Jersey Unreported Judgments

[2010]JRC067A

royal court

(Family Division)

6^th April 2010

Before     :		V. J. Obbard, Family Registrar, sitting alone.
Between	A		Petitioner
And	B		Respondent

IN THE MATTER OF M

Distribution of Assets after long marriage.

Advocate R. E. Colley for the Petitioner.

Advocate M. E. Whittaker for the second Respondent.

judgment

the registrar:

1.        The parties in this case were married on 14^th February, 1993.  They lived together before that, sharing a cottage during the previous year, so one could say that it has been a 17 year relationship until a decree nisi divorce was pronounced in September, 2009. 

2.        The main issue which I have to decide is how to split a capital sum of £533,000 between them.  It is actually a few pounds short of that, but this judgment is based on that convenient rounded up sum.  I shall call it "the capital fund". 

3.        The capital fund represents the remaining proceeds of sale of the former matrimonial home.  It is, in a sense, the parties' housing fund and, I believe, all things considered, should remain as such.  It is for me to decide how it should be divided so as to enable, if possible, each party to obtain independent accommodation best suited to his and her needs. 

4.        However, (one could say, unfortunately), a host of other issues have been introduced so that this principal issue has become more complicated to resolve.  It is, of course, the Court's duty to take all the circumstances described in section 25 of the Matrimonial Causes Act 1973 into account. 

5.        The argument has cost the parties dearly.  The wife has spent at least £45,000 in legal fees (I was told a pessimistic estimate of £46,000) and the husband about £10,000 less than that.  Both have paid some of the fees on account.  £10,000 was released to each of them from the capital towards the payment of legal fees. 

6.        The wife has her heart set upon a three bedroom house, where she will live with the parties' two boys, child 1, and child 2, somewhere on the outskirts of town or in the country where there is "space".  The husband hopes to buy a flat large enough for himself, and for the children to stay with him for contact.  Realistically, that is going to be difficult, if not impossible. 

7.        If that is not hard enough, the wife is insistent that the boys continue their schooling at a private school.  It was her evidence that, if necessary, she would use her share of the capital fund to pay for the boys' school fees rather thanto buy property. 

8.        The husband would like the contingent liabilities of his company to be taken into account in assessing the division of the capital.  Both parties are agreed that the company is not an asset at the moment, but that it is on course for a slow recovery, barring unforeseen events. 

9.        The husband would also like his greater age to be taken into account.  He is 55, the wife 47.  He has only 9 years until normal retirement, whereas the wife has 18.  It will be difficult for the husband to obtain a mortgage facility, not only because of his lack of income at present, but because of his age. 

10.      Some time was taken discussing the nature of the remaining assets, which exist in addition to the capital fund.  To what extent were they "copper bottomed" and did the fact that they partly were accumulated prior to the marriage mean that they should be discounted or ignored?  Should one party have a larger share of the liquid assets (e.g. the capital) as opposed to the illiquid assets (e.g. the pensions)?  How should the insurance polices be treated if they were at present used as security to guarantee the husband's business liabilities?  Was this case primarily a "needs" case or should one party's superior financial contributions be taken into account? 

11.      Finally, there are important details to resolve:-

(i)        How much child maintenance and what, if any extra children's expenses will be paid by the husband? 

(ii)       Will there be an order that the husband will pay spousal maintenance? 

(iii)      What tax allowances can the parties claim? 

(iv)      Can the wife swap the Volvo car and its number plate for a sum of money for another car?  The wife clams £12,000, the husband offers £9,000. 

12.      Many of the problems about how assets were to be treated arose because of the present uncertain state of the husband's business.  It occurred to me that the husband was, on the one hand, being surprisingly optimistic.  He was allowing the Court to rule on his divorce without knowing for certain whether his business was going to survive or not.  On the other hand, if the business recovers, he may have achieved a divorce settlement which valued the business at nil.  This will result in him benefiting in future if the company prospers, with no further claims on his capital in matrimonial proceedings. 

13.      My approach to this case is to take account of all the circumstances which have been drawn to my attention in accordance with the well known check list set out in Section 25 of the Matrimonial Causes Act.  However, when all is said and done, if it is no longer the sole issue, the most pressing one is to satisfy both parties' immediate needs to house themselves and the children. 

14.      This is an agreed table of the total capital (including the capital sum from the proceeds of sale) for division:-

Joint Assets	Wife	Husband
Capital fund - £533,000
Standard Life policy £40,901 (Assigned) Standard Life - £33,682 (Free)	Clerical Medical policy £3,251.00	Standard Life policy £13,841.00 (Assigned)
	Shares £6,149.00	Shares £378.00
	Pensions £69,795.00	Pensions £147,857.00
Cars: Volvo £12,000 (at present wife drives) BMW - £9,000 (husband drives)	Watch & Jewellery  £4,680	Plate on Volvo - £1000

I have placed the cars in the "joint asset" box as in the agreed schedule, noting that each party has one car.  It is agreed that the wife will receive a sum of money from the husband in exchange for the Volvo.  The husband also wants the number plate back from the Volvo, which is said to be worth £1000.  

15.      There are three Standard Life insurance policies.  The larger jointly owned one (£40,901) and the husband's own policy (£13,841) are assigned to the bank as security for the husband's business loans.  They are valuable in their own right if the business makes a recovery, but could turn out to be valueless if the bank takes up the policies as the loan security.  I think they should be included in the table at their true value.  They are not "copper bottomed" assets, but they do have potential value.  The smaller jointly owned policy (£33,682) could be assigned to either party or surrendered.  The wife has her own small Clerical Medical policy (£3251). 

16.      I have not included the parties' overdrafts into the calculation.  The wife's fluctuates well above the £281 shown on the asset schedule, so that figure is not accurate anyway.  More importantly however, the husband's bank overdraft shown of £5,531 is by no means representative of his true indebtedness which is bound up with the company.  The company C & W debt is at least £80,000.  Two of the Standard Life policies are assigned as guarantee.  If anything, I have to bear in mind that the husband's debts are potentially very serious. 

17.      An edited version of the wife's advocate's open letter dated 17^th March, 2010, reads as follows:-

"a.       The wife requires at least £510,000 to re-house herself and the children.  She can prudently borrow £75,000.  She should therefore receive £420,000 from the escrow account and the husband the remaining £130,000;

b.        The policy ending *160 A-V (£33,682) should be transferred to the husband;

c.        The policy ending 107A-V (£40,901) should be transferred to the husband;

d.        The policy ending *119 (£13,841) should be retained by the husband;

e.        the wife should retain her policy ending *196 (£3,251);

f.         the wife should retain the shares in her name;

g.        The parties shall retain their own pension provisions;

h.        the husband shall retain his entire holding in ODF (his company);

i.         the husband should procure the transfer of the Volvo car to the wife;

j.         child maintenance to continue at the present rate, namely £100 per week and the husband shall contribute 50% towards the children's school trips, activities and school uniforms;

k.        there shall be a nominal order for maintenance on the wife's favour until the youngest child reaches 18 or ceases secondary education;

l.         separate assessment for tax purposes."

18.      It transpired during her evidence, that the wife could obtain at least a £100,000 mortgage.  A £125,000 mortgage would cost her £1,000 per month. 

19.      The wife is working for a local bank.  She has a net income (including bonus) of £33,705.88.  She explained that the bonus was discretionary and she may not receive it next year.  She presently pays rent £1,800 per month but, by arrangement she may only have to pay £1,700.  Her total monthly expenses amount to £4,881.49.  School fees amount to £708 per month with extra expenses, the children cost an extra £975.33 per month.  Added all together, her monthly expenditure comes to £5,856.82.  This is in stark contrast with her total monthly income of £2,808.82.  This cannot continue, if the husband is unable/unwilling to subsidise the school fees and if she has to continue to pay rent. 

20.      An edited version of the husband's open position is as follows:-

"(a)      £40,000 from the capital should be "ring fenced" to protect him from a secured debt, but if the sum is not required within 12 months, the sum of £40,000 shall be divided equally;

(b)       the balance of the capital fund will be divided equally between the parties;

(c)       the SL Insurance policy 160 AY worth £33,682 will be surrendered and divided equally;

(d)       the SL Insurance policy 107 AY (£40,901) (if no longer required as security for the husband's business debts)) will be surrendered and divided equally;

(e)       the SL Insurance policy B119 (£13,841) held by the husband, if released before maturity, will be divided equally;

(f)        the wife will retain her small policy (£3,251);

(g)       each will retain their shares;

(h)       each will retain their pension provision;

(i)        the wife will acquire 33% of his company;

(j)        other provisions include the transfer of a car for £9,000, the payment of child maintenance, payment of school fees until the end of this year only, the dismissal of spousal maintenance, the sharing of tax allowances."

21.      The husband's company cash flow was produced.  The company is his sole source of income.  So far this year, he has drawn £2,000 only.  Last year he drew a total of £47,000.  The cash flow for 2010 projects each of the two directors being able to draw a salary of £3,000 from January to December.  So it is already shown to be optimistic.  However, the parties' accountants are to some extent united in their advice.  The first paragraph of Mr. G's letter dated 29^th March, 2010, to Advocate Whittaker, for the husband, writes:-

"I have read the letter from David H [accountant for the wife] and find nothing glaring inconsistent with my understanding of the position.  The company has suffered over the last few years now been slashed right back and combined with an attempt to focus on high margin clients the company may be moving into recurring profitability". 

22.      The husband is an experienced business man.  He has, however, no formal training as an accountant other than what he learnt during his time as a banker and taking banker's exams.  The accountants' letters refer to the present indebtedness of the company, but the wife's advocate took comfort from the husband's accountant's letter quoted above to the effect that "the company may be moving into recurring profitability."  However the husband's advocate wanted to take a more cautious approach and referred me to the bankruptcy law which allows protection to the family of someone who is declared bankrupt.  The wife will not be afforded such protection, because she is now already divorced.  (Decree Absolute was actually issued today 19^th April.)  It appears that the husband's business partner had his house on the market in order to raise cash to inject into the business, but it has been withdrawn from the market.  The partner, who is married, was not available to give evidence, so I am not aware of the reasoning behind these moves.  To summarise the business fortunes of the husband, I would say I have gained the impression that the he is astute, he has taken all the right actions to protect his business, which still has potential, and that I would have heard much more about the misfortunes of the company, if he did not think it would prosper in the long run.  Although the cash flow is shown to be inaccurate so far, it is still a good estimate of the profit to be made in 2010. 

23.      So, returning to basics, how is the capital fund to be divided?  I have settled upon dividing the capital fund by giving the wife £360,000 from the capital fund and the husband £173,000.  This will not enable the wife to fulfil her dream of a three bed roomed house in the country but will at least afford her a 3 bedroom property if she takes out a mortgage of £100,000.  This will give her £460,000 or a net figure of about £425,000 if one deducts legal fees of £25,000 still due and £10,000 for removal costs.  I have not calculated a figure for school fees, because I do not believe they are affordable.  I can only suggest that an approach is made to the school for a bursary.  From advertisements shown to me, I have deduced it should be possible to find a reasonable 3 bedroom property at that price.  

24.      The husband will probably have less legal fees in total to pay than the wife but I understand that £26,000 may be still due.  So if one starts with £173,000 and assumes a mortgage facility of £100,000, deducts legal fees and removal costs, this leaves a net figure of £237,000.  This is not adequate for any more than a one bedroom apartment in Jersey, which start at a price of about £200,000.  This assumes he will obtain a mortgage facility of £100,000 and I have no definite indication of that, because the husband told me that he had not approached any mortgage provider with a view to asking for a loan, since his income is, at this moment, so low.  

25.      How does the settlement work out in respect of the other assets?  The wife will have:-

(i)        Her small insurance policy                 £3,251;

(ii)       (b)     Her stocks and shares              £6,149;

(iii)      Her pensions                                    £69,796;

(iv)      Her cars and chattels                                    £16,680;

(v)       Total                                                £95,876

(vi)      Plus                                                 £360,000

(vii)     Grand Total                                      £455,876

26.      The husband will have:-

(i)        Insurance policies                                         £88,424;

(ii)       (b)     Stocks and shares                  £378

(iii)      (c)     Pensions                                 £147,857

(iv)      (d)     BMW Car & Plate                     £10,000

(v)       Total                                                £246,659

(vi)      Plus                                                 £173,000

(vii)     Grand Total                                      £419,659

27.      This works out that of total assets of £875,535, the wife will have 52% and the husband will have 48%, which is very roughly equal division, but with a slight bias toward favouring the parent who has primary responsibility for the children. 

28.      Having dealt with the capital, I need to explain my decision on child maintenance, extras, and spousal maintenance.  I have provided that child maintenance be maintained at the present level.  Really I do not know what the husband's income will be in the immediate future, so I think he should be expected to pay additional money on a regular basis until it is known with greater certainty whether or not the company will recover.  I do, however think that he should be making some additional provision for uniforms, extra curricular activities and school trips. 

29.      It seems logical to me that the wife should be provided with nominal maintenance for herself and therefore the ability to apply for an increase for herself if, in the case of unforeseen circumstances, if the children are still at school.  She might be committed to mortgage payments which she could not afford if her earning ability were to be affected for any reason. 

30.      A common basis for sharing the Jersey Income tax allowances is for the party with care of the children to claim full tax allowances until his or her quota is used up or his or her tax liability is reduced to nil.  Thereafter the other parent can claim the remainder of allowances if there are any left over.  I see no reason to depart from this formula in this case. 

31.      The husband will pay £12,000 for the Volvo.  This is apparently what it is worth.  He will also acquire the number plate, which is to be included in this price.  

32.      I am fully aware that the husband has been awarded all the risk laden assets and has not been given any discount for his pension assets which are illiquid and, to a large extent, built up before the marriage.  In the case of Rossi-v-Rossi [2007] 1 FLR 790, Nicholas Mostyn QC was faced with a similar problem of classing assets as 'matrimonial' (i.e. accumulated during the marriage) as opposed to non-matrimonial (i.e. accumulated either before the marriage or after separation).  At paragraph 24.6 of his judgement he writes this:-

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

33.      So, I return to where I started.  This has been a long marriage and, above all, I must consider first the welfare of the children, who need to be housed.  In this case all the assets should be considered as matrimonial assets.  In allocating each party a fair share of the capital fund, I regret that, in the end, the decision is a compromise which will not entirely please either side. 

Authorities

Matrimonial Causes Act 1973.

Rossi-v-Rossi [2007] 1 FLR 790.