England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		10/06/2015

This judgment was handed down in private on 10^th JUNE 2015. It consists of 74 paragraphs and has been signed and dated by the judge.

The judge hereby gives leave for it to be reported.

Mr CUSWORTH QC:

1. On 13^th June 2002, the parties in this case signed an agreement by which they agreed [cl.13] that in the event that their forthcoming marriage ended in divorce, neither would make a claim against the other (at least in their own right). Yet, at the end of this hearing during which I have heard extensive evidence from each of them over more than 3 days, as well as from their former nanny, and heard submissions from their respective Leading Counsel for the best part of a further day, they have between them run up during the extent of these proceedings costs in the sum of c.£1.77m. If ever there were a paradigm example of a case which demonstrates the need for more certainty in the law of financial remedies and nuptial agreements, this is surely it.
2. Brief History. I have read, but will not here repeat in full, a detailed agreed chronology. The husband in this case ('H') is 57 and the wife ('W') 46. They met and began a relationship in the summer of 2000, when H was 42 and W 31. In July 2001, their elder child was born (now 13). Sometime after this, they became engaged to be married. H was born and raised in Southern Africa, before studying at Film School in England. I have not been told much about the first 20 years of his career – he evidently had his own small production company, and when the couple met he had written and was staging a play in Shoreditch.
3. It is now accepted (although this was not understood by W at the time), that he had never generated any substantial income from his artistic endeavours. His only significant capital was the house he owned in London, E1, which he was to sell at the outset of their relationship to generate an equity of £474,000. His current assets comprise his interest in the parties' home in London W1 (discussed below but on his own case as put to me worth £742,000, on W's £611,100), savings in his bank accounts, and his interest in his production company – FF. This has some value but is subject to a very significant tax issue.
4. W's father had died young, when she was only 3, in 1972. This meant that she, along with her mother and brother, came into a significant inheritance. This includes their interests in an historic stately home (W's is 25%), and a very valuable painting now attributed to a celebrated 16^th century artist. The current value of her assets, virtually all of which are inherited, held in trust for her, and in shared ownership with the rest of her family, is somewhere around £27m. This figure does include her interest in the parties' London home, which has a market value of £4.5m, so that her net interest is valued at least at £3.5m. She currently works as the director of an art gallery in London.
5. In the circumstances it is unsurprising that the suggestion was made on W's side that the parties should sign a pre-nuptial agreement in advance of their wedding. She had taken advice from her family's solicitors, Charles Russell, and they produced the draft which H received in the middle of May 2002. On 22^nd May he had a meeting with H's solicitor at Hughes Fowler Carruthers where the document was discussed. On 24^th May, she sent him a follow up letter in which she provided him with certain further advice. She confirmed that although the document was not legally binding under English Law, it was possible that the law might change and that it could become so. Both sides exchanged schedules of assets and income for attaching to the document prior to its signing – H's drawn by his solicitor, and evidently based upon the instructions which he had given her in the 22^nd May meeting. As indicated, the document was eventually signed on 13^th June 2002. The parties married on 4^th July 2002.
6. By their agreement, the parties acknowledged and agreed, amongst other provisions, that:

a. The marriage was conditional upon the agreement being executed [Rec. B]

b. The parties intended that the agreement should be legally binding upon them [Rec. H]

c. They had each received independent legal advice and were fully aware of the right that they each were acquiring or surrendering [Rec. J]

d. They had each fully and frankly disclosed their respective means and other relevant circumstances. [Rec. K]

e. They each acknowledged that it was not possible to exclude the jurisdiction of the Court to make orders under the Matrimonial Causes Act 1973. [Rec. L]

f. Neither would make any claim against the other on dissolution of the marriage, and would enter into a consent order to that effect, without prejudice to their right to make such a claim in respect of a child. [Cl.13]

g. Any real property jointly owned would be vested in joint names as tenants in common, and their respective proportions of ownership would be set out in a Declaration of Trust to be drawn up, and otherwise in accordance with their respective financial contributions to that property. [Cl.9]

h. All pre-marital, gifted or inherited property should remain the parties' respective ownership. [Cl.3/4]

i. Neither would make any claim against the other's separate property, or against any trust interest, in the event of dissolution of the marriage. [Cl.10/11]

7. At the time that the agreement was signed, W's disclosure showed assets worth over £16m, together with further inheritance prospects, and income. W's understanding of H's financial position appears to have been as set out in his financial disclosure at the time. Aside from his share of their home (put at 10%), he claimed to have £600,000 in cash, £580,000 in business assets and income which, including royalties, was said to have been £280,000 in the years to April 2000 and 2001, but only £140,000 in 2002 due to a claimed advertising industry downturn.
8. In August 2004, the parties' second child was born, who is now therefore aged 10. They separated in 2012, and their marital relationship may thus be put at about 11 years in duration. Aside from a significant issue about an outstanding tax liability within H's company FF, and who should bear responsibility for that, the only issue of practical legal significance is how the parties' agreement and the other surrounding factors should now affect the assessment of H's needs (for neither side suggest that this is a case which involves any element of sharing). However, there are many underlying issues of fact which will have to be resolved before that question can be determinatively answered.
9. The Law. Both parties acknowledge that the principal authority in this area is now the judgment of the Supreme Court in Radmacher (formerly Granatino) v Granatino [2010] UKSC 42. In delivering the judgment of the Court, Lord Phillips dealt thus with the issues of weight that are relevant in this case:

Factors detracting from the weight to be accorded to the agreement

68. If an ante-nuptial agreement, or indeed a post-nuptial agreement, is to carry full weight, both the husband and wife must enter into it of their own free will, without undue influence or pressure, and informed of its implications...

69. ...Sound legal advice is obviously desirable, for this will ensure that a party understands the implications of the agreement, and full disclosure of any assets owned by the other party may be necessary to ensure this. But if it is clear that a party is fully aware of the implications of an ante-nuptial agreement and indifferent to detailed particulars of the other party's assets, there is no need to accord the agreement reduced weight because he or she is unaware of those particulars. What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.

70. It is, of course, important that each party should intend that the agreement should be effective. In the past it may not have been right to infer from the fact of the conclusion of the agreement that the parties intended it to take effect, for they may have been advised that such agreements were void under English law and likely to carry little or no weight. That will no longer be the case... In future it will be natural to infer that parties who enter into an ante-nuptial agreement to which English law is likely to be applied intend that effect should be given to it.

71. In relation to the circumstances attending the making of the nuptial agreement, this comment of Ormrod LJ in Edgar v Edgar at p 1417, although made about a separation agreement, is pertinent:

"It is not necessary in this connection to think in formal legal terms, such as misrepresentation or estoppel; all the circumstances as they affect each of two human beings must be considered in the complex relationship of marriage."

The first question will be whether any of the standard vitiating factors: duress, fraud or misrepresentation, is present. Even if the agreement does not have contractual force, those factors will negate any effect the agreement might otherwise have. But unconscionable conduct such as undue pressure (falling short of duress) will also be likely to eliminate the weight to be attached to the agreement, and other unworthy conduct, such as exploitation of a dominant position to secure an unfair advantage, would reduce or eliminate it.

72. The court may take into account a party's emotional state, and what pressures he or she was under to agree. But that again cannot be considered in isolation from what would have happened had he or she not been under those pressures. The circumstances of the parties at the time of the agreement will be relevant. Those will include such matters as their age and maturity, whether either or both had been married or been in long-term relationships before. For such couples their experience of previous relationships may explain the terms of the agreement, and may also show what they foresaw when they entered into the agreement. What may not be easily foreseeable for less mature couples may well be in contemplation of more mature couples...

73. If the terms of the agreement are unfair from the start, this will reduce its weight, although this question will be subsumed in practice in the question of whether the agreement operates unfairly having regard to the circumstances prevailing at the time of the breakdown of the marriage.

...Fairness

75. White v White and Miller v Miller establish that the overriding criterion to be applied in ancillary relief proceedings is that of fairness and identify the three strands of need, compensation and sharing that are relevant to the question of what is fair. If an ante-nuptial agreement deals with those matters in a way that the court might adopt absent such an agreement, there is no problem about giving effect to the agreement. The problem arises where the agreement makes provisions that conflict with what the court would otherwise consider to be the requirements of fairness. The fact of the agreement is capable of altering what is fair. It is an important factor to be weighed in the balance. We would advance the following proposition, to be applied in the case of both ante- and post-nuptial agreements, in preference to that suggested by the Board in MacLeod:

"The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement."

76. That leaves outstanding the difficult question of the circumstances in which it will not be fair to hold the parties to their agreement. This will necessarily depend upon the facts of the particular case, and it would not be desirable to lay down rules that would fetter the flexibility that the court requires to reach a fair result. There is, however, some guidance that we believe that it is safe to give directed to the situation where there are no tainting circumstances attending the conclusion of the agreement.

Autonomy

78. The reason why the court should give weight to a nuptial agreement is that there should be respect for individual autonomy. The court should accord respect to the decision of a married couple as to the manner in which their financial affairs should be regulated. It would be paternalistic and patronising to override their agreement simply on the basis that the court knows best. This is particularly true where the parties' agreement addresses existing circumstances and not merely the contingencies of an uncertain future.

Non-matrimonial property

79. Often parties to a marriage will be motivated in concluding a nuptial agreement by a wish to make provision for existing property owned by one or other, or property that one or other anticipates receiving from a third party. The House of Lords in White v White and Miller v Miller drew a distinction between such property and matrimonial property accumulated in the course of the marriage. That distinction is particularly significant where the parties make express agreement as to the disposal of such property in the event of the termination of the marriage. There is nothing inherently unfair in such an agreement and there may be good objective justification for it, such as obligations towards existing family members. As Rix LJ put it at para 73

"…if the parties to a prospective marriage have something important to agree with one another, then it is often much better, and more honest, for that agreement to be made at the outset, before the marriage, rather than left to become a source of disappointment or acrimony within marriage."

...

81. Of the three strands identified in White v White and Miller v Miller, it is the first two, needs and compensation, which can most readily render it unfair to hold the parties to an ante-nuptial agreement. The parties are unlikely to have intended that their ante-nuptial agreement should result, in the event of the marriage breaking up, in one partner being left in a predicament of real need, while the other enjoys a sufficiency or more, and such a result is likely to render it unfair to hold the parties to their agreement.

...

Need

118. Baron J had held that the ante-nuptial agreement was "manifestly unfair" in that it made no provision for the possibility that the husband might be reduced to circumstances of real need. Wilson LJ at para 144 appears to have thought that there was nothing unfair about this and, inferentially, that had the husband been in a situation of real need the agreement would none the less have been good reason for the court to decline to alleviate this by an order of ancillary relief. We would not go so far as this.

119. We stated at para 73 above that the question of the fairness of the agreement can often be subsumed in the question of whether it would operate unfairly in the circumstances prevailing at the breakdown of the marriage, and this is such a case. Had the husband been incapacitated in the course of the marriage, so that he was incapable of earning his living, this might well have justified, in the interests of fairness, not holding him to the full rigours of the ante-nuptial agreement. But this was far from the case. On the evidence he is extremely able, and has added to his qualifications by pursuing a D Phil in biotechnology. Furthermore the generous relief given to cater for the needs of the two daughters will indirectly provide in large measure for the needs of the husband, until the younger daughter reaches the age of 22. Finally the Court of Appeal did not upset the judge's order that the wife should fund the discharge of debts of £700,000 owed by the husband, only a small part of which she had challenged.

120. In these circumstances we consider that the Court of Appeal was correct to conclude that the needs of the husband were not a factor that rendered it unfair to hold him to the terms of the ante-nuptial agreement, subject to making provision for the needs of the children of the family.

10. Mr Harrison QC for H contends that further examination of subsequent authority, insofar as it has provided a gloss on that decision, is unhelpful. He suggests that I should focus on the words of Lord Phillips' judgment as my primary source. I have of course considered the helpful synopses of the Supreme Court's judgment contained in Mostyn J's decision in Kremen v Agrest (No.11) (Financial Remedy: Non-Disclosure: Post-Nuptial Agreement) [2012] EWHC 45 (Fam) at para.72, and Holman J's in Luckwell v Limata [2014] EWHC 502 (Fam) at para.130. Both of course derive from the same source material as set out above. I agree with Mr Harrison QC that, by following the original, there is less chance that any element of that decision will be misunderstood or incorrectly applied. Consequently that is what I shall do having set out my factual findings below.
11. The factual issues. The parties' evidence generally. Before turning to the various specific issues of fact that have arisen, I shall deal first with the parties' evidence generally and the impression which they created as witnesses. I am afraid to say that I felt that both on occasion were not entirely frank in what they said, and both displayed a certain tendency to feign forgetfulness when the honest answer to a question asked might not have been entirely helpful to the case which they were seeking to put.
12. However, generally, it was clear that the bulk of the evidence which W gave was honest and open, and specifically I accept her accounts of:

a. The reasons why she felt the need for and propriety of the pre-nuptial agreement at the outset of the marriage.

b. Her denials that she gave any reassurance prior to his signature that H should not worry about signing the pre-nuptial agreement.

c. The parties' standard of living during the marriage, and the extent to which their marriage was conducted as an equal financial partnership.

d. Her involvement in the events which occurred around her becoming entitled to a $3m. commission payment in 2008, and the subsequent tax treatment of that payment up to the point when the parties decided not to place the funds into an EBT.

e. Her account (as opposed to the nanny's) of the parties' domestic arrangements and their respective contributions in that sphere.

13. As to H's evidence, whilst there were areas where I find that he was telling the truth, this was generally only where he felt that it was indeed in his best interests to do so. Regrettably this self-serving approach meant that there were many points where he was evasive, unhelpful and even untruthful as I will identify specifically below. In his written closing submissions, Mr Marks QC for W identified 9 'substantive lies' that H has told during these proceedings. I am driven to accept that he is right in his identification of each one, although some are more significant than others. In addition to those dealt with in more detail below, he:

a. Positively asserted that he had not been advised that the law on pre-nuptial agreements might change, before disclosing a letter (albeit voluntarily) to him which gave just that advice.

b. Suggested that he did not have the impact of the pre-nuptial agreement in mind when later seeking to persuade W to enter into a post-nuptial agreement.

c. Failed to correct a plainly inaccurate submission from his previous leading counsel at an earlier hearing characterising commission received by FF as akin to money in a Film Scheme, which can now be seen to have been made on what H knew then to have been an entirely false premise.

d. Claimed, orally, that in 2008 W had told him that she had concerns that she may have acted in breach of contract in accepting the commission payment, despite telling the Revenue that this was a realisation to which he had come only during these proceedings.

e. Asserted that he had put all that he could have into the renovation of the parties' home, when it is clear that he did not; and at the same time asserting to the Revenue that he had been living off the capital realised from the sale of his former home in London, E1, when (a) he cannot have been, and (b) these are the funds which, had he used them at all, he could have put to the renovation of the parties' home.

14. The result of these and the other untruths identified below is that if I do accept his case in any aspect, I do so only where there is independent documentary support for that case. Generally, he was an unreliable witness.
15. I also heard evidence from the parties' former nanny, but I did not find her evidence helpful, as it was tainted by partiality towards W, for whose family her partner still works. I place no reliance upon her statement or her oral evidence.
16. H's career, finances and historic income. As indicated, H's account of his own financial circumstances in 2002 was, if not substantial, certainly solid. As well as a home and significant business capital, he asserted an income from royalties of £80,000pa, plus other income which, whilst being £60,000 in 2002, had apparently been £200,000 in each of the 2 preceding years. It is now clear that all of this was a substantial exaggeration, designed very probably to reassure W that his motives for entering into the marriage with her were not purely financial. By asserting a significant income for himself, and therefore that he was not someone who was likely to be dependent upon her, he was holding himself out to W as someone whose finances rendered the terms of the pre-nuptial agreement apparently readily capable of implementation. He was making out that he could stand on his own financial feet.
17. In fact, the truth was far from this. The £32,000 that H actually generated as income in the year to April 2001 was in fact the largest income figure that he has ever produced, and as far as disclosed in these proceedings, by some margin. His income for 2002 was a mere £6,000. His royalties, he accepted in oral evidence, were not £80,000pa at this time, but just £8,000. He told me that this figure must have been a typographical error. I cannot accept that. The figure of £80,000 appears in his solicitor's attendance note of the 22^nd May 2002 meeting, as emanating from H. It then appears in his disclosure at Annexe B. Another figure in that disclosure – the % interest in the parties' home that he was then claiming – was then manifestly altered after he saw the schedule but before it was sent to Charles Russell. It was reduced from 20% to 10%, no doubt because H must have known that W would have realised that the higher figure at the time was inaccurate. So too was the asserted value of the property itself reduced. Had the £80,000 not been the number which he wanted to show to W, I am persuaded that he could and would have altered it.
18. Similarly, he knew that the income figures which he gave were simply untrue. His account in oral evidence was that the £200,000 number represented the size of the budget of the films on which he was then working. This was not, and could never have been thought by him to have been, an income figure. In putting it forward, he was seeking as I find deliberately to mislead the wife and her advisers as to his financial status, so that he could be assured that the marriage would happen. There is also significant doubt about the capital value that he ascribed to his business assets at that time, although I need make no findings about that. This attitude from H suggests a number of things, and in particular:

a. That he well understood the recital to the agreement (B) which stated in terms that without the agreement the parties would not otherwise marry.

b. That he also understood that the financial disclosure provided was important in informing the terms of the agreement, and that reliance was being placed upon the assertions which he was there making.

c. That he then felt no compunction about telling an untruth to his fiancee and her advisers in order to procure an arrangement that he clearly wanted at that time.

d. That he had given some significant thought to the importance or otherwise of entering into the agreement prior to its execution.

19. H's lack of candour about his financial position did not however stop with the signing of the pre-nuptial agreement in June 2002. Right up to the beginning of this year, he was maintaining that he had enjoyed good levels of income prior to the marriage, based upon a period during which he shot a number of fashion commercials with a well-known photographer. In his note for this hearing, Mr Harrison QC was still asserting that: 'Following the marriage, H gave up the lucrative aspect of his career making fashion commercials...His case...is that he did so at W's request.' Having heard both parties giving evidence on this point, I have no hesitation in accepting W's account, essentially as set out at para.59 of her statement of 9^th March 2015, which is that she expressed reservations about a particular shoot with lingerie models, whilst she was heavily pregnant. Thereafter, the well-known photographer chose others to film his commercials – but that was not because H had given up at W's request. Further, as H's income figures for the period now belatedly show, this work was never especially lucrative in the first place.
20. H's case as to his career thereafter has been that he 'effectively retired at the age of 44' – para.99 of his statement dated 2^nd March 2015 – that is in 2002, the year of the parties' marriage. However, put now in the context of the very modest earnings which H was generating in the period prior to that year, it is hard to see how his subsequent endeavours could possibly be termed 'retirement', even though they have not been lucrative. In 2006/7, H made a film in London called XY, which was released during 2010, and enjoyed a cast of well-known actors. The budget for this film was some $5m. Sadly it was not a commercial success. Since then he has produced and directed a second feature, to be released under the title XZ. Whilst this latest effort has been shot with a much more modest budget, it has won at least a couple of awards at independent film festivals. There is a dispute about the value of these awards, and there is certainly no evidence that this film, of itself, is likely to generate substantial profits for H. However, it does confirm the impression that he is an able and functioning member of the independent film world.
21. Overall, whilst H is clearly a man of some artistic ability, he has reached the age of 57 without ever generating substantial income, or income that would have been sufficient on its own to provide a reasonable lifestyle for himself. To some significant degree, this may have been due during the past decade to the fact that he has been able to rely on W's financial support, and to live off funds generated by her endeavours. This has meant that he has been able to indulge in his artistic whims and has not needed to try too hard to be a commercial success. However, I also have to bear in mind that there is little evidence of any very different approach to his career at an earlier stage. It will therefore require significant effort from him now, in the autumn of his working life, if he is to achieve what has so far eluded him – a regular decent income for a sustained period. He is undoubtedly able, and has experience, but I doubt that he will be able to generate a reasonable income in the film industry beyond the age of 66, nine years hence. I will return to this below.
22. W's career, and the receipt of the $3m commission. W describes herself in Form E as a Gallery Curator/Director. Since 2010, she has been the director of a gallery in London. Prior to that, she worked first for art dealer DD, and secondly for international businessman CC. It was the interface between these 2 periods of employment that has led to one of the most contentious factual issues in the case. It is agreed that, during May 2008, W facilitated the sale to CC of artwork of significant value, from DD. It is agreed that she did not in fact invoice DD for this work until June 2008. Later still she signed a contract with CC to work for him exclusively, in September 2008, which was backdated to 1^st June. There is a question as to whether during May 2008 she was still working for DD, so that the commission which she received should have been accounted for by her as part of her employed income. In fact the commission was invoiced through H's company FF.
23. This device had been used by the couple on other occasions, in order to absorb losses within H's company, which was rarely profit making, and to obtain the benefit of the lower rate of corporation tax, as opposed to income tax, on the sums received. The money was paid into FF, and there it remained. W's account was that her employment with DD was coming to an end in May 2008, and he was happy to be invoiced independently for the commission. Certainly, by the date of the invoice, she was not employed by him. Similarly, when the invoice was issued in June 2008, W had not then signed any contract with CC, and in any event the commission itself had been earned back on 8^th May 2008. The fact that when signed in September the contract with CC, which forbids the receipt of commission by W in addition to the sums earned under his retainer, was backdated to June, is undoubtedly complicating. It was also clear from W's evidence that she did not want CC or his associates to know of the size of the commission that she received, although she told me, and I accept, that she had told one of his aides that a commission had been received on the deal.
24. In any event, FF issued the invoice, as it did on the other occasions. To permit this, the company had amended its principal activities to include 'sale of artwork'. Usually, commissions paid were accounted for by the company as turnover, and corporation tax was duly paid. On this occasion this did not happen. There is no suggestion, however, that in the first instance there was any thought that no tax would be paid on the money. Investigation was made about the possibility of paying the sum into an EBT, and it is accepted that W was fully involved in this. Eventually, however, when the relevant accounts were prepared on in January 2010, the first version signed by H included the sum under 'Creditors: amounts falling due within one year' and in the notes more particularised as 'Accruals and deferred income'. On the same day (or perhaps a few days later) a second set of accounts was signed, by H, recording the money not as 'Accruals and deferred income' but as 'Other loan for new project'. H says that all of this was on the advice of his accountant Mr Wrigglesworth of ERC, and that in consequence, no corporation tax was then paid on this money.
25. The HMRC dispute. The dispute which has followed has manifested itself in an unedifying series of allegations and counter allegations, through which it has become evident to me that H has been doing his utmost to absolve himself from any responsibility for the fact that the money remained untaxed within his company, and to lay the blame, exclusively if he could, at W's door. There is some evidence that W might have been aware of the fund's treatment as a loan in the 2009 accounts. W was sent a version of the 2009 accounts on 25^th January 2010, albeit one which did not apparently refer to the money as a loan. H has produced an email which he was sent by W's mother in May 2010, in which she alludes to W's having mentioned his accountant as being very 'helpful and clever with tax advice'. Her ascribing this back to discussions about the use of an EBT which did not progress in early 2009 was not convincing. It is also right that on 21^st May 2012, at the outset of these proceedings, her original solicitors Charles Russell made reference to W having 'loaned a large sum to FF'. The 2009 accounts themselves do state, at note 14, that they were 'authorised for issue on 29 January 2010' by W.
26. However, as against that there is significant evidence that the principal player, along with his accountant, in this scheme, was H. There are emails from him in September 2009 referring to the money having been received for a fictional film which he says that he intends to shoot in 2010 entitled 'Art-Film' or 'Amnesia'. It was he who signed the 2009 accounts. It was also he who, on 1^st February 2010, signed 2 representation letters to the accountants, first recording the commission as deferred income, and then, by handwritten amendment, changing this to 'loan'. The version sent also to W on 25^th had included the former treatment. There are e-mails between H and the accountant discussing treating the funds as a loan in the accounts during January 2010, with no evidence that these were forwarded to W. There can be no doubt that, whatever was W's state of knowledge from time to time, H was aware at all times that the funds held in his company FF had been deliberately mis-described in the accounts, and that tax which should have been paid had thus far been avoided. This could not have lasted, and did not as soon as these divorce proceedings began and the parties began predictably to argue between themselves about the status of the money.
27. H did not help himself in this regard. In his first replies to questionnaire, when asked about the funds appearing as bank loans in the company's financial statements, he made up an untrue story about their being an aggregate of a number of different loans going back as far as 1986, in relation to a number of different films. He said: 'The accumulative total of £2.098m represents the sum total of all production funds due to be paid back out of earnings before distribution of profits hence their loan status'. He now accepts that this was an outright lie. In subsequent questions he was asked (predictably) to provide a schedule of those to whom the money was due. His response was that the loan related to 'three invoices from FF to DD and BB.' This was also untrue.
28. The parties came before Moor J on 17^th July 2014, upon the wife's unsuccessful application for a freezing order in relation to the money. The judge was shown these questionnaire responses, and in particular he commented on the following passage from H's second responses on this topic. 'These particular amounts the applicant was unable to collect due to her contract with her employer, which forbade her to take commissions on works she was buying in for his collection. She chose to pass these on to the respondent who benefitted from their collection in numerous ways. FF's loss account reduced any tax liabilities and it was deemed future tax prudent to attribute these sums to production loans. The applicant did not have to post in her IRS or Inland Revenue returns these amounts.' Moor J indicated that he had some trouble with that accounting presentation. He made reference to the letter from Charles Russell dated 21^st May 2012 to which I referred at paragraph 23 above. He said that H's further suggestion that the liability may be W's had prompted the freezing application.
29. He continued, at paragraph [15]: 'I am not a tax expert or an accountant but it seems pretty clear to me that the way in which this money has been accounted for is wrong. I am quite clear that this must be corrected as soon as possible. I have absolutely no doubt that HMRC must be approached. I consider it really essential that it is done on a joint basis, and I would have thought that very serious consideration has to be given very quickly as to how that should be done, and what presentation should be made to HMRC. Those are my clear views on the matter, and I very much hope that it will be possible to agree a way forward in that regard. The situation can only get worse if there is not an agreed way forward. Indeed it may well be that if there cannot be such a joint approach, the wife's advisers will advise her to make a unilateral declaration. It does seem to me that it would be better if it was a joint one, and I urge that upon the parties.' His order contained a recital which recorded that the court had recommended a joint approach, and that the wife had indicated that she would allow the husband a further 3 weeks to engage before making a unilateral approach.
30. Following this clearest of entreaties from a most experienced judge, W's solicitors wrote on 4^th August 2014 indicating their willingness to engage in a joint approach to the Revenue. H's response was twofold. On 5^th August, his then solicitors wrote to W's with a different proposal – that his accountant should write to the revenue recording the commission as income rather than as a loan, provided that W 'agreed not to interfere in any way with the process'. On 6^th August, his accountant Mr Wrigglesworth of ERC indeed wrote such a letter. However, and crucially, the letter maintained a further fiction. He said as follows:

'In the accounts for 31 March 2009, a transaction took place which initially was understood to be a loan facility for the company to further develop its film production work which is its primary trading activity. The understanding was that the facility would be repaid at a future date if the films proved to be profitable. The company has recently been made aware that the loan made was in fact income for the company in the first instance and as such a prior year adjustment will be made in the account for the period 31 March 2014 with a revised CT600 return being prepared accordingly.'

31. This, clearly, was yet a further manifestly inaccurate statement designed to avoid responsibility for the initial misdescription, and so reduce the company's proper tax liability.
32. On 8^th August, W's solicitors wrote indicating that whilst their client had now notified HMRC of her wish to make voluntary disclosure (in accordance with Moor J's timetable), there still remained a short window within which a joint declaration could be made. In response on 12^th August, H instructed his former solicitors to write: 'We note that your client has taken the unilateral step of contacting HMRC, which is clearly not helpful to either of our respective clients. Whether your clients actions can be mitigated in some way is something our client is considering.' He had clearly not told his own solicitors that his accountant had already referred the matter.
33. There was another aspect to this letter. The solicitors also stated that H was concerned in relation to 'the source and any implications' stemming from the commission; they asked whether W had 'made any unilateral approach' to CC in relation to this matter. By this it is clear that H wished to put pressure onto W, by suggesting that the very existence of the commission may be problematic for W if it came to CC's attention. In October 2014, H dispensed with the services of his solicitors, and on 15^th October wrote an email to W in which he said: 'Pandora's box is now open, you and I will be under intense scrutiny, given the stellar cast of characters involved I don't believe this will be an easy ride.' Again, he was making a thinly veiled threat to involve CC.
34. This became an open issue when, still acting in person in the divorce proceedings, but represented in relation to the Revenue, H filed an Outline Disclosure form statement on 27^th November 2014, in which he named CC, and speculated about possible issues which may have arisen by virtue of the commission being paid to FF. He indicated that his advisers were 'reviewing whether this has been declared as income of my company or simply a "resting place" for my wife's money'. I am quite satisfied that he was doing all that he could to pass the tax liability in relation to these funds onto W – and by raising further issues about the way in which she invoiced CC seeking to cause as much trouble for her and financial pressure on her as he could.
35. At his interview with the investigating revenue officer on 12^th January 2015, it is clear that H continued to do all that he could to place the blame for the tax issues firmly at W's door, and that his tax advisors were seeking to find ways to argue that this should happen. He claimed only to have realised that W may have been acting in conflict with her contract with CC during these divorce proceedings – however in his oral evidence to me he said that he had been aware of the problem long before. It was also at this interview that he first revealed that he had never earned more than the £32,500 declared in 2000/2001, and that he claimed to have been living off capital from the sale of his property in London, E1 in 2001. Subsequently, he wrote to W's solicitor Helen Ward on 23^rd January 2015, requiring an indemnity against any claim that CC may make against him or FF in relation to the commission. Absent satisfaction, he threatened to write directly to CC.
36. None of this reflects at all well on H. I am quite satisfied that the raising of the $3m invoice by FF on 22^nd June 2008 was an agreed step between H and W designed to minimise their exposure to tax on that money, which was something of a windfall. It is clear that, at the time when they were exploring the possibility that the money might be paid into an EBT in late 2008 and early 2009, they were jointly involved in discussions. There was no thought then that the money would simply not be declared to the Revenue. Whilst W may have been embarrassed by the size of the commission paid, and not keen for that detail to get to CC, I am satisfied that she had not knowingly acted in breach of her contract with him. Indeed, given that the contract was only signed in September 2008, it would be extraordinary if she had signed a document in relation to which she believed that she was already in breach. Yet, H has sought to press W on this point, and create difficulties for her with the Revenue, and absolve himself of blame for a series of actions and decisions of which he was, perhaps on occasion with advice from his accountant Mr Wrigglesworth, the prime instigator.
37. Even if W was made aware, and the evidence is at best equivocal, that the commission had been treated as a loan in the 2009 accounts when they were signed off in 2010, it is clear that H took the vital decisions, and altered the instructions to the accountant on the filing day. The greater part of the responsibility up to that point for the mis-declaration must be his. Beyond January 2010, there is no evidence of W receiving any fresh information about the status of the payment.
38. Indeed, the Charles Russell letter of 21^st May 2012 suggests convincingly that W did not know at that time what had happened to the funds. The solicitors ask what has happened to them since 2010, where they are held and how they are treated in accounting terms. Once the proceedings commence, and H begins to tell a succession of untruths about the money, culminating in his disregarding the wise indications contained in Moor J's judgment and order of 17^th July 2014, (meanwhile instructing his tax advisors to make a further dishonest declaration, whilst keeping his own solicitors of the time in the dark), there can be no suggestion but that the responsibility for all of the potential penalties which have accrued since 2010 are his sole responsibility.
39. The calculation of H's net assets. Sensibly, a payment on account has already now been made in relation to the tax due, which, on the assumption which I must make that corporation tax is the appropriate tax, will have totalled some £572,500. However, after the payment there remains outstanding the sum of £313,723, plus interest of a further £85,875, and penalties which have yet to be finally fixed, but could range from a low of £171,750, to a high of a further £572,500. This amounts to a total further liability of between £571,348 and £972,098. To set against it, the combined capital value of all of the assets in FF, (which has now changed its name to EE), is currently just £948,390, to include figures for debtors and stock. H would also have a further personal tax liability (of £42,742) if the company were to be liquidated.
40. H's actual current capital position is starker still, as he still owes some £470,507 for the costs of these proceedings, and has a further personal tax liability of (probably at least) £65,000. In addition, H has already paid £65,142 to Kinsella Law, his tax advisers in relation to the Revenue investigation discussed above, and they estimate that he is likely to end up owing them a further £78,858. Aside from his interest in the parties' home (discussed below), H's only other assets presently are cash savings totalling £108,483, and an investment in a company called EC Ltd, which is not now liquid and apart from £45,000 provided through FF, may be worth to him just a further £15,000.
41. Given the position in relation to the Revenue investigation, and the purposes for which H has been using Kinsella Law, as I have found above, Mr Marks QC for W urges that I should disregard the sums still due to that firm, and further, add back the sums already paid to them. He also suggests that whatever the penalties eventually levied in relation to the commission monies, these should all fall at H's door. I shall deal with this below.
42. The ownership of the parties' home. As the parties' pre-nuptial agreement made clear at [Cl.9], real property was to be vested in joint names as tenants in common, with the parties' respective proportions of ownership set out in a declaration of trust, and 'otherwise in accordance with their respective financial contributions to the… property'. What the parties intended by this was made clear in a letter written to W by Charles Russell on 31^st July 2001, a week or so before the purchase of the property and some 11 months before the signing of the agreement. The letter records that W is providing the sums necessary to meet the purchase price of £1.05m. It then goes on to state that H's 'financial contribution to the project will be to pay for the renovations which you are undertaking'. It recommends that a document be drawn up showing the parties' respective contributions but conceding that 'by the very nature of things this will not be possible until the renovation works are complete and the bills have all been paid.'
43. No such declaration has ever in fact been drawn up. However, when H saw his then solicitor on 22^nd May 2002 he did, as I find, tell her that there was one and that his interest under it was 20%, as her attendance note records. He also told her that the property was then worth £2.2m., notwithstanding that this was more than double its purchase price 10 months earlier. When, 2 days later, she sent him a draft schedule of assets reflecting those instructions, he clearly instructed its amendment, to show an interest of 10% and a property value of £1.5m. These were of course figures of which W would be aware. As indicated, the accompanying income figures remained unchanged. At the same time, W's schedule recorded that the precise proportions of ownership were not yet agreed.
44. That remains the position, although there is now much common ground between the parties in this regard. Both agree that the pre-marital agreement itself amounts to a declaration that the property is held in proportion to the parties' respective financial contributions. With their pleaded case on 9^th January 2015, W's Counsel included a schedule which set out all documented contributions to the renovation of the property between 2001 and May 2003. From this they derived a calculation that overall W's contribution could be taken as £1,343,568 (86%), as against H's of £226,921 (14%). H's response on 9^th February accepts all of those calculations, but seeks to assert further contributions by H, between August 2005 and September 2013, in the sum of a further £53,074. Despite initially suggesting that this brought him to 20%, he now acknowledges that even if accepted, these additions would take him only to 17%.
45. In fact, on analysis, the bulk of these claimed figures relate to items of general household maintenance, as Mr Marks QC identifies, and some were not in fact paid at all but relate to sums not charged of a painter who was staying in another property of H's rent free. All come very late, and cannot be set against any equivalent financial contribution from W over this time which has not been so computed. Finally, nearly all of these subsequent payments came from FF, and the bulk of funds so held were the proceeds of the commission payment invoiced for W and discussed above. In consequence I reject H's case in relation to these further contributions and find that, prior to the discretionary exercise mandated by the Matrimonial Causes Act 1973, the property is held as to 86% by W and 14% by H. This means that the value of their respective interests is £3,753,900 for W, and £611,100 for H.
46. I do not forget that the property has been the parties' matrimonial home, and as such would usually be treated as a matrimonial asset and so subject to the sharing principle. However, and quite apart from the impact of the fact of the parties' agreement in respect of the proportions in which their home should be held, that sharing will not necessarily be in equal proportions where the contributions to the acquisition have been clearly unequal, as here. As Mostyn J said in S v AG [2011] EWHC 2637 (Fam):

'[9] In Miller & McFarlane Lord Nicholls specified that the matrimonial home should always be designated matrimonial property, whatever its source… This is reflected in the remarks of Wilson LJ in K v L... But even the matrimonial home is not necessarily divided equally under the sharing principle; an unequal division may be justified if unequal contributions to its acquisition can be demonstrated. In Vaughan v Vaughan [2008] 1 FLR 1108 Wilson LJ stated at para 49:

"… the home had been owned by the husband, free of mortgage, since well before the marriage and… the contributions of each party to the welfare of the family during the marriage were in effect agreed to have been equal in value albeit not in kind. Although, in the words of Baroness Hale in Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24, [2006] 2 AC 618 at 663E, "the importance of the source of the assets will diminish over time", I consider that the husband's prior ownership of the home carried somewhat greater significance than either the district or circuit judge appears to have ascribed to it".'

47. The impact of the pre-nuptial agreement. In all of those circumstances, and given the current state of the law, how should the fact that these parties signed the agreement that they did impact upon the Court's exercise of the discretion mandated to it by Parliament? All of the passages from the above cited passages in Radmacher have to be borne in mind. In particular I remind myself in relation to this case:

a. That the primary purpose of this agreement was to protect from a sharing claim W's inherited property, which is an entirely reasonable ambition.

b. The agreement expressly left open the ability for either side to make a separate claim in relation to provision for their children, and it is in that regard that W acknowledges that substantial provision, albeit in trust, should be made for H.

c. That the fact that the agreement made no provision for the parties' respective needs may have been due in part to the fact that H did, as I have found, deliberately overstate his financial position at the time of the agreement, so as to make himself appear more self-sufficient. The agreement cannot therefore be judged unfair from the start, given the financial disclosure that each then made. H must accept responsibility for the disclosure which he chose to give.

d. That H was prepared to exaggerate his financial status to procure the agreement and so the marriage, demonstrates that he was very far from being broad-sided at the time of its completion. There are no relevant vitiating circumstances here.

e. The advice which both parties received was given at a time when the Court's approach to such agreements was much more reticent than it is now. I acknowledge that there are no international considerations in play. As explained by Lord Phillips at paragraph [70] in Radmacher: 'It is, of course, important that each party should intend that the agreement should be effective. In the past it may not have been right to infer from the fact of the conclusion of the agreement that the parties intended it to take effect, for they may have been advised that such agreements were void under English law and likely to carry little or no weight.'

f. In this regard I note that Connell J had, in July 2001, delivered his judgment in M v M (Prenuptial Agreement) [2002] 1 FLR 654, in which he had said at [21] that the Court 'should look at any such agreement and decide in the particular circumstances what weight should, in justice, be attached to it.' In that case the agreement had had a significant impact upon the outcome of the case. I note too the advice that H received that although the agreement 'was not legally enforceable', he would be most unwise to get involved in working on the wife's inherited estate, as he wouldn't get his money back. This suggests that he was aware that the document may have had some real impact at least. He was also advised that such documents may become binding, although of course that has still to happen. I also cannot ignore the recital to the agreement at [Rec. H], that the parties intended that the agreement should be legally binding upon them. H signed that document.

g. All of the factors referred to at paragraph [72] of Radmacher are significant here, and militate in favour of giving weight to the agreement. H was under no especial pressure to agree – he was a man already in his 40s, the parties already had a child out of wedlock, and he was aware of W's desire to protect her inheritance as a condition of the marriage. For W, as I accept, signing this agreement was a condition of entering into the marriage. Individual autonomy is an important consideration here.

48. In all those circumstances, the agreement must be considered within the framework provided by the 1973 Act, and in this regard I do remind myself of the first sections of the propositions of law set out by Holman J in Luckwell v Limata [2014] EWHC 502 (Fam) at [130], which I adopt:

'1. It is the court, and not the parties, that decides the ultimate question of what provision is to be made;

2. The over-arching criterion remains the search for 'fairness', in accordance with section 25 as explained by the House of Lords in Miller/McFarlane (i.e. needs, sharing and compensation). But an agreement is capable of altering what is fair, including in relation to 'need';

3. An agreement (assuming it is not 'impugned' for procedural unfairness, such as duress) should be given weight in that process, although that weight may be anything from slight to decisive in an appropriate case;

4. The weight to be given to an agreement may be enhanced or reduced by a variety of factors;

5. Effect should be given to an agreement that is entered into freely with full appreciation of the implications unless in the circumstances prevailing it would not be fair to hold the parties to that agreement. i.e. There is at least a burden on the husband to show that the agreement should not prevail;...'

49. H gave evidence to me that he felt that he did not have a full appreciation of the implications of the agreement. He told me that when his solicitor confirmed to him that such agreements were not legally binding he just 'switched off' and did not listen any more. That cannot absolve him of responsibility for the consequences of the document which he signed. According to Lord Phillips in Radmacher at [69]: 'What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.' It is noticeable that in her letter of 24^th May 2002, Ms Hughes asks whether H requires further information, explains the absence of a long formal letter by reference to their discussion on 22^nd May and concludes by saying that: 'if you would prefer to have very full advice on the Deed in writing, then please let me know'. He did not seek that advice. In those circumstances I am satisfied that he had every opportunity to receive further advice had he wished it, and that his understanding of the consequence of signing the document was sufficient. That he chose not to seek further advice was a mark of keenness to pursue both the agreement itself and the marriage.
50. I have formed the view that significant weight ought to be afforded to the agreement in this case. Both parties understood the agreement, had the opportunity for full advice about its contents, entered into it freely and intended that it should be binding upon them at the point when it was executed. Both parties were comparatively mature, and neither sought to exploit a dominant position. Just as in those circumstances it may be perfectly fair to H to place weight on the agreement, it would be unfair to W as I find not to do so. She entered into this marriage on the basis that this agreement would be and had been signed.
51. H's own case acknowledges that his claim now can be no more than needs based, in any event – given that the property against which he claims is substantially non-matrimonial in nature. In the circumstances I have no difficulty in finding that it would be fair to hold H to the parties' agreement unless his needs should dictate a different outcome. In those circumstances I must consider (a) how H's needs should be assessed in the light of the agreement, and (b) how H would be left once his claim as father of the children has been considered, and whether in those circumstances he can be seen to be in a predicament of 'real need' in all the circumstances of this case.
52. The assessment of need. Mostyn J. in Kremen v Agrest (No.11) (Financial Remedy: Non-Disclosure: Post-Nuptial Agreement) [2012] EWHC 45 (Fam) at para.72 (iv) (c) derived the following from 2 of the above cited passages in Radmacher:

c) Is likely to be unfair to hold the parties to an agreement which leaves one spouse in a predicament of real need, while the other enjoys a sufficiency or more (para 81). However, need may be interpreted as being that minimum amount required to keep a spouse from destitution. For example, if the claimant spouse had been incapacitated in the course of the marriage, so that he or she was incapable of earning a living, this might well justify, in the interests of fairness, not holding him or her to the full rigours of the ante-nuptial agreement (para 119).

53. So, should H's need here necessarily be interpreted as the minimum amount that is required to keep him from destitution? This will not invariably be the case, even where an agreement would otherwise produce such an extreme situation. As Lord Phillips confirmed in Radmacher at [75] 'The fact of the agreement is capable of altering what is fair'. However, even where there is an agreement, fairness will not necessarily equate to near destitution. The level at which a party's needs should be assessed, if they are not met by an agreement which might otherwise be binding upon them, must surely depend upon all of the circumstances of the case, amongst which the fact of the agreement may feature prominently as a depressing factor. But each case will be different.
54. In Radmacher itself, having rejected the view adopted by Wilson LJ in the Court of Appeal that the agreement should be binding irrespective of need, the Supreme Court went on to find that in that case the husband's needs were in fact met by the award made, albeit not at the level he might have expected absent the agreement. Given the earning capacity which they were inferentially able to attribute to him, this could hardly be equated to 'destitution'. In Luckwell v Limata [2014] EWHC 502 (Fam), Holman J found of the husband in that case at [143] that: 'He has no home, no current income, no capital, considerable debts, and absolutely no further borrowing capacity.' He justified further provision on the basis at [148] that: 'the need to provide an adequate home in which the children can visit and stay with their father is very important'
55. Unlike Luckwell, and more closely like Radmacher, this is a case where any provision which W makes will not have a significant effect on the quality of the children's lives whilst they are with her. There is thus no need to balance the effect on the children of losing their home with one parent to provide adequate accommodation in which they can stay with the other. However, it should be borne in mind that any award to meet need, even absent the agreement in this case, is being made from non-matrimonial assets; and here those assets were specifically protected by the agreement which H willingly entered into. There is consequently no obvious basis for any generosity in the interpretation of these needs.
56. Housing for H. Both sides have produced particulars in relation to this aspect of the case. H's are based around SW1, and are priced between £2.3m and £2.624m. Most have only 3 bedrooms, and seem chosen for their location rather than their suitability as a home in which H can have his children come to stay during their London school days. W's particulars are all 4 bedroom family properties located in central South West London. They range in price between £1.545m and £1.695m. They are comfortably suitable to meet H's housing needs both as a father to his children and in all the circumstances of this case. Indeed, in the former aspect they are more suitable than his own more expensive offerings. Given that the children's schools are in South East London and West London respectively, they are I find sensibly positioned, and appropriately meet his fair needs claim for housing. I propose that the fund to be made available should therefore be in the sum of £1.7m.
57. W's case is that the housing fund for H should be provided for his life, reverting to W's estate in due course, and indeed subject to a trade down when the children cease to be dependent. H's case is that notwithstanding his agreement to make no claim in his own right against W, his needs dictate that he should receive his housing fund outright. Given the agreement that he signed, and given that the claim left to him by the agreement on behalf of the children enables provision which meets his housing need for the rest of his life, I do not accept that his needs encompass more than the lifetime provision which is offered. The terms proposed by W are entirely appropriate.
58. Step-down. Whether this is appropriate essentially depends upon the level at which H's needs are to be met. This is not a case such as Luckwell where any ongoing provision will have a direct and significant effect upon the other party's lifestyle and available resources. By the time the children are adults, the fact that their father is adequately and securely housed for his lifetime will remain important; the precise level of that accommodation is unlikely to be material to their concern. Ultimately, the question will turn on whether in all the circumstances it is fair to both parties that no sums are released back to W upon the children's majority (when the younger child turns 23), enabling H to retain the housing fund intact for the rest of his life. That question of fairness may be impacted on by the question of conduct, which I come to consider next.
59. Conduct. It is W's case that H's behaviour in relation to the treatment of the commission payment received into FF in 2008 and discussed above amounts to clear financial conduct, for the purposes of s.25(2) (g) of the Matrimonial Causes Act 1973. I accept that H's behaviour has been (1) irresponsible and dishonest in making untrue statements in the accounts about the nature of the receipts into FF's accounts, and (2) designed deliberately to pass on unfairly to W a liability to tax, interest and penalties for which he has to bear primary responsibility. This is so because, even though the commission on which the tax is due was earned by W, it was invoiced through FF by agreement between the two of them as a tax mitigation device, as the Revenue appear to have accepted.
60. H's efforts to establish, through the use of his tax advisors Kinsella Law, that due to supposed irregularity in her employment position in 2008 W should in fact bear the full burden of this tax is, as I find:

a. Probably designed to increase the net value of the assets which he holds, so that if the pre-nuptial agreement is implemented, he emerges with as much money as possible;

b. Reckless as to the impact on W, her career and reputation, and regardless of whether the tax levied at the end of the process is higher than it might otherwise be, provided that it falls on her;

c. Inappropriate having regard to the joint decision taken to use FF to invoice for the commission, and the joint discussions which followed about possible tax treatment of the funds;

d. Misconceived in that primary responsibility for the problems with the Revenue clearly lies with the untrue assertions made in the company accounts in relation to which I find H bears primary responsibility, along possibly with his accountant Mr Wrigglesworth.

61. In those circumstances, W sought at the start of this hearing to add back to H's assets the funds already spent by him with Kinsella Law (in the sum of £65,142), as well as disregarding those further funds which he estimated that he would be spending with them (£78,858) as a prospective liability. In so doing, Mr Marks QC was fully aware that in Vaughan v Vaughan [2007] EWCA Civ 1085, Wilson LJ at [14] spoke of:

'a line of authority which stretches back to the decision of this court in Martin v Martin [1976] Fam. 335 that, in the words of Cairns LJ 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."

The only obvious caveats are that a notional re-attribution has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element) and that the fiction does not extend to treatment of the sums re-attributed to a spouse as cash which he can deploy in meeting his needs, for example in the purchase of accommodation.'

62. In closing he retreated a little from his position, but suggested instead that H's conduct could be used to justify a narrower interpretation of H's needs. I agree that in a case such as this where H's needs will be engaged as an integral part of this process, it would be inappropriate for the court to work on the basis that H has funds in his bank accounts which in actual fact he does not. I will not therefore add back the sum of £65,142. Similarly, although I do not condone the basis on which Kinsella Law have plainly been instructed to date, I do accept that H will need further professional assistance up to the conclusion of the HMRC enquiry, which he will have to pay for. I do not accept that the postulated figure will be as high as the one quoted.
63. As to the impact on H's needs, generally, I remind myself that the over-arching criterion remains the search for fairness. Just as the fact of the agreement which these parties have signed is capable of affecting what is fair, so too can their conduct, provided that the conduct in question is obvious and gross, and such that it would be inequitable for the Court to disregard it. In N v F [2011] EWHC 586 (Fam), Mostyn J recorded at [17] that there are 'needs and needs' and at [19] said that he did not take Wilson LJ's remarks in Jones to suggest that the 'assessment of need is an insulated metric uninformed by factors that are centrally key to the performance of the sharing principle'. I do consider that the way in which H has conducted himself in relation to the Revenue is conduct capable of bearing upon the level at which his needs should be met going forward.
64. I remind myself as well that, although this is conduct which has infected the course of this litigation, it is not litigation conduct as such, the impact of which will generally sound only in costs, as opposed to in the substantive outcome. It is also remarkably brazen for a claimant who seeks an award in the Court's discretion, notwithstanding his having signed a prior agreement not to claim one, to simultaneously be seeking to load onto the respondent to that claim in a different enquiry a significant liability which in these proceedings he is praying in aid as his. All of this drives me to conclude that when I finally come to determine the amount that H will have at his disposal to meet need, I can in fairness avoid being overly protective of him, especially where uncertainties created by that conduct in the way of penalties are the biggest risk to his future financial security.
65. H's current position. I take H's currently available assets and current and future liabilities to be as follow:

66. This means that, subject to the size of the eventual penalty levied by HMRC, H's net position could be anywhere between £534,082, and £133,332, and from those funds he will have to pay a reasonable amount to his professional tax advisers – he claims a further £78,858. I shall allow him £35,000, or just under 50%. This puts the range of available funds, in round figures, at between £500,000, and £100,000. The mid-point is thus £300,000.
67. As I indicated at paragraph 21 above, I do not expect H to be able to generate significant income beyond the age of 66 – 9 years hence. Until then, I assess his realistic earning capacity at £20,000pa, net. In order to generate this he will have to simply go out and get a job, whether as director, producer, writer, editor or otherwise in the arts world. I am satisfied that such is well within his abilities over the coming years until 2024. He may yet generate some profit from his latest film XZ, but more likely is that he may be able to utilise its positive critical reception to get himself some form of appropriate job.
68. H's current budget with his Form E came to £9,535pcm. He also included a much higher future estimated figure of £18,390pcm to include the cost of a country home. It follows from what I have said above, and especially in the light of the pre-nuptial agreement, that I do not accept that H requires a second home. Further, I also bear in mind that £2,445pcm of his present budget, and £8,010pcm in his future budget, relate to children's costs, in relation to which there is agreement that W will pay £18,000pa per child by way of child maintenance, as well as school fees, with the figure reducing by 2/3rds when the children are in tertiary education.
69. It is also inevitable that the amount upon which H will have to live going forward will be affected in some measure by the amount of the penalty which he eventually incurs at the conclusion of the Revenue's current investigation. This cannot be known at this stage, but for the sake of enabling a calculation to be performed I will take the middle figure (which assumes a 65% penalty). This gives H an available sum of c£300,000 to contribute to his income fund once the fine is paid. On a needs basis, there is no reason not to amortise these funds.
70. On the basis that H exercises the earning capacity that I have attributed to him above, I find that in all the circumstances it is reasonable for him to have a net income of £50,000pa. This will properly but comfortably meet his sensible outgoings on the basis that he is living in a London home with a value of up to £1.7m. Once he ceases to work, then his reasonable income aspiration in retirement reduces to £35,000pa, from 2024. The capitalise programme produces a required capital sum for H (assuming mid-range life expectancy) of £516,527, on the basis that he contributes £20,000pa net until age 66, and thereafter is entitled to the state pension. The lump sum required from W to bring his assets to this total I shall round to £215,000.
71. If a 100% penalty is imposed, H will then have £315,000, and this will produce for him £30,235pa for life without step-down, if he adds £20,000pa net earnings for 9 years, and he receives the state pension. Even on the basis of a worst case scenario, in which H exits the HMRC investigation with none of his current assets, either because those assets do not come up to value or professional costs exceed expectations, the resultant £215,000 will produce for him an income for the rest of his life, assuming the same income and pension figures, of £24,500pa. At the other end of the scale, if only 30% penalties are imposed, H will have over £715,000, which will produce just under £50,000pa for life, without step-down, on the same assumptions.
72. I acknowledge that these figures, certainly at the lower end, are below the levels at which he has been able to live whilst provided for by W's inherited wealth, but the uncertainty is unavoidable in the light of the tax problems which I find that H has created, and the potentially reduced income fair given all of the circumstances which I have dealt with above. Furthermore, I find that it would be unfair to W for her to be required to insulate him further against these problems.
73. Finally I return to the question of whether a step-down in accommodation is merited in all of the above circumstances, as I have provided for a step down in H's income level at the point of retirement. Aside from the obvious point that with a reduced income in retirement H might well find the cost of living easier in a smaller property, I consider that having made an order based upon his needs as I find them, it is impossible to justify his retaining a four bedroom house in central SW London indefinitely on that needs basis. The reduction in the housing fund is not proposed by W until the younger child is 23, in August 2027, by which time H will be 69 and no longer in need of the larger property. In this case, I do consider a step-down fair.
74. The fact of the parties' agreement at the outset of this marriage is important in reaching that decision, but there is another factor. I consider that the return of 45% of the fund to W at that time is fair, in circumstances where she has incurred very significant costs in the HMRC proceedings, quite apart from the costs of these proceedings. I accept that she entered into this marriage only upon the basis that H agreed that he would not make a claim, and yet she has nevertheless been constrained to resist a series of costly attempts to undermine their agreement. Ultimately, that she has not been wholly successful in doing so has been due to the very significant liabilities which have been, and may still be, incurred as the result of H's erratic behaviour and not to any default on her part.
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