned income.
7. The principal issues in the case are:

(a) What percentage of the Confluence shares should each party receive? The wife contends that they should be divided equally; the husband contends that the wife should receive 1/3^rd. The husband's case rests on two points. First, he submits that he has made a special contribution during the marriage such as to justify a departure from an equal division. Secondly, he submits that the fact that the value of the shares will not, and cannot, be realised until some years after the end of the marriage, during which he will continue to work in the company (an unmatched contribution), justifies a departure from equality;

(b) How should the currently available capital resources be divided having regard to the parties' current needs. The husband contends that they should be divided equally. The wife contends that she should receive £5.4 million (excluding chattels);

(c) Should there be a clean break or should the wife receive maintenance pending the realisation of the Confluence shares;

(d) The wife asserts that the division of the assets should be adjusted in her favour on the sale of Confluence to reflect a "wanton campaign of extravagance" by the husband. This has been referred to as an "add-back" submission;

(e) The wife also seeks additional safeguards in respect of the Confluence shares.

There are a number of additional issues which have been raised by the parties but which, as referred to above, I do not consider it necessary for me to address in this judgment.

8. The wife's case, as outlined above, is that there should be an equal division of the parties' capital resources. This is the longer term outcome because she seeks an unequal division of the capital resources currently available to enable her to meet, principally, her housing need pending realisation of the Confluence shares. At the start of the hearing it was submitted that the wife should receive £6.1 million of these resources and the husband £3.5 million. At the conclusion of the hearing this had become respectively £5.4 million and £3.4 million (although these figures ignore the wife's case that tax of approximately £815,000 is or may be due as set out below). In addition the wife seeks periodical payments at the total rate of £30,000 per month for herself and one child until realisation of the Confluence shares.
9. The husband's case is that there should be an unequal division of the Confluence shares to reflect his special contribution and the fact that the value of the shares will not be realised until some years after the end of the marriage. The proposed division is 2/3^rd to the husband and 1/3^rd to the wife. The husband additionally proposes that the non-business assets should be divided equally giving each party just under £5 million (including chattels). In order to provide the wife with greater current liquidity and with the ambition of achieving a clean break, in his closing submissions Mr Pointer indicated that the husband is willing to "countenance a solution" which provides more of the liquid wealth for the wife.

History

10. The parties married in 1985 when the husband was aged 21 and the wife 20. They are both US nationals. The husband is now aged 48 and the wife is aged 47. They have two children aged 18 and 16.
11. Following the parties' separation in 2010 the wife has remained living in the former matrimonial home in London and the husband has moved to live in California. Their elder child lives with the father and the younger lives with the mother. The parties' elder daughter will very likely attend university in the USA. The younger daughter attends a boarding school just outside London. Following completion of her secondary education she is expected to attend university although at present there is no definite plan as to in which country this will be.
12. The parties met and spent most of their married life living in Pittsburgh, Pennsylvania. When they married they had no money. Indeed, it appears that the husband had substantial debts. The parties worked in employment until 1991 when the husband set up Confluence. Not long after, the wife embarked on qualifying as a lawyer and she received government loans which were used to support the family until the business began to generate sufficient income to pay the husband a salary.
13. After the wife qualified as a lawyer she practised for a very short period and then worked, also for a very short period, as general counsel to Confluence.
14. In 2006 the husband sold 65% of his interest in Confluence to a venture capital fund for $40 million net. The family's wealth was transformed as a result. It is apparent that their lifestyle changed dramatically as can be demonstrated by their purchase of an interest in, that conventional mark of substantial wealth, a private jet.
15. The parties lived in Pittsburgh, where Confluence's head office is located, until 2009 when they moved to London. This resulted in part from Confluence's decision to seek to expand its European business. The husband obtained a three year residence visa for himself and the family. The parties initially lived in rented accommodation before buying their last matrimonial home in April 2010 for just over £10 million with a mortgage of approximately £7.4 million. For the period April to December 2010 Confluence contributed approximately £9,500 per month gross towards the mortgage instalments totalling £30,600 per month (of which approximately £18,500 is interest).
16. The parties' former home in Pittsburgh was sold in February 2012 for $1.8 million.
17. As referred to above, the wife has remained living in London. The husband moved to live in San Francisco in late 2010. He lives in rented accommodation substantially funded by Confluence. He remarried in August 2012. In addition to the parties' elder child, he lives there with his current wife, Dr Bramlette, and her two children by her previous marriage. The husband's wife is due to give birth imminently. The husband is Chairman and CEO of Confluence.
18. The parties' separation was clearly traumatic for a variety of reasons. They are plainly now a highly conflicted family. The separation has been followed, as referred to above, by litigation which has been fought with little regard to the obligation on parties to co-operate.

The Proceedings

19. The wife commenced divorce and financial proceedings in October 2010. There have been numerous orders and very substantial volumes of evidence have been adduced for the purposes of interim applications and the substantive hearings.
20. During the course of the proceedings the parties have made a significant number of allegations about the financial and litigation conduct of the other. I do not consider it either necessary or proportionate to address any of these allegations in this judgment, save the wife's case in respect of add-back. However, in order to provide some insight into the course of these proceedings, I set out some details in the following paragraphs.
21. The wife commenced proceedings in England on 20^th October 2010. She applied for a freezing order without notice to the husband. In her Affidavit in support she relied on a number of matters. These included significant non-business related expenditure by the husband, in about late July 2010, in part on "items for women that had not been purchased for me" such as jewellery. She puts the amount at $150,000 per month and states that this was inconsistent with his previous pattern of expenditure.
22. In September 2010 the wife travelled to Phoenix where she knew the husband was attending a conference. She took the children. She discovered that the husband was there with his present wife. It is not difficult to question the wisdom of this, unannounced, trip, although it is right to recognise that it took place whilst the marriage was unravelling. The wife asserts that the husband repeatedly threatened to have her UK visa cancelled and to cancel her access to their joint credit cards. She also says that he made other threats. At the beginning of October her use of two cards was cancelled and she says that, for a period, she was unable to access the parties' PNC (bank) accounts because the password had been changed. The wife also became aware that the husband had given or was proposing to give a ring, which she says was her replacement engagement ring, to his present wife as their engagement ring.
23. Whatever was said, it is clear that on her return to the UK the wife set about obtaining a visa to live in this country in her own right. It is also clear that the husband did change, unilaterally, some of the financial arrangements as referred to above. The result was, in some respects, something of a free for all as both the wife and the husband took unilateral steps in respect of their financial resources.
24. In her Affidavit sworn on 4^th February 2011, the wife refers to financial transfers effected unilaterally by the husband from joint bank accounts. The total was $360,000 and appears to have been largely, if not entirely, spent by the husband on furnishings and otherwise in connection with his then new home in California. The wife also accepts that she had made some unilateral transfers which had not been referred to in her previous Affidavit. In addition, the wife relies on the sale by the husband of the parties' interest in a private jet. In correspondence between the parties' solicitors, the husband's solicitors said (by letter dated 7^th January 2011) that the husband proposed to sell their interest in the jet "in the next few days". The wife did not agree to the sale. In fact, the husband had signed the contract for the sale of the parties' interest on 4^th January 2011 and the contract had been completed on 7^th January. In other words, the letter dated 7^th January 2011 was misleading.
25. In his Affidavit sworn on 23^rd February 2011 the husband accepts that he had acted unilaterally in moving the parties' funds. He accepts this was inappropriate and would have caused the wife "uneasiness and concern". He apologises. He says that he did so because he was concerned the wife would be "unco-operative in ensuring that we had sufficient liquidity to meet our obligations". As an explanation, and as the husband accepts, this does not justify unilateral action.
26. The husband also accepts that his actions in respect of the ring were "particularly upsetting" for the wife and again apologises.
27. As for the wife's allegations about what he said when she travelled to Phoenix he says, "In the context of our separation, some very hard and unfortunate things were said by us both". He says he very much regrets this and apologises. He accepts that he cancelled the wife's access to two credit cards and seeks to provide an explanation for this.
28. As for expenditure, the husband accepts that "fairly significant sums" have been spent on non-business related items including those identified by the wife. The husband explains that, from discussions with his Pittsburgh attorney, he understood that "it was acceptable for me to spend money on some furniture for myself as long as I kept records … If I had overspent on furniture I understood that this could be offset in the final settlement". The husband does not specifically mention other expenditure, such as on jewellery, but the same would seem to apply with even greater force to such expenditure. The husband later produced a schedule showing that in the period between 24^th July 2010 and 7^th August 2011 he spent, on items costing in excess of $5,000, a total of $204,000 principally on gifts of jewellery, bags and clothing for his present wife.
29. In their respective Affidavits addressing maintenance pending suit both parties refer to the need to reduce their expenses. They both acknowledge the need to "draw in our horns". The husband specifically refers to the fact that the parties have been using capital to meet their living expenses as their income was inadequate and was sufficient only to meet what he calls "our infrastructural costs". This has the obvious consequence that all their other expenditure will result in their capital resources being depleted.
30. The wife's application for maintenance pending suit was determined early in 2011. On 3^rd March 2011 Mostyn J ordered the husband to pay the mortgage/loan instalments due in respect of the properties, all service charges, property taxes, utility bills and, in respect of the Pittsburgh property, the cost of insurance. In addition, he ordered the husband to pay direct maintenance to the wife of £480,000 per year.
31. Mostyn J's Order of 18^th April 2011 fixes the husband's interim maintenance needs at $500,000 per year. This was fixed at a level lower than that fixed for the wife because of a number of points – namely, that the husband has very significant business expenses which, to some extent, reduce his own income needs; that the cost of living in San Francisco is less than in London; and that the husband's partner had a significant income. As is clear from his judgment, Mostyn J assessed the husband's interim needs because the parties' respective interim needs were going to have to be met from capital. The family's income of approximately $100,000 per month broadly equalled a number of fixed expenses, principally in respect of their properties. The Order specifically records that the provision made for the parties was intended to cover the entirety of their interim personal needs (save in respect of legal costs).
32. On 15^th July 2011, Mostyn J reduced the amount of the husband's interim maintenance needs to $360,000.
33. Other applications and orders were made dealing with, among other matters, the fact that the mortgage on the former matrimonial home had not been paid as required by the Order of 18^th April 2011.
34. The Order of Wall P., of 19^th June 2012, provides for a rehearing of the wife's financial applications. He also gave permission for the Decree Nisi to be made Absolute.
35. On 13^th August 2012 the Court of Appeal varied the order made in respect of the Decree. The Court of Appeal permitted the Decree to be made Absolute provided the husband transferred 1/3^rd of his shareholding in Confluence to the wife. The registration of this transfer is conditional on the wife subscribing to the stockholders' agreement, a non-compete agreement and a confidentiality agreement. The husband has executed a deed of transfer. As I understand it, the transfer has not yet been registered pending receipt of the specified documents from the wife.
36. At this hearing I have heard oral evidence from the wife, the husband, the former CFO of Confluence who left in June 2012 and the former President who also left in June 2012. Given the extent to which the parties have so clearly become entangled in a bitter forensic battle, I consider it appropriate to treat their evidence with a degree of caution. The evidence from the former employees of Confluence provided me with little assistance.
37. In addition to the evidence in the core bundles, I have been referred to limited parts of the 30 further bundles provided for the hearing. I propose only to refer to elements of the evidence during the course of this judgment but I have taken into account all the evidence which I have heard and to which I have been referred when determining the issues in this case and determining how to exercise my powers under the Matrimonial Causes Act 1973.

Confluence

38. As referred to above, Confluence was set up in 1991. The husband was an equal partner with Mr Schiller, the co-founder. In 1996 Mr Schiller left the company and sold his interest to the husband/company.
39. Confluence has clearly grown very substantially over the years. It describes itself as a "global leader in investment data management automation".
40. In 2006 a venture capital firm called Polaris Venture Partners purchased a majority stake in the company (65% of the husband's interest, equating to approximately 53% of the issued share capital). At the time of the purchase all stockholders entered into a Stockholders Agreement dated 20^th July 2006. This Agreement contains a section dealing with restrictions on transfer, right of refusal, co-sale and drag-along provisions. This section deals with the manner in which a stockholder can sell shares when "the Drag-Along Right is not in effect". The drag-along provisions apply in the event that the Board of Directors and a majority stockholder interest have determined to enter into what is called a "Sale Event". In that situation all stockholders are required to sell to the third party buyer a pro rata portion of their shares at the same price and on substantially the same terms as applicable to the stockholder majority interest. The Agreement also contains a section dealing with the right to participate in the event that the company sells or issues "additional securities". It is a comprehensive agreement and, as might be expected, it is clear that it provides a considerable level of protection to all shareholders.
41. As referred to above, the 2006 sale to Polaris resulted in the husband receiving $40 million net of tax. This was paid into an investment vehicle set up by the parties in their joint names called Highmont Capital LP.
42. In 2007 Confluence was incorporated in Delaware. There are just over 8 million preferred shares and just over 15 million common shares. The preferred shares are owned by Polaris. The husband and (following the Court of Appeal's Order) the wife own 34.7% of the common shares. In addition the husband owns 120,562 warrants to purchase preferred shares.
43. In the event of what is defined as a "Liquidation Event", which includes a sale of the company, the preferred stockholders are entitled to be paid in cash the original purchase price plus any accrued and/or declared but unpaid dividends of 8% per year. This provision will only impact on the value realised by the other stockholders if the eventual sale price obtained for the company would result in Polaris receiving less than this guaranteed amount on a pro rata apportionment. Currently the total which Polaris would be entitled to receive under this provision has been calculated by Mr Howard at just under $90 million. Whilst on the evidence it currently appears unlikely that this provision will be relevant, given that the sale will not be effected in the immediate future, there is a possibility that it might become relevant in the future.
44. Following the banking crisis in 2008, Confluence had its own difficulties with its bankers, described as an "important crisis" by the company's former President. In his Affidavit of 12^th April 2011, the husband says that this arose because of the company's failure to meet banking covenants. This led to the company needing to re-finance its bank debt. This was done by the husband and the wife lending the company a total of $6 million, $2.5 million in December 2008 and $3.5 million in July 2009. There is an issue between the parties as to whose idea this was. In my view, the origin of the idea is of little importance. The significant fact is that the parties decided to support the company by lending a very significant amount of their own capital. It was at a good rate of interest, for the parties and probably also for the company, and it helped the company at a critical time.
45. The investment made by Polaris in Confluence is in a 10 year fund. In 2006 it was made clear that their plan was to seek to realise their investment over the course of 5 to 10 years; i.e. between 2011/2016. It is to state the obvious that a great deal has happened in the financial services and banking industry since 2006. However, it is clear from the husband's evidence that the intention or goal remains to sell the company in the next few years. During the course of his oral evidence he said he hopes the sale will take place in the next 30 months. He also said that this depends on external factors, in particular the state of the banking industry. In addition, the husband said that effecting a sale involves a "tremendous" amount of work. I am satisfied that maintaining and developing the company and procuring its sale will continue to require a great deal of important work from the husband (and, indeed, everyone involved in the company).
46. In his Form E sworn on 1^st April 2011 the husband refers to a value for the company identified during recent discussions with a potential purchaser. He says:

"It is clear, however, that my aim and that of (Polaris) is to achieve a sale at a higher value. It is very difficult to form a view as to what that 'exit' might achieve and when that future value might be achieved. Similarly, it is very difficult to ascribe a willing buyer/seller valuation to my holding as at today".

He then gives an estimate for the value of the whole company of between $120 and $150 million.

47. In March 2011 the wife obtained a "preliminary" valuation of Confluence from a forensic accountant. This was intended to be no more than a very broad estimate of the company's value given the limited information available to the accountant. He arrived at a bracket of between $200 and $269 million for the whole company and between $65 and $83 million gross for the husband's shares.
48. The Order made on 20^th January 2012 records:

"the parties agree that the entire shareholding in Confluence will be sold in the near future (it being the husband's case that this will be in 2-3 years) and that the proceeds of sale of the shares currently held in the name of the Respondent (however they may be held at the time of the sale as between the Petitioner and the Respondent) shall be divided according to a percentage to be determined by the trial judge".

49. In his Affidavit of March 2012 the husband says he and Polaris are optimistic that "we will find our 3x exit" before giving a range of $220 to $330 million.
50. For sound reasons, the approach taken by the parties and endorsed by the court is that the case does not justify significant expenditure on seeking to value the Confluence shares. The principal reasons for this are that, at present, the shares are not realisable as their value can only be realised in accordance with the Stockholders Agreement. Accordingly, any current valuation would be no more than theoretical. Secondly, as referred to above, the parties expect the value of the shares to be established by a sale or otherwise within the near future, by which I mean within about 3 years. The parties, therefore, agree that the method by which the value of the shares should be divided between them is by giving each a defined percentage of their total shareholding of 34.7% (and of the warrants).
51. There is, of course, no guarantee that Confluence will be sold within 2/3 years. Given that Polaris' investment is in a 10 year fund from 2006, it seems unlikely that any realisation will be significantly longer than that, unless events compel further delay. There is also no assurance as to what sum will be realised. As the husband says in his evidence, Polaris could decide simply to recover its investment in which event the common shareholders would receive nothing. Again, this appears unlikely, but it would also be trite to say that a great deal can happen even in three years. There are, therefore, uncertainties as to when the value of Confluence will be realised and the amount which will be received by the parties.
52. During the course of his oral evidence, the husband has offered to guarantee or undertake (a) that the wife will not be disadvantaged in any way as a shareholder; (b) that he will not receive any further shares in Confluence (other than by exercising the existing warrants); (c) that he would try to achieve a sale of the company within 2/3 years; and (d) that, subject to a non-disclosure agreement, he would inform the wife of any bona fide offers to buy the company.

Section 25

53. I turn now to the section 25 factors.

Capital

54. During the course of the hearing, I asked the parties to provide me with one schedule of assets identifying those items which are agreed and those which are not. It would have been helpful if I had been able simply to incorporate such a schedule into this judgment. When the parties were making their closing submissions I was provided with a schedule which undertakes this exercise. However, it contains such a range of differences (approximately 25 and ranging from £500,000 down to £1) that it would be disproportionately time-consuming to seek to make sense of them all. I also asked how, if these differences were considered to be material, I was expected to determine those which had not been addressed in the course of the hearing. In the absence of any satisfactory answer, I will do the best I can.
55. As referred to at the start of this judgment the parties' assets can be divided between the Confluence shares and the other assets. I have dealt with the Confluence shares above. When giving figures in pounds or dollars I use the exchange rate as taken by counsel of £1 = $1.6.
56. (a) London Property: The former matrimonial home in London has a net agreed value of £3.4 million based on an agreed gross value of £10.75 million. There is a mortgage of approximately £7 million. The mortgage instalments total £30,600 per month of which, broadly, £18,500 is interest and the balance of £12,100 is capital. In addition both parties' solicitors have a charge against the property in respect of their unpaid costs totalling approximately £2.28 million (the wife's are £1.22 million and the husband's are £1.06 million). Therefore, on these figures, the net sum available to the parties on the sale of this property would be approximately £1.1 million.
57. It is now agreed that this property should be sold. The husband suggests that this will take 3 months; the wife suggests that it will take 6 months. Absent any strong reason and, apart from the cost of maintaining the property, no reason at all has been mentioned, it would seem sensible to put the property on the market for sale early in 2013 (on a date recommended by the instructed estate agents). Accordingly, for the purposes of my calculations, I propose to work on the basis that the property will take until May 2013 to sell, giving 6 months (from October 2012) of additional costs.
58. (b) Turks and Caicos Property: The parties own two properties in the Turks and Caicos. They consist of a plot of land valued at just over $1.55 million net of sale costs and a house valued at just over $1.45 million net of sale costs. The island/resort where the properties are situated is owned or managed by a company which went into administration at the end of 2010. This has clearly resulted in uncertainty about the future.
59. It is the valuer's opinion that a marketing period of between 18 months and two years "would be required" to obtain the values given in the substantive reports. Notwithstanding this clear statement, made in response to a specific question following receipt of the valuations, Mr Pointer has submitted that "it can safely be concluded that the properties could be sold within another year". This is, in part, based on a submission that the expert's evidence "indicates that a marketing period of 18 months from March 2012 may be required" (my emphasis). In my view this submission is contrary to the only expert evidence on this issue. First, the expert's evidence is would, not may: to quote more fully, "a marketing period of between eighteen months and two years would be required" (my emphasis). Secondly, although I suppose the period could be interpreted as being from the date of the expert's letter, this is not expressly stated and in my view is not implicit from the evidence. This might not seem a major point in the case but it provides an example of what I regard as being the unhelpful manner in which this case has been litigated. Mr Pointer also seeks to rely on the "tenor" of the substantive valuations and that they provided the "current" market value. These points do not address the fact that the valuer has expressed a clear opinion of the marketing period required to achieve the values he has given.
60. The parties have other assets in their joint names, the most significant of which are the loan due from Confluence and their investments in Highmont Capital.
61. (c) Confluence Loan: In the circumstances described above, the parties lent $6 million to Confluence. They currently receive gross loan interest of $670,000. The initial term for this loan has expired. The husband has put forward a proposed repayment schedule incorporated into a draft promissory note which he says Confluence will agree. During the course of his evidence the husband appeared to say that the proposed repayments had been approved by the Board and by the company's bankers. In his cross-examination, his evidence on this was far less confidently given and left me with a degree of uncertainty as to what will in fact happen.
62. The schedule provides that the loan will be repaid as follows: December 2012 $350,000; December 2013 $750,000; December 2014 $1.5 million; and $1.7 million in each of December 2015 and 2016, with earlier repayment in the event of a sale of the company. I make clear that, if the company offers to repay the loan in accordance with this schedule, I would expect the parties to agree to it.
63. (d) Highmont Capital: The parties' investments in Highmont have a value of approximately $2.9 million (with accrued interest) after deduction of bank loans. Of these, $890,000 is illiquid, leaving $2 million currently realisable. The parties are not agreed about the tax payable on the realisation of these investments. I have heard no evidence on this issue and, indeed, the reasons for the parties' respective contentions were only very briefly addressed during the hearing. This is another example of the way in which the parties have approached this case as a forensic battle rather than seeking to assist the court in exercising its discretionary powers.
64. The wife asserts that I should deduct tax of approximately $550,000 (£340,000), giving a net sum for these investments of $2.3 million. It is not clear what proportion of this tax relates to the illiquid part of the investments. The husband asserts that I should make no tax deductions at all. This issue centres in part on the ability of the parties to carry forward losses.
65. In a report obtained by the wife from the accountant who was jointly instructed to deal with other matters, he provides a figure for potential US tax (of a maximum of $138,000) but adds that there is a "realistic possibility" that neither party will have to pay any US tax because of capital losses carried forward. As from the 2010 tax year, the parties had capital losses to carry forward of $6 million.
66. The position in respect of the wife's potential liability to UK tax is more opaque. It depends on a number of factors, including whether the wife claims the "remittance basis" in the year in which the investments are sold. The accountant calculates that the wife's UK tax charge will be between zero and £261,000 adding that, with appropriate planning, she should be able to claim foreign tax credits so as to avoid being taxed twice on the same gain.
67. For the purposes of calculating the resources currently available, I propose to assume that there will be no US tax payable and that there will be UK tax of £261,000, allocated proportionately between the liquid and illiquid investments, for the purposes of addressing what funds I should treat as being available in the immediate future. This gives approximately £1 million available capital and £450,000 illiquid.
68. (e) Net Proceeds of Pittsburgh Property: The proceeds of sale of the parties' home in Pittsburgh now total £261,000. On the assumption that Montpelier Street is not sold until May 2013, I propose to deduct the interest element of the mortgage for six months totalling £110,000 (being approximately £18,500 per month) and two service charge payments totalling roughly £24,000, giving a net balance of £127,000.
69. (f) Joint Bank Account: The parties have a joint account with Citizens' Bank with a balance of either $108,000 (£67,000) or $165,000 (£103,000). I will take the average of £85,000.
70. (g) Other Joint Assets: There are a small number of other joint assets, excluding chattels, totalling £30,000 (two further Coutts accounts and one investment – Wooden Iguana).
71. (h) Husband's Sole Assets: The husband's sole assets less liabilities total £125,000. The largest asset is a pension (401K) fund. The husband's liabilities, as set out in the asset schedules, total approximately £160/170,000, including a sum due to accountants of £32/45,000.
72. (i) Wife's Sole Assets: The wife's sole net assets total approximately £250,000. She has liabilities of approximately £60,000. The assets consist almost entirely of £150,000 in a RBS account and an investment in a business called Villa Paradiso Ltd of £100,000. The wife states that she needs to retain these assets in support of her visa to reside in the UK. Given that it is reasonable for the wife to remain living in the UK, at least while the parties' youngest child completes school here, I consider this to be a reasonable need. The wife's other assets total £13,000. Her liabilities are principally personal loans of £42,500 and credit cards of £14,500, giving net liabilities of £44,000. I do not include these net liabilities in the capital calculation, as they can be paid through income. In addition, it is said that the wife has costs orders in her favour of approximately £250,000.
73. (j) Tax for 2011 and 2012: On the issue of tax, there is also a dispute as to whether the parties have any liability for US tax for the years 2011 and 2012 (to date). The husband's schedule of assets prepared for the commencement of this hearing includes tax due (on Confluence loan interest received) of $117,000 for the wife and $151,000 for the husband. By the end of the hearing the husband's position had developed, in part due to the production by him on the last day of the hearing (2^nd November 2012) of emails to him dated 2^nd and 4^th October 2012 from the parties' US tax accountants stating, without explanation, that there is in fact a tax refund due for 2011 of $150,000. In his closing submissions, Mr Pointer provided his own calculation of the tax which might be due for 2012 (to October) of $104,000 (£65,000).
74. The wife asserts that the parties have a potential liability for US/UK tax for the years 2011 and 2012 of approximately $760,000 (about $380,000 each). In the context of this case this is a significant sum to set against the available resources.
75. As referred to above, I have had a very brief look at the additional evidence supplied on behalf of the husband after the conclusion of the hearing. There is clearly an element of uncertainty. However, given the PWC evidence, I propose to assume that there is no US tax liability for 2011, with a refund of $100/150,000, but that this will be matched by the US tax due for 2012. Given what I regard as the greater degree of uncertainty in respect of UK tax, I propose to deduct assumed UK tax of £105,000, again for the purposes of calculating the resources currently available. If this turns out to be pessimistic, it will provide the parties with additional resources, the distribution of which I deal with later in this judgment.
76. (k) Chattels: The parties have chattels valued at between £500,000 and £600,000. I do not propose to include the value of any of the chattels when considering the assets available to meet the parties' needs for housing and income. Neither party made such a submission but, in any event, although they cumulatively have a significant value, they are not of a type or at a level which would justify this.
77. The parties are not agreed as to how the chattels should be divided. This subject was not addressed at any length during the course of the hearing. As for the cars, I consider it fair if the wife retains the car in London and the husband retains the other cars. The wife should retain her jewellery and furs and the husband retain his watches, pens and jewellery. As for the other items, namely the contents from the parties' former home in Pittsburgh, the London property and the San Francisco property, it is clearly appropriate (as appears to be proposed) that the husband retains what I will call the household chattels in California and the wife retains those in London. It is not clear to me whether the disputed items remaining are confined to those listed in the valuations included in the bundles for this hearing or extend beyond these. If necessary, I will have to resolve that issue. However, I provisionally propose that the disputed items (wine, antiques, art, piano) should be divided equally by value between the parties leaving out of this account the other chattels divided as set out above. I have excluded the other chattels from this exercise because I do not consider it necessary in order to effect a fair division for the value of these other items to be included. In my judgment it is fair to divide them by reference to the nature of the asset such that, for example, the wife retains her jewellery and the husband retains his. In value terms this results in an imbalance between the parties, but this is insignificant in the context of the case as a whole.

Capital Summary

78. I propose to divide the assets, apart from the Confluence shares, into those which are liquid, being those available over the course of the next 6/12 months, and those which are not likely to be available in that period (which, not entirely aptly, I will call illiquid). I undertake this exercise to identify what capital resources are available to meet the parties' needs over the course of the next 6/12 months. I exclude chattels for the purposes of this exercise.
79. Liquid assets are: (a) the net proceeds of sale of the Montpelier Street of £1.1 million; (b) if paid, two instalments of the Confluence loan totalling £690,000, of which £470,000 is not payable until December 2013; (c) Highmont Capital of £1 million; (d) remaining proceeds of sale of the Pittsburgh property of £127,000; (e) Other joint assets, including the Citizens' Bank account, of £115,000. The combined total is approximately £3 million including the Confluence loan repayments, of which part will not be paid until December 2013. Against this must be deducted potential UK tax of £105,000 (paragraph 75), leaving a net sum of £2.9 million. I also recognise that, in addition, the parties have their respective liabilities (other than costs).
80. Illiquid assets are (a) the properties in the Turks and Caicos, the land of £970,000 and the house of £910,000; (b) the balance of the Confluence loan of £3.06 million; (c) Highmont Capital of £450,000; (d) the husband's sole assets (after deduction of debts) of £125,000; (e) the wife's sole assets of £250,000. The total is just under £5.8 million.
81. Apart from the Confluence shares, therefore, the parties' assets are in total worth £8.7 million.

Income

82. (i) Husband: The husband receives a net annual basic salary of approximately $410/420,000. I say, approximately, because the parties have not been able to agree what his net basic salary is: the wife says it is $423,000 whilst the husband says it is $410,000. In the context of this case, this is not a significant difference but it would have been helpful if this had been agreed. In addition the husband receives a number of benefits in kind, namely rent and a contribution towards utilities totalling $120,000 per year and a car. It is said that tax will be payable on these benefits. The husband is also entitled to a discretionary bonus. For 2011 he received $130,000 gross and for 2010 $155,000. No bonus was paid for the previous three years. The husband says that he may get a bonus for 2012 but it will probably be less than last year.
83. For the purposes of this judgment, I propose to take the husband's net earned income, comprising his salary and bonus, at £280,000 per year.
84. If, as both parties propose, the Confluence loan is divided equally between them, the husband's income will currently consist of his salary and bonus, the rental and utilities payments and half the loan interest (of approximately £110,000 net). I propose to ignore for these purposes the provision of a car, pension contributions and the very significant business expenses incurred by the husband which include meals. They do not provide the husband with any additional income although they do, to differing extents, reduce his income needs.
85. During his oral evidence the husband said that the rental payments would cease in September 2013, on the basis that Confluence had agreed to pay the rent for three years. The company had previously been making a contribution to the cost of the family home in London. In cross-examination, the husband was shown the Confluence document dated 26^th January 2011 setting out the terms and conditions of his posting to San Francisco. The posting is for an initial term of up to 3 years, from 26^th January 2011, but may be extended by mutual agreement. It also provides that "During your posting" the company will pay a housing stipend of $8,500 per month and a utilities stipend of $1,500 per month. In response the husband said that he thought there was another document which superseded this and which contained a termination date. No such document was produced during the hearing. I will determine this case on the basis that the husband will continue to receive the current payments from Confluence until at least January 2014 and probably beyond.
86. When considering the parties' respective positions, I also have to address the fact that the husband is living with his current wife. The husband's evidence in respect of the contributions she has been making to their joint expenses has not been clear. Indeed, it has been misleading. In his Form E (1^st April 2011) the husband said that Dr Bramlette earned approximately $400,000 per year but made no contribution to their household expenses and had no significant assets. In his Affidavit of 26^th July 2012 the husband asserted that Dr Bramlette had started a new part-time medical practice in April 2011 from which she was earning approximately $72,000 per year. He added:

"Given her own financial obligations to her children and her limited income, I do not invite her to contribute to the fixed costs of our living together. Inevitably, however, she makes a contribution through payment for groceries, travel costs and household items".

87. During his oral evidence the husband said, for the first time, that Dr Bramlette had made a contribution from her savings, starting in 2011, of about $200,000, later giving the very precise total of $194,000. It had initially been documented as a loan but had been converted into a contribution since she and the husband had married. The husband said that he had not intended to mislead the court but the absence of any reference to these payments was a failure to comply with his obligation to make full and frank disclosure. In his oral evidence, the husband said that Dr Bramlette's current plan is to stay at home for 1/2 years following the birth of their children and then return to practice; i.e. between December 2013/2014.
88. (ii) Wife: The wife qualified as a lawyer in Pennsylvania in the mid 1990s. Following qualification she only practised for a short period and has undertaken no paid legal work for over 10 years. Her qualification is limited to Pennsylvania. In her Affidavit sworn on 1^st March 2011 she says that she has "always hoped and anticipated that I would be able to re-start my career after the children left home". The wife clearly has an earning capacity, but she is unlikely to be able to earn any significant income in the near future (within the next 2 years, at least).
89. At present, therefore, the wife's only income will be what she receives from her capital resources. If the Confluence loan is divided equally, this would currently provide her with approximately £105,000 net per year.
90. There is an issue as to whether any maintenance payable by the husband to the wife is tax deductible. Again, it is puzzling that what would seem to be a relatively simple issue has not been resolved or addressed fully in the evidence. The only evidence on this issue is in the Report dated 23^rd March 2012 obtained by the wife from Mr Collings. This states that, whilst the wife remains a tax resident of the UK, the US/UK double taxation treaty "should apply" meaning that her receipt of maintenance payments will not be taxable in the UK or the US whilst the husband "should be entitled" to a deduction on his US tax return for maintenance payments to the wife.
91. In order for payments to be deductible by the husband a number of requirements must be met. They are (i) that the payments are made in cash; (ii) that the payments are not classified as not being alimony; (iii) that the parties are not members of the same household when the payments are made; (iv) that the husband has no liability to make any payment after the wife's death; (v) the payment is not treated as child support. If I were to order the husband to pay maintenance to the wife, all of these conditions would appear to be satisfied.

Standard of Living

92. It is clear that following the sale of part of Confluence to Polaris in 2006 the family's standard of living was transformed. The wife's initial budget for herself was in the region of £800,000. The husband's Form E budget for himself was £310,000, limited to California.

Financial Needs

93. (a) Housing:

The husband has recently extended the lease on his home in California for a further year, at an increased rent of $9,250 per month.

94. In his Form E the husband put his housing needs, including "removals, decorating, transfer tax etc.", at $5 million (just over £3 million). In his Affidavit sworn on 16^th March 2012 he said he would like to purchase a home as soon as possible at a cost of £2.5 million.
95. I am satisfied that the husband's current housing needs are met. The property he occupies is a large property and is clearly sufficient to accommodate his family at a reasonable standard both now and following the arrival of his additional children. It is, however, clearly a reasonable aspiration for the husband to want to purchase a home.
96. In her Form E the wife said that she hoped to be able to stay in the former matrimonial home in London. This aspiration, and the consequent refusal to agree to a sale of the property, has been the subject of criticism, which I return to below. The wife has now accepted that the property must be sold. The wife says that she wants to remain living in London for the foreseeable future. In her oral evidence she made clear that her focus is central London largely because this is where she has lived and she is unfamiliar with other areas. She does not see herself returning to live in Pittsburgh.
97. The wife has produced particulars for one property in Knightsbridge on the market for £3.95 million. As I understand it, this was produced with Mr Howard's written submissions. The property is air conditioned which the wife says is necessary because she has asthma and allergic rhinitis. This latter issue does not appear to have been raised until October 2012 when the wife filed a statement dealing with other matters and exhibited a short report from a doctor in Pittsburgh. This states that the wife "will be more comfortable" if she has air conditioning which would have a "disease modifying effect". The wife also gave oral evidence that she has required air conditioning since she was aged seven. In my view, the evidence (in particular, the medical evidence) does not justify the submission made by Mr Howard that air conditioning is "essential".
98. On 26^th October 2012, the Friday before the hearing commenced, the husband produced a bundle of property particulars for London and Pittsburgh. As with the particulars produced by the wife, I fail to see how this late disclosure of material was considered to be consistent with achieving a fair hearing. The husband's case on housing is that the wife could purchase a home in Pittsburgh for between $1.6 million and $2.75 million. It is his case that the wife will return to live in Pittsburgh. If the wife remains living in England "at all", to quote Mr Pointer's submissions, it is proposed that she rents a property for between £70,000 and £90,000 per year or alternatively purchases a property at a cost of up to £2 million.
99. When the husband's case is that he wants to purchase a property costing £2.5/£3 million, it is difficult to see how he can sensibly advance a case that the wife should be re-housed in a property costing less than that. The fact that this amount might go further in, say, Pittsburgh than San Francisco is in my judgment immaterial in this case. It is anticipated that, on the sale of Confluence, the parties will receive wealth which will enable them, in general terms, to live where they want.
100. In my view, the level and nature of housing which the parties can obtain in the immediate future (being the next two to three years) is limited critically by the resources likely to be available to them during this period. However, if the resources were available, I consider that it would be reasonable for each party to purchase accommodation costing in the region of £3 million.
101. (b) Income:

Given the standard of living enjoyed by the family in the years from 2006 and given the other factors in this case, it would not be difficult for the parties to justify an income needs schedule of the level set out in the husband's Form E of £300,000. However, as with housing, the level at which the parties can meet their income needs is limited by the resources which are likely to be available over the next few years until the sale of Confluence.

102. I propose now to address the issue of add-back, this being part of the computation exercise.

Add-Back

103. The wife's case is that $1.5 million should be added to the parties' resources to reflect: (a) $360,000 "appropriated" from joint funds; (b) $522,000 excessive expenditure between July 2010 and 18^th April 2011; (c) $500,000 excessive expenditure between 19^th April 2011 and 29^th February 2012; (d) $198,000 excessive use of private jet.
104. It is contended that these resources should be deemed to be part of the husband's resources (and taken into account on the sale of Confluence) because the husband was spending not from his income but from the parties' capital resources and because the husband embarked on this expenditure in the "understanding that any excess expenditure would have to be added back".
105. My initial response to this part of the wife's case was that it would depend on an analysis of what both parties had been spending. It is not sufficient merely to point to certain aspects of the husband's expenditure or to note that he has spent more than permitted under Mostyn J's Orders. The overall picture would need to be analysed, as it is clear that both parties' expenditure has, to a very large extent, been funded from capital given the level of the available income and the fixed costs on housing and the like. To quote Wilson LJ (as he then was) in Vaughan v Vaughan [2008] 1 FLR 1108, at para [14],

"a notional reattribution has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element) …".

106. In addition, reattribution must be justified. During the course of his judgment, Wilson LJ referred to a passage in the judgment of Cairns LJ in Martin v Martin [1976] Fam 335, at 342H:

"a spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to if he had behaved reasonably".

If it were otherwise, parties would have little incentive to behave reasonably but rather would have an incentive to spend what they could pending resolution. However, in addition, reattribution must be justified in the context of the case. It is a form of conduct and as such it must be "inequitable to disregard it".

107. There is, therefore, an evidential element – is there clear evidence of wanton dissipation – and a legal/discretionary element - would it be inequitable to disregard it or, to put it another way, is notional reattribution required in order to achieve an outcome which is fair?
108. The level of the husband's expenditure has, indeed, been very high. A schedule produced on behalf of the wife shows total expenditure for the period 27^th July 2010 to 29^th February 2012 of not less than $2.4 million. It is not the full extent of his expenditure during this period because not all relevant statements were available for analysis. During the hearing the husband was asked about certain elements of his expenditure including $13,000 on a meal for two at the well-known restaurant of El Bulli in May 2011, $6,000 on renting a car for a few days in June 2011 and $81,000 on a short trip to New York in February 2011. The schedule referred to above, for the period 1^st July 2010 to 29^th February 2012, shows that the husband spent $205,000 on Dr Bramlette, on jewellery, clothing and accessories costing, individually, more than $5,000. A more complete schedule for the period July 2010 to July 2011 totals $227,000. Another schedule shows use by the husband of the private jet costing $198,000 between September 2010 and January 2011. In addition the husband spent in the region of $350/400,000 on furnishing his new home in California (in part reflected in the asset schedule).
109. I do not have a clear picture of what the wife was spending prior to March 2011. Certainly the husband is able to point to significant items of expenditure by the wife, such as the cost of the trip to Phoenix ($50,000); in January 2011, a total of $36,000 for car services (to replace the car service contract previously arranged by the husband); and, in February 2011, $13,700 on a private flight. However, these are isolated expenses which give only some insight into the level of her expenditure in comparison with the husband's. In her oral evidence the wife said that she was in the process of transitioning from one lifestyle to another. This would suggest, given that the wife's maintenance pending suit budget was £800,000 for herself, that during this period she was spending at a significant rate.
110. In addition, the husband asserts that the wife should have agreed to the sale of the London home earlier than she did (September 2012). Such a sale would have led to the repayment of the mortgage, which would have led to the notional saving of the interest payments totalling about £440,000 over two years. However, it would have required an alternative property to be rented or purchased, neither of which would have been likely to have been agreed by the parties. I also note that in his Affidavit of 12^th April 2011 the husband acknowledges that, whilst an immediate sale of the property would "solve a lot of problems" given the expense of maintaining it, it "would cause difficulties".
111. Context is also important. For example, in their Forms E the parties gave significantly higher gross market values for their properties in the Turks and Caicos - $9 million by the wife and $6.5 million by the husband.
112. I do not consider that the wife can be criticised for not agreeing a sale earlier, but the consequence nevertheless is that the parties have spent £440,000 on interest over the past two years.
113. In my judgment the wife has only partly established the evidential foundation for a notional reattribution. Both parties were spending at a prodigious rate (including on the costs of these proceedings) and, on the evidence, it is not possible to carry out a proper comparison fully to determine whether the husband's expenditure was wanton. I appreciate that certain elements of his expenditure appear startling in their extravagance but this alone is not sufficient. At its highest, I would accept that the husband's expenditure on buying gifts for Dr Bramlette ($227,000) and on private jet flights ($198,000) would constitute extravagant expenditure of joint funds. It may also be that part of the husband's expenditure in the period April 2011 to February 2012 would qualify as wanton.
114. In addition, I must consider whether I should effect a notional reattribution. Is it required in order to achieve an outcome which is fair? Given that the assets in this case, to which I would be making a notional reattribution, are estimated, including the Confluence shares, in the region of £40 million, I do not consider that the reattribution of approximately $425,000, or even, say, $700,000, is justified. It is no more than about 1/2% of the total wealth which, if reattributed, would give the wife an extra 0.5/1%. This degree of adjustment, in this case, is not necessary in order for a fair result to be achieved. Even if I had concluded that a greater level of extravagance had been established, I would have been likely to come to the same conclusion.

Discretion

115. Counsel have made very extensive written and oral submissions as to the manner in which I should exercise my discretion under the MCA 1973. I propose to make limited references to their submissions during the course of my consideration of the principal issues raised in this case.
116. In my view it is plain, as submitted by Counsel, that the governing principle by which I should determine the overall distribution of the capital wealth in this case is that of sharing. This is not to say that needs and the needs principle are not relevant. They are potentially relevant to the manner in which I should distribute the wealth which is currently available and to the issue of maintenance/clean break. However, it is the sharing principle which will determine the ultimate division once the Confluence shares have been realised.
117. I propose to address the issues in the following order: (1) special contribution during the marriage; (2) post-separation endeavour; (3) distribution; (4) maintenance for the wife/clean break; (5) maintenance for the younger child; (6) additional provisions in respect of the Confluence shares.

Special Contribution

118. In his Form E the husband asserts that the "scale of the wealth and my achievement in creating Confluence … from nothing, is properly to be defined as a special contribution". His Affidavit sworn on 16^th March 2012 expands on this issue.
119. The husband says that in 1996 he had a "flash of inspiration". Until then Confluence had been a consulting company. He realised that he needed to invent software which would "revolutionise" the way in which the financial industry communicated with its clients. At about the same time his business partner who had been responsible for selling "my software" decided to leave. The husband says that he did, indeed, write software which achieved this effect and is now used by over two-thirds of mutual funds. He asserts that it is through "my personal skill and industry that Confluence has grown to become a leader in fin tech" and has become a company worth in the region of $2/300 million. He puts this forward as an exceptional personal achievement and contribution.
120. In order to meet the husband's case on this issue, the wife has given evidence about the contribution she asserts she has made to Confluence and otherwise. She points to her financial support at the very start of the marriage by helping the husband with his substantial credit card debt. She introduced the husband to his initial business partner when Confluence was founded in 1991. For a period after this, the wife supported the family with her earned income and then with loans she obtained as a law student as the husband received no income from the company. The wife says that this continued for three/four years whilst Confluence was in its initial period of development. The wife also relies on the fact that she and the husband lent Confluence $6 million as referred to above.
121. The wife acted as corporate counsel for the company for a short period. Both parties agree that this was not a success as it led to conflict between them. In addition, however, the wife says that she acted as an informal adviser and sounding board to the husband - helping, advising and supporting him - in respect of the business and she lists the aspects of the business with which she says she was particularly engaged.
122. Much of the wife's case is agreed by the husband. There is some disagreement over details but he accepts the thrust of her evidential case.
123. In his oral evidence during the hearing in March 2012 the husband accepted, "absolutely", that the wife supported him when he was building up Confluence. He also accepted that this was financially, emotionally and in giving advice although limiting this to, "in some cases". Financially, it included helping the husband to pay off his debts, of approximately $36,000, which he accepted was a significant amount in 1985. He accepted that she supported the family for a period at the beginning of the business, with her own earned income and then student loans, when the husband was receiving no income.
124. The husband also agreed that the wife was "incredibly supportive" and that he "bounced ideas off her" until almost the end of the marriage. Her ideas were "useful" and "helpful" notably about the "fabric of the culture".
125. In his written evidence (Affidavit 23^rd February 2011), the husband says that, following the share sale to Polaris, he told the wife that he was going to put his remaining shares in Confluence into their joint investment vehicle, Highmont Capital. As Highmont is owned equally by the parties the effect would have been to share the economic value of the shareholding equally. He did not in fact do this, not because he changed his mind, but because he "never got round to doing" it – "it would have required the permission of … Polaris, a board resolution etc. and it was not a pressing matter". This evidence was given in response to the wife stating that he had told her he was going to put half the shares into her name.
126. During the course of the hearing before me, the husband said that he was proposing to do this because he considered that this would have been fair. He agreed that this would have been a fair step to take up until the end of the marriage. He also agreed that if the shares had been realised prior to the end of the marriage he could not see why they should not have shared the proceeds equally.
127. During the course of the hearing in March 2012 the husband accepted that the effect of his plan, in respect of his remaining shareholding in Confluence, was that the wife would have had 50% of the economic value of the shares. He agreed that he thought this was fair. When asked why this was no longer fair he replied: "We are in a different country with different rules" and "I have learned that there are different ways of looking at what contribution means".
128. I have been referred to a number of authorities on the issue of special contribution. It is clear that for such a contribution to justify influencing the court's determination it must be "of a wholly exceptional nature, such that it would very obviously be inconsistent with the objective of achieving fairness (i.e. it would create an unfair outcome) for (it) to be ignored": Bodey J in the Court of Appeal decision of Lambert v Lambert [2003] Fam 103. This passage was approved by Lord Nicholls of Birkenhead in Miller; McFarlane [2006] 1 FLR 1186 at para [68]. In the same case Baroness Hale of Richmond said, at para [146]:

"Only if there is such a disparity in their respective contributions to the welfare of the family that it would be inequitable to disregard it should this be taken into account in determining their shares".

129. In Charman v Charman (No 4) [2007] 1 FLR 1246, Potter P, giving the judgment of the court, said at para [80]:

"… In such cases can the amount of the wealth alone make the contribution special? Or must the focus always be upon the manner of its generation? In Lambert Thorpe LJ said, at para [52]:

'There may be cases where the product alone justifies a conclusion of a special contribution but absent some exceptional and individual quality in the generator of the fortune a case for special contribution must be hard to establish.'

In such cases, therefore, the court will no doubt have regard to the amount of the wealth; and in some cases, perhaps including the present, its amount will be so extraordinary as to make it easy for the party who generated it to claim an exceptional and individual quality which deserves special treatment. Often, however, he or she will need independently to establish such a quality, whether by genius in business or in some other field. Sometimes, by contrast, it will immediately be obvious that substantial wealth generated during the marriage is a windfall – the proceeds, for example, of an unanticipated sale of land for development or of an embattled take-over of a party's ailing company – which is not the product of a special contribution."

130. In K v L [2012] 1 WLR 306, Wilson LJ said, at para [21]:

"Thus a special contribution arises in circumstances in which a spouse's contribution, direct or indirect, to the creation of matrimonial property has been so extraordinary as to dictate a departure within the sharing principle from the ordinary consequence of its equal division."

131. Has there been in the present case such a disparity in the parties' respective contributions during the marriage, in that the husband has made a contribution of a wholly exceptional nature, such that fairness requires that his contribution should result in his receiving a greater share of the marital wealth?
132. The answer to this question should not depend on any detailed analysis of contributions. It requires a striking evidential foundation which so clearly stands out that the question almost answers itself. During the course of the hearing I felt compelled to remark that it was not a defended divorce. The extent to which the case, at times, seemed in the eyes of the parties to require what Coleridge J has aptly described as "a general rummage through the attic" was unedifying. This is not required, even when a case of special contribution is being advanced.
133. Given the husband's own evidence, I find it very hard to see how the case merits the conclusion that he has made a special contribution. As referred to above, the husband specifically accepted in his oral evidence that he considered an equal division of the value of the Confluence shares would have been fair up until the end of the marriage. If the parties themselves consider that an equal division as at the end of the marriage would be fair, it must surely be difficult for the court to conclude that there has been such a disparity in their respective contributions that it would be "inequitable to disregard it" – to adopt Baroness Hale's words as quoted above; "different country with different rules" or that he has learned that there are different ways of looking at contributions, as referred to by the husband in his evidence, cannot be sufficient justification.
134. For the avoidance of doubt, I am satisfied that in this case there is not such a disparity in the parties' respective contributions that the husband's contribution during the marriage justifies his receiving a greater share of the marital wealth. Both parties made very considerable contributions. In addition, if it were necessary for me to determine, the wife's specific contributions to the business would serve to dispatch the husband's case that his contribution was exceptional.

Post-Separation Endeavour

135. The next point I propose to address is the effect, if any, on the division of the wealth in this case of the fact that the Confluence shares will not be realised until some years after the end of the marriage. During these years the husband will continue to work in the business. The wife will be making no marital contributions although she will continue to make contributions by caring for one of the children of the family.
136. Mr Howard contends that this fact should not have any impact on the division of the wealth. He submits that the wife is entitled to 50% of the shares as at the end of the marriage. It would be unfair if this percentage was not awarded to her as the husband is using or trading with the wife's interest in Confluence which is, accordingly, at risk and because the husband continues to receive an employment package. Mr Howard submits that it is no different to the shares being held in a public company such as Shell. If there is to be any adjustment, it should not be a percentage adjustment but should be based on any increase in value due to work undertaken outside the marriage.
137. Mr Pointer submits that this factor should result in a departure from equality in the husband's favour. Why, he asks, should the wife share in the product of the husband's endeavour after the end of the marriage and when it is unmatched by a contribution of her own? She will, potentially, benefit as the value of her share is preserved and/or enhanced. Mr Pointer adds that in this case the husband is not trading with the wife's interest because the shares are unrealisable until the company is sold.
138. In my view, the principles which apply to this issue are clear. They involve considering what is meant by marital property and then addressing the manner in which the sharing principle is applied.
139. In Miller; McFarlane the sharing principle was based on the proposition that at the end of a marriage the spouses, as equal partners, should be "entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary": per Lord Nicholls, para. [16]. These assets are described as the "financial fruits of the marriage partnership", para. [21] or "the financial product of the parties' common endeavour", para. [22]. Baroness Hale refers to the partnership assets as being those "built up by their joint efforts during the marriage" and "the product of their joint endeavours" para. [143].
140. In Charman v Charman (No 4), matrimonial property is defined as "the property of the parties generated during the marriage otherwise than by external donation", para. [66] (my emphasis).
141. The Confluence shares have been generated during the marriage. However, their economic value cannot be realised until some years after the end of the marriage. In so far as their realised value reflects, as it inevitably will, what has occurred since the end of the marriage, that value will in part be the product of the husband's endeavours not the parties' joint endeavours. It matters not, in my view, whether that value is greater or lower than or even the same as the value as at the end of the marriage. It will still, in part, not be "the financial product of the parties' common endeavour" nor property "generated during the marriage". Accordingly, the value realised from the shares will, in part, not be marital property.
142. This fact alone does not lead inevitably to the conclusion that the wealth, including the realised value of the shares, should not be divided equally between the parties. The sharing principle applies to all the parties' property: Charman v Charman (No 4) at para [66]. However, as was also said in Charman, again at para [66]: "to the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality". I have also been referred to Jones v Jones [2011] 1 FLR 1723 and N v F (Financial Orders: Pre-Acquired Wealth) [2011] 2 FLR 533.
143. The facts of the present case do not permit me to follow the approach adopted in these latter cases. However, the fact that I cannot identify specifically what part of the wealth is not marital does not in my judgment mean that I must divide the wealth equally. I must still decide, as part of the discretionary exercise, what weight to give to the husband's endeavours after the end of the marriage and the fact that, as a result, the value realised from the Confluence shares will in part reflect these endeavours and not the parties' joint endeavours.
144. An example of the court deciding that no weight should be given to this factor is Jones v Jones. In that case the company was sold just over one year after the end of a 10 year marriage. At first instance Charles J declined to treat the increase in the value of the company between these dates as a non-matrimonial asset. In the course of his judgment Wilson LJ, after commenting that the husband had "wisely" decided not to appeal against this decision said, at para [15]:

"The evidence fully justified his finding that, apart from no more than 10% of it (which he then chose to ignore: [463]–[464]) the soaring jump in value was attributable only to what at [383] he called the 'spring-board' which was in place within the company by the date of the separation".

145. In my judgment, the present case is different and some departure from an equal division is justified because of this factor as part of the discretionary exercise. The company is not static. As referred to above, I am satisfied that maintaining and developing the company and procuring its sale will continue to require a great deal of important work. I am, accordingly, satisfied that the value in due course realised on the sale of Confluence will reflect, in part, the husband's post-separation endeavours. I now turn to the manner in which I propose to exercise my discretionary powers.

Determination

146. In deciding what outcome is fair in this case I must, of course, give proper weight to all the section 25 factors including the length of the marriage and the contributions made by the parties during and after the marriage to the welfare of the family. The extent to which the husband's post-separation endeavour in respect of Confluence justifies a departure from equality depends in part on the duration of the period between the end of the marriage and the sale of Confluence. On the evidence, it appears to me likely that Confluence will be realised, roughly, in two to three years' time. On this basis, the period between creation and sale will be approximately 25 years, of which approximately five will be after the end of the marriage. However, I consider it would be too simplistic in this case to apply a purely arithmetical approach to this one factor when determining the outcome which is fair. That requires an assessment of the weight properly to be given to all the circumstances of the case including that part of the wealth which is, to an unquantified extent, not marital property.
147. As referred to above, the wife's case is that she should receive an equal share of the wealth whenever Confluence is realised because the wife is and should remain entitled to her half share.
148. Mr Pointer submits that the combined effect of the husband's special contribution during the marriage and his post-separation endeavour justifies the husband receiving 2/3^rd of the Confluence shares and the wife 1/3^rd which, on his figures, would give the wife 38% overall. He accepts that, if I reject one of these limbs, the wife's percentage would have to be greater. He did not seek to advance any particular division in respect of either of these factors.
149. In my judgment, the critical issue, as I have identified above, is that when the Confluence shares are realised, that value will in part be the product not of joint endeavours but of the husband's post-separation endeavour. The reason for this is that they cannot be realised now. I also do not accept Mr Howard's alternative submission that any adjustment must be based on any increase in value. In any event, the evidence in this case does not permit any such calculation to be undertaken. In addition, however, whatever value is ultimately realised will, of necessity, in part reflect post-separation endeavour.
150. In my judgment the overall division which effects a fair outcome is an award that, following the realisation of the Confluence shares, gives the husband 55% of the capital wealth and the wife 45%. Taking the value of the shares at £32 million and the others assets at £8.7 million, a combined total of £40.7 million, the wife would receive just over £18 million and the husband would receive just over £22 million.
151. In this exercise, I can see no justification for dividing the non-Confluence assets other than (broadly) equally between the parties with the important caveat that the manner in which this is effected must take into account their respective current needs. A notional equal division would provide each party with £4.35 million. However, of this only £2.9 million is available, as defined above. In my judgment, the parties' needs are the critical factor which determines the manner in which I should divide these resources.
152. What are the parties' current needs? As referred to earlier in this judgment, I am satisfied that the husband's housing need is currently met by the property he is renting in California. In any event, there are insufficient liquid resources available to enable both parties to purchase accommodation. Indeed, the liquid resources are not sufficient to enable the wife to purchase a property mortgage free at the level she seeks, namely £3.95 million. I do not know whether the wife might be able to obtain a mortgage. It will be a matter for the wife to decide how she deploys the resources she receives under my award.
153. In addition, the husband has current debts of £160/170,000 and there is the uncertainty in respect of the tax.
154. In my judgment, the wife should receive £2.4 million from the liquid resources (including £105,000 in respect of her potential UK tax liability, so a net sum of £2.3 million). This will consist of the net proceeds of sale of the former matrimonial home of £1.1 million; the first instalment of the Confluence loan repayment of £220,000; Highmont capital of £1 million; with the balance, of approximately £80,000, to come from the balance of the proceeds of sale of the Pittsburgh property. The husband will receive the balance of £600,000 (which will consist largely of the sum due from Confluence in December 2013 of £470,000). I appreciate that this will not enable the husband to pay his debts until then but he will then have £430/440,000. I also appreciate this means that the wife will be unable immediately to purchase a property at what would otherwise be a reasonable level, but I do not consider it fair to give the wife all the liquid assets. It provides her with sufficient funds to purchase a more modest property or a property in an area outside her current focus, or to rent a property.
155. If the former matrimonial home sells for more than the gross value of £10.75 million, any excess should be divided as to 75% to the wife and 25% to the husband, given the wife's more pressing current need (with a balancing payment on the sale of Confluence to the extent that the wife receives more than £100,000 more than the husband under this provision). If the assumed levels of tax referred to earlier in this judgment turn out to be inaccurate, the parties must share the gain and the burden equally.
156. In order to receive half of the assets of £4.3 million (apart from the Confluence shares), the wife will also receive half the balance of the Confluence loan (approximately £1.53 million: $2.45 million); her other assets totalling £250,000 (which are included within the illiquid resources as defined above, namely the RBS account and Villa Paradiso); and the balance of approximately £220,000 from the Highmont investments. The husband will receive the balance of the illiquid funds, totalling £2.2 million, and the other half of the Confluence loan, of £1.53 million, giving him a total of £4.3 million. I appreciate that this gives the husband a substantially greater proportion of the illiquid funds but this is more a timing than a risk issue. In any event, I consider this justified to enable the wife to meet her current needs.
157. The wife's case is that, given the uncertainty about the value of Confluence, there should be an accounting after it has been sold. I do not consider it appropriate to adopt this course as it leaves the parties uncertain as to the proportion of the Confluence proceeds which they will receive. Although the valuation of the shares is indicative only, it is sufficient for the purposes of determining the distribution of the parties' capital resources. In order to effect the division referred to above, the wife is to receive 44% of the parties' Confluence shares (and warrants) and the husband the balance of 56%. This also accords with my assessment of a fair division of this specific asset.

Maintenance

158. The wife contends that given the current financial circumstances and given an element of uncertainty about the future in respect of Confluence, she should continue to receive maintenance from the husband to enable her to meet her current needs at a fair level.
159. The husband contends that this case "cries out for a clean break". With some adroit financial calculation, Mr Pointer submits that the wife will have capital of £2.7 million in addition to her housing of £2 million and will, therefore, have sufficient resources to meet her income needs. However, this includes assets which are not liquid, including the balance of the Confluence loan (which is payable from December 2014), and the monies which are invested by the wife in respect of her visa, £250,000. It also assumes no tax on the realisation of the Highmont investments (£261,000) and does not take into account the additional costs in respect of the former matrimonial home until its sale (£134,000).
160. It is well-established that a clean break should be effected whenever it can, fairly, be achieved. I have no doubt that in this case an immediate clean break would not be fair. It would not enable the wife to meet her current income needs at a reasonable level, let alone as assessed above. The share which the wife receives of the available resources is to enable her to purchase a property. Even if she decides not to purchase a property, the capital will, at best, only produce sufficient gross income to pay rent. I do not consider it reasonable to require her to use her capital (save as an income resource) to meet her income needs pending the sale of Confluence. Given that there is an element of uncertainty as to when that will occur and what the parties will receive when it does, it is reasonable and fair for this to be preserved until the position becomes clear following a sale.
161. The wife's only income, therefore, will be the interest she receives on the Confluence loan. This will provide a maximum net income of £105,000. This will reduce as a result of the repayment of $1.1 million as set out above. I have dealt above with the wife's ability to earn an income.
162. The husband is able to pay maintenance as a result of his earned income (enhanced by the benefits he receives). My award must reflect the fact that this is earned income. On the basis that the husband's net earned income is £280,000, he should pay the wife maintenance for herself of £100,000 per year. This will provide the wife, initially, with £205,000 per year. The husband will have approximately £290,000 plus the rental and utilities allowance, the provision of a car and other benefits which contribute to his standard of living. However, in addition, I am satisfied that any maintenance award is likely to be tax deductible by the husband but not taxable when received by the wife, for so long as she resides in England. I propose that the effect of this benefit should be divided so that the wife's maintenance is increased to £140,000 per year (if I am wrong about this, then the payment will remain £100,000).
163. I do not consider it appropriate to secure the payment of maintenance against the Confluence loan or at all. In addition, apart from continuing maintenance in the wife's favour, there should be a dismissal of all the parties' other claims.
164. In the exercise of my discretion, I consider that the above award, to adapt the words from Charman, para [67], effects a division and an award of maintenance which best achieves a fair overall outcome. It is one which gives appropriate weight to all the circumstances of the case. It shares the wealth fairly, both in terms of proportions and in terms of manner, and in a way which enables the parties to meet their respective needs.

Child Maintenance

165. There are substantial assets held in trust for the children. There is a separate trust for each child. Each trust holds shares in a company which holds the investments. The investments of each trust include a small number of shares in Confluence and other assets valued at approximately $900,000. The parties are not agreed as to whether they are health and education trusts or health, education, maintenance and support trusts. Again, this issue has been developed in a very unfocussed manner.
166. For the purpose of seeking to resolve this issue I was provided with a copy of the trusts during the course of the hearing. On a plain reading of the documents it appears that trust income must be distributed and that trust capital can be distributed for health and education. Because of the way in which the trusts are structured (the assets are held in a company) it appears that there has to date been no trust income. However, even if this is the correct interpretation, it would seem relatively easily changed by income being paid, by way of dividends or otherwise, from the investment company to the trust. The trusts have been used to pay for educational expenses whilst the family were living in the USA.
167. In respect of the children, given the parties' current financial position and given the level of the resources in the trusts, I consider it reasonable for the trusts to be used for the payment of both school fees and maintenance. I appreciate that, in respect of the younger child, this will have additional (UK) tax consequences and will result in a greater level of expenditure as compared with her sibling. However, given the resources within her trust I still consider this a reasonable charge on the trust assets. I do not, however, consider it reasonable to seek to procure a reimbursement for school fees already paid.

Additional provisions in respect of the Confluence shares

168. The wife seeks the imposition of a number of provisions in respect of Confluence to protect her interest in the company. It is agreed that the wife will receive her defined interest in the company by the transfer of the requisite number of shares. In my view the wife will have considerable protection under the terms of the Stockholders Agreement as a result of her being a shareholder. Having regard to that, and the need to make sure that any formal undertakings provided by the husband are clear, in my view it is sufficient if the husband provides undertakings in respect of the matters referred to in 52(b), (c) and (d) above.
169. Following delivery of this judgment in draft a number of additional points have been raised. I have dealt with some of these summarily but I address others below.
170. One issue, raised on behalf of the husband, relates to the orders for costs in the wife's favour which have been estimated at £250,000. Mr Pointer has submitted that, because I have deducted the parties' respective costs before undertaking the sharing exercise, the husband will in part be paying these costs twice. Once because the wife's costs have been deducted before division and secondly because the husband will again have to pay the wife £250,000. So, it was said, he would end up paying 150% of the liability.
171. I was initially attracted to this submission because, superficially, it did appear that the husband could in part be paying twice.
172. However, in answer to this submission, Mr Howard pointed to the fact that the husband's costs have also been deducted before the assets have been shared so that, if Mr Pointer's submission was to succeed, the wife would not be receiving the costs to which she is entitled under the orders made in her favour.
173. I agree with Mr Howard's submission. The effect of the deduction of both parties' respective costs before division is costs neutral. They will, in theory, each have paid half of the other's costs. This is on the assumption that there is no issue as to the level of one party's costs as against the other's, which there is not in this case. Accordingly, the orders for costs will have the intended effect if they are implemented after the assets have been shared between the parties. The wife's assets will increase by the agreed or assessed amount and the husband's will decrease by that amount. If full recovery were not procured, the wife would in effect be paying part of the husband's costs in respect of the events which led to him being ordered to pay her costs.
174. The next issue which has been raised relates to the number of warrants which the husband owns. Throughout the hearing the husband adduced evidence that he owns 244,474 warrants (as referred to above). Following the dissemination of my draft judgment, the husband said that this figure was wrong and he only owns 120,562 warrants. I gave the husband permission to adduce evidence on this issue because it was said the earlier evidence was mistaken. It seemed to me that he should have the opportunity to seek to demonstrate whether the earlier evidence was mistaken. In my view it is self-evident that orders made under the MCA 1973 should be based on the true facts. It will, of course, be rare for parties to be permitted to seek to re-open points but where it is asserted that a simple mistake has been made as to, for example, the number of shares or warrants it is clear to me that, in justice, a party should be permitted to seek to make good the point.
175. Mr Howard has submitted that the only basis for reconsideration is the Barrell jurisdiction: In re Barrell Enterprises [1973] 1 WLR 19. He contends that the husband should be ordered to transfer 122,237 warrants. The manner in which the court should exercise its discretionary jurisdiction in circumstances such as these has recently been considered by the Supreme Court in In the matter of L and B (Children) [2013] UKSC 8. I am satisfied that it is appropriate for me to consider the additional evidence and decide whether to amend the number of warrants.
176. The evidence which has been filed is from the husband and Karen Brownlee, General Counsel of Confluence. The latter's statement explains the history and states that the husband currently owns 120,652 operative warrants. She states that the previous evidence was incorrect. Given the clarity of this evidence and the documents adduced in support, I have amended the figure for the warrants in my judgment to 120,562.
177. The final matter I propose to address in this judgment is the application made by each party that the other should pay their costs of the proceedings since May/June 2012.
178. The wife's initial proposal, made by letter dated 21^st January 2013, was that:

"So far as costs are concerned, we consider that we have a significantly better argument that your client pays our client's costs than your client has in respect of our client paying his costs. However, we believe the preferable way to proceed would be for neither client to make an application for their costs. If, however, your client does not agree to this and is going to seek an order for costs in his favour, then our client will make an application that he pays hers".

179. At the hearing on 24^th January 2013 it was made clear on behalf of the husband that he was seeking an order that the wife should pay his costs since May 2012.
180. There was insufficient time for me to determine costs at that hearing so a further hearing was required to enable me to deal with the issue. In order to explain the parties' submissions, I need first, briefly, to summarise the background.
181. Mostyn J who heard the first final hearing delivered a draft judgment on 3^rd April 2012. Following delivery of this judgment, he recused himself. On 19^th June 2012 Wall P ordered a rehearing. He also ordered that the draft judgment and his own judgment should not be put before the judge hearing the retrial, save:

"insofar as either party seeks to rely on the draft judgment and/or the President's judgment after determination of the substantive application for a financial order in relation to the question of costs of that application.

182. I propose to refer to some of the correspondence. This is limited to those passages to which I have been referred and which I consider relevant. On 11^th May 2012 the husband's solicitors wrote to the wife when she was acting in person as follows:

"Surely the simplest and most cost-effective solution is to accept the judgment of Mr Justice Mostyn …".

183. The same suggestion was made in a letter dated 22^nd May 2012. By letter dated 13^th June it was said that the husband remained willing to implement Mostyn J's judgment. It was also said that if there was a retrial the husband's position was "likely to harden" and he would revisit his arguments as to special contribution and as to the percentage of shares which the wife should receive. It was also said that he was likely to seek an order for costs.
184. By letter dated 13^th July 2012, the wife's solicitors, who were again acting for her, made it clear that if the husband was making any settlement proposals they should be by way of an open offer.
185. On 16^th July 2012 the husband's solicitors wrote that they had made an open offer to settle on the terms of Mostyn J's draft judgment. Adding:

"At the same time, we made plain that that offer would not be maintained for a new trial …".

186. On 19^th July 2012, the wife's solicitors replied. They asserted that no open offer had been made because the letters from the husband's solicitors referred to Mostyn J's judgment which had been "embargoed" and that, accordingly, the references to it in the letters were inadmissible – making the letters inadmissible.
187. On 20^th July 2012, the husband's solicitors contended that an open offer had been made.
188. The debate ceased because, by letter dated 23^rd July 2012, the husband withdrew his offer to settle the case as set out in the above correspondence.
189. On 31^st July 2012 I ordered the parties to serve their respective open positions by 14^th August 2012.
190. On 28^th August 2012 the husband sent his open position. Although an over-simplification, this proposed an equal division of the non-Confluence assets, the transfer to the wife of 33.3% of the Confluence shares and a clean break.
191. On 21^st September the wife served her open position. Again, although an over-simplification, the wife proposed that there should be an equal division of all the assets with continuing maintenance for herself and one child of the family at the rate of, broadly, £250,000 per year. The wife indicated that, in the hope of reaching a settlement, she was prepared to forego her contention that excess expenditure by the husband should be added back to the assets.
192. It will be seen that my judgment differs significantly from the open offers made by each party in August and September 2012. It will also be apparent that I rejected the husband's argument for a special marital contribution whilst accepting his argument in respect of post-marital endeavour. I rejected the wife's argument for reattribution or add-back, which was advanced again at the hearing. I have awarded the wife 44% of the shares (and warrants) rather than 33.3% or 50%. I have also ordered continuing periodical payments in favour of the wife.
193. Extensive arguments have been made as to whether the wife or the husband has done "better" under my judgment than they had done under Mostyn J's draft judgment. However, neither party chose to litigate before me on that ground nor to make open offers based on the terms of the latter. They chose to litigate on the basis of their respective open positions and the issues they advanced before me. Indeed, it appears to me that, apart from the brief period between May and July 2012, they both chose to litigate as though the previous hearing and draft judgment had not taken place at all.
194. Rule 28.3 of the Family Procedure Rules 2010 provides:

"(5) Subject to paragraph (6), the general rule in financial remedy proceedings is that the court will not make any order requiring one party to pay the costs of another party.

(6) The court may make an order requiring one party to pay the costs of another party at any stage of the proceedings where it considers it appropriate to do so because of the conduct of a party in relation to the proceedings (whether before or during them);

(7) In deciding what order (if any) to make under paragraph (6), the court must have regard to –

(a) any failure by a party to comply with these rules, any order of the court or any practice direction which the court considers relevant;

(b) any open offer to settle made by a party;

(c) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(d) the manner in which a party has pursued or responded to the application or a particular allegation or issue;

(e) any other aspect of a party's conduct in relation to the proceedings which the court considers relevant; and

(f) the financial effect on the parties of any costs order.

(8) No offer to settle which is not an open offer to settle is admissible at any stage of the proceedings, except as provided by rule 9.17".

195. Mr Howard submits that the husband should pay the wife's costs, or at least a proportion of them, from 19^th June 2012. Alternatively, he submits that the husband should pay certain specific costs, namely half of PWC's costs incurred by the wife (at present only half has been included in the wife's costs); the costs since the final hearing (including specifically amounts incurred addressing an issue raised by the husband's solicitors in respect of their charge); the costs of arguing costs; and the costs of the warrants issue.
196. In support of this first submission, Mr Howard, somewhat boldly, contends that the wife "succeeded on her application in relation to the substantive issues". It is a bold argument because the wife did not succeed in obtaining the division of the Confluence shares which she sought. The proportion which I have awarded is closer to that for which she contended than the husband's case but it is still 6% (approximately £2 million) less. I have referred above to the outcome in respect of specific issues raised by the parties.
197. In response to the husband's application, Mr Howard submits that the husband has not made any "open offer" within rule 28.3 because the offers made by the husband between May and July 2012 referred to matters which were, or became, inadmissible in the proceedings until after delivery of my judgment.
198. Mr Bishop on behalf of the husband submits that the wife should pay the husband's costs from 25^th May 2012, being 14 days after his offer of 11^th May 2012. He submits that the wife has not achieved any significant material advantage as a result of the rehearing of her claims. He submits that the costs incurred by the parties in respect of the rehearing – very broadly in the region of £1 million – are disproportionate to any difference in the wife's favour between the terms of Mostyn J's draft judgment and of my judgment.
199. At times it seemed to me that Mr Bishop's submissions could be applied equally to the husband. He submitted that there was an obligation on the wife to weigh carefully the cost of proceeding to a re-trial against the prospective benefit of doing so. That, clearly, also applied to the husband. It was a continuing obligation on both parties.
200. He also submitted that the wife had the option of settling the case in accordance with the husband's proposals in May/July 2012 but that thereafter the husband had "no choice" but to re-litigate. He contended that this was the wife's "choice". With respect, I do not understand this submission. As I have just said, both parties had a continuing obligation to seek to resolve the case by agreement. Under the rules this is achieved and demonstrably achieved by the making of open offers. If a party wants to demonstrate to the court that they have sought to resolve the case in an appropriate manner, the mechanism which the rules provides in respect of financial remedy proceedings is the open offer. This is why the rules provide that it is only "open" offers which are admissible.
201. Apart from any argument about the status of the letters between May and July 2012, the husband's contention that he had no choice after July 2012 but to litigate is unsustainable. He continued to have the choice of making an open offer but chose not to do so. Instead, he withdrew his offer to settle and chose to litigate on the same ground as before. If the husband wanted to settle the case on the basis of Mostyn J's draft judgment he should have made an open offer containing the terms on which he was willing to settle the case.
202. It is certainly arguable that between 11^th May 2012 and 19^th June 2012 (the date of Wall P's judgment) the husband had made open offers. But after that date they ceased to be open offers (because they referred to inadmissible matters) and, in any event, they were withdrawn on 20^th July 2012. However, even if they are open offers, I do not consider that this brief period has had any significant impact on the progress of the proceedings. The first substantive hearing before me was on 31^st July 2012. Thereafter, both parties elected to continue the proceedings in the same manner as previously. They continued to litigate in a manner which failed to comply with their obligations pursuant to the overriding objective, namely by failing to litigate proportionately and in a way which sought to save expense.
203. I accept that the President's Order expressly provides for the draft judgment to be considered. I also accept that it was clear that a comparison would be made between my judgment and the draft judgment. However, Mr Bishop is right additionally to point to the fact that the level of costs incurred in this case has now been said to be unacceptable and disproportionate by three judges. This was a clear message which both parties needed to heed. The extent to which they heeded it is in my view determined by the way in which they have each acted in the proceedings. They have acted, as described above, by failing to make substantive open offers and choosing to re-litigate the same issues.
204. The court must have regard to all relevant matters when deciding whether to make an order for costs including the specific matters referred to in rule 28.3(7). In the circumstances of this case I am satisfied that the parties are both sufficiently responsible for the continuation of the proceedings to a re-hearing that the only fair substantive order is no order as to costs. Both failed to abide by their obligations under the overriding objective. They both pursued and contested issues which should not have been pursued or contested and both made open offers to settle which are significantly different from the terms of my judgment. I agree with Mr Howard's submission that the wife's offer is closer than the husband's but it was still some distance away. I do not agree with him that neither party can say that the other is to blame. In my judgment, they are both to blame and there is no sufficient discriminating feature to justify one paying the other's costs (save in respect of the issues below).
205. I now turn to deal with the subsidiary points raised in respect of costs. The evidence obtained by the wife from PWC was sufficiently relevant and material to justify the full amount being included within the costs deducted before division. As half has already been included in the wife's costs, the other half must be included in the husband's costs. Given the amount (£16,000) and given the effect of the distribution of the assets as determined above, there is, in my judgment, no need to alter the effect of my judgment in the light of this modest adjustment.
206. As for the costs incurred in addressing the warrants issue, to the extent that identifiable additional costs have been incurred, it is clearly just that the husband should pay these.
207. As for the costs said to have been incurred by the wife in respect of what I have described as the charge issue, in my view these are implementation costs and I do not propose to make any separate order in respect of them.
208. The final point I propose to determine is whether the husband should pay the costs incurred in dealing with the applications made in respect of the costs of the proceedings since May/July 2012. The wife made an open offer on 21^st January 2013, effectively, that there should be no order as to costs. I say "effectively" because it was not couched in those terms but in my view that was its clear effect. Further, there was no substantive response before the hearing before me on 24^th January 2013 when the husband made plain that he was seeking his costs.
209. Given this open offer and given that in my judgment it was not reasonable for the husband to pursue this point, I propose to order the husband to pay the costs incurred in dealing with the costs' applications since 24^th January 2013. As referred to above, in my judgment it should have been plain that there is no sufficient discriminating feature to justify one paying the other's costs.
210. I will assess the costs awarded above if requested to do so. Otherwise, I make clear that costs of the hearing on 20^th February 2013 are to be treated as being incurred in dealing with the issue of costs as the vast bulk of the hearing was used in addressing this matter.