Jersey Unreported Judgments

[2011]JRC119

Royal Court

(Samedi)

22 June 2011

Before     :

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Le Breton and Marett-Crosby.

 

IN THE MATTER OF S

Advocate M. E. Whittaker for the Petitioner.

Advocate N. S. H. Benest for the Respondent.

judgment

the commissioner:

Introduction

1.        This is the wife's application for ancillary relief following a divorce.  The issues falling for determination are the wife's application for a lump sum and the quantum of her periodical payments.  The parties agree that this is not a case where a clean financial break can be achieved.

2.        We will set out the relevant factors as we find them.  For the avoidance of doubt, in so far as the matters set out differ from the evidence of the husband, the wife or the two accountants, this is because we have preferred the evidence of another or because we consider that the documents produced confirm our findings of fact.

History of the marriage

3.        The parties were married on 30^th August 1986 when the husband was 25 and the wife 24.  It was a first marriage for both of them and there was no significant period of cohabitation prior to the marriage.

4.        There are three children of the marriage, namely C, who is almost 21 years old, D, who is 14 years old and E, who is 13 years old. 

5.        Throughout the early years of the marriage, the wife worked full-time as a legal secretary and then as a marketing executive before reducing to part-time, moving to trust administration and latterly, compliance.  By way of a joint decision she ceased paid employment in 2003, because the husband's income was sufficient to sustain the family.

6.        When the parties were married, the husband was a police officer.  He left the police force in 1987 and re-trained as an accountant.  He eventually joined F Trust Company ("FTC") in July 1997 as a client accounting manager.  In 2001, he became a shareholder and director.

7.        The parties started on the property ladder in 1991, when the wife's father gave them £25,000 to put down as a deposit on their first property.  Properties were bought and sold until on 27^th August 1999, they purchased the former matrimonial home for £595,000 with an initial mortgage of £360,000.  With further borrowings, substantial work was carried out on this property.

8.        The husband described the parties as working well as a team, with the wife as the home-maker in every sense and the brains behind the house improvements, at which she was very skilful.  She left the finances to him. 

9.        In addition to what had become a luxury home, in later years the parties had expensive cars, a boat, horses, paid help and luxury family holidays.  The children were privately educated.  Both parties acknowledge that they lived beyond their means, accumulating credit card and other debts which had to be repaid from borrowings taken out from the properties or elsewhere.

10.      In June 2008, the husband cashed certain insurance policies netting some £84,000, because he had become aware that they were not required to support the mortgage. In the same year, the mortgages were changed to interest only, in order to assist with the family's cash flow.

11.      The parties separated on 28^th February 2009, when the husband moved out of the former matrimonial home into rented accommodation. 

12.      On 18^th September 2009, the husband purchased a property (G) in his sole name for £1,060,000, funded by two mortgages totalling 100% of the purchase price.  The first mortgage of £700,000 was interest only repayable over 16 years and the second was £360,000 repayable over 4 years with capital repayments of £40,000 in the first year and £108,000 in each of the remaining three years.

13.      The parties sold the former matrimonial on 20^th August 2010 for £1,700,000.  After repayment of the mortgages, the wife utilised the balance of £937,933.87 with the husband's consent for the purchase of a property (and certain contents) in her own name, H, where she lives with the three children. The husband has also paid off her credit card debts so that she was established in her new home debt free.

Procedural history

14.      The wife filed the divorce petition on 7^th May 2010 and the decree nisi was pronounced on 30^th June 2010.

15.      On 19^th July 2010, the Deputy Registrar made interim orders which resulted inter alia  in the husband paying a total of £127,600 per annum for the wife and the children out of his income in that year of £312,824 - 40.8% of his income  for the wife and children and 59.2% to him.   Those orders included a payment of £2,500 per month towards the wife's legal costs.

16.      The hearing in relation to ancillaries took place before us on 28^th, 29^th, 30^th and 31^st March, when we heard evidence from the husband, the wife and the two accountants.  At the end of that hearing, the Court granted the husband's application to reduce the maintenance payable by the husband to the wife of £8,000 per month to £5,500 per month pending our decision, i.e. that element that was earmarked as a contribution to the wife's costs.  Final submissions were made on 4^th May when the judgment of the Court was reserved.

17.      We also had before us an application by the husband for the decree to be made absolute, which application is opposed by the wife.

Section 25 criteria

18.      It is a matter of trite law that the Jersey Courts have regard to the criteria set out in section 25(2) of the Matrimonial Causes Act 1973.  First consideration is given to the provision of homes for the parties and to the welfare of minor children.  In this case each of the parties have homes and they have agreed the arrangements for the children as set out in the terms of proposed undertakings and orders handed to us on 4^th May 2011.  The husband has  the financial responsibility for their maintenance, education and health cover, but there is no necessity for the purposes of this judgment for us to go into those arrangements, other than to make two points:-

(i)        We calculate that the total cost to the husband for the maintenance and education of the children is currently £44,709 per annum. For the assistance of the parties we arrived at this figure by taking the maintenance for D and E (£2156 per month), the school fees for E (£384.75 per month), school trips (£70 per month), pocket money (£40 per month) and additional food when the husband has contact (£175 per month) which comes to £2825.75 per month to which we have added a monthly allowance for C of £900 all of which when added together comes to £3725.75 per month or £44,709 per annum.

(ii)       The eldest child C is about to start on a year out during which he hopes to be working, but he may return to a course which, if no grant is forthcoming, may result in a material increase in the husband's obligations in terms of fees, rent and accommodation.  Whilst D is leaving Victoria College for Hautlieu this year, it needs to be borne in mind that both he and E may well attend university in due course, with the commensurate costs that will inevitably fall upon the husband. 

We now turn to the remaining criteria.

The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of an incapacity any increase in that capacity which it would, in the opinion of the Court, be reasonable to expect a party to the marriage to take steps to acquire

19.      The wife owns H free of charges which she purchased for £887,500 which the parties agree is its value.  She has household contents valued at £7,970 and at the commencement of the hearing some £4,000 in her bank account. She drives an Audi Q5, which is in the name of the husband, but it is agreed that this will be transferred to her.  It has been valued at £23,000.

20.      The husband made it clear at the hearing that he did not expect the wife to attempt to get back into the finance industry after an eight year gap.  In March of this year, the wife found part-time work as a stable hand looking after horses in full-time livery.  The stables are close to her home and she can take the children there.  She is paid £10 an hour and the hours are flexible.  The work is seasonal, but she might be able to work out of season and thus be able to earn some £12,000 per annum gross.  She does not wish to work such hours as to require her to leave the children alone at home, particularly as hers is a home which she told us seemed to attract young people to it.  We agree that in the light of the husband's income, being at home at this important time in the lives of these two teenage children takes precedence over the relatively small sums she can earn by working longer hours. 

21.      The husband owns G, which is valued at £1M, and to all intents and purposes, is fully charged.  He has two pension funds, the first with Aviva valued at £57,191.06 and the second being a self-invested pension plan (SIPP) valued at £280,123.  His retirement annuity contract is with Rock Solid Limited, which holds the investments and which he beneficially owns.  He contributes £1,385 per month to the SIPP, which payment is matched by FTC. His current cash flow difficulties to which we will refer later required him to suspend those contributions for the moment.  Under the contract, he is entitled to draw a pension at the age of 50 and is able to draw down 25% of the value of the pension fund as a lump sum which would not attract tax.  However, we accept that it is not intended that he will draw a pension until such time as he retires from his employment.  

22.      At the time of the hearing, the husband owned a boat valued at £130,000 (financed by a loan of £104,000) and a 2-seater Aston Martin which cost £82,000 but which is now worth less than the finance he took to acquire it.  The car is worth £34,000 against the loan of £42,429.50. The boat is now under offer and will net the husband equity of £22,000. 

23.      The husband owns 15% of the shares in FTC and its value is an issue in this case, in respect of which it is necessary to go into some detail.

24.      The husband's rights in relation to the shares are set out in a shareholders' agreement entered into in July 2008 by the four shareholders defined as "the Initial Individual Shareholders".  One, the managing director, owns 30% and the remaining three (which includes the husband) own 15% each.  There is a class of non-voting shares, to enable employees to acquire an interest in the company, which two have since done.  In broad terms, the Initial Individual Shareholders acquired the company from its original owners by way of a management buy-out, financed through borrowings made by FTC.  Without descending into a detailed analysis of the shareholders' agreement, the following conclusions can fairly be drawn from it:-

(i)        Save as mentioned below, no Initial Individual Shareholder can secure charge or dispose of his shares without the consent of the others.

(ii)       A transfer is permitted (there are conflicting provisions as to whether this requires the consent of the Initial Individual Shareholders) to a trust of which the beneficiaries are members of the transferor's family, but which would not include a former spouse.

(iii)      A shareholder wishing to sell his shares can do so but they must be offered first to the company or in default to the other Initial Individual Shareholders at a price determined in accordance with the formula set out in the agreement (defined as the "calculated value").

(iv)      The pre-emption provisions can be triggered in the event of default (breach, bankruptcy, death, incapacity, dismissal, ceasing to be employed) upon written notice from all of the Initial Individual Shareholders acting reasonably with the consideration being by reference again to the calculated value. Under the terms of a supplemental agreement, death and terminal illness are no longer events of default.  Those risks are now covered by an insurance policy taken out by FTC, the proceeds of which will be used to acquire the shares at the calculated value. 

(v)       The total value of the share capital is required to be valued annually by the directors on the basis of an arm's length sale between a willing vendor and a willing purchaser with no reduction or addition for minority or majority holdings.  The annual valuation carried out on 30^th June 2009 valued the husband's shareholding at £4,953,738 and the valuation as at 30^th June 2010 valued his shareholding at £4,792,508. We were informed that it is not unusual for such agreements to provide for an annual valuation as it gives an internal record as to how the company is progressing.

(vi)      There are "Carry Along" provisions by which the Initial Individual Shareholders can require any employees who have shares to join in a sale of the whole company.

25.      The husband procured a joint valuation of his shareholding as at 30^th December 2009 by Mr Shaun Walbridge of Begbies Traynor (Central) LLB at a time when it was hoped that the parties could resolve their financial differences amicably.  There was no letter of instruction but Mr Walbridge set out his brief in his report. He gave evidence as a joint witness. Of the various methodologies available, he considered the multiples or earnings basis to be the most appropriate, using a weighted average EBIT (earnings before interest and tax) and applying a multiplier.  This is the same methodology used by the directors in carrying out their annual valuation.  They applied a multiple of 8 but Mr Walbridge advised that a multiple of 7 was more realistic.  On that basis, he valued the group at £28,870,265 and the husband's shares at £4,330,540 on a straightforward pro rata basis. He then applied a discount of 60% to reflect the minority nature of the husband's holding and the restrictions on marketing imposed by the shareholders' agreement and a further 10% to reflect the influence of the dominant 30% shareholder (the managing director) whom he considered exerted a controlling influence over the affairs of the group, thus reducing the valuation of the husband's shares to £1,299,162. 

26.      Mr Walbridge also valued the shares applying the formula set out in the shareholders' agreement (the Calculated Value) which valued the husband's shares at £4,477,277 and which after applying the same discount of 70% gave rise to a valuation of £1,343,183.

27.      He then valued the shares on the dividend yield basis which can be appropriate for a small shareholding where the shareholder is not actively involved in the company, which is not the position here.  In order to calculate a dividend yield, it is necessary to assess the rate of return that an investor would expect having regard to the perceived risk; in essence, the greater the risk, the greater would be the required return. In his view, a 12% return was appropriate, which would value the husband's shares at £1,470,973.  We note that in P-S v C [2003] JRC 116 at paragraph 17, Mr Peter Beamish of Deloittes had taken a yield of 10% for an investment in another local trust company, which he did not see as a high risk business.  A 10% yield would value the husband's shares on a dividend yield basis at £1,765,170.

28.      Finally, Mr Walbridge took an average applying all of these methods to arrive at a median value of £1,392,898 as at 30^th December 2009, which is the figure the husband invites us to accept as the value today of his shares. Mr Walbridge confirmed that a comparison of the accounts for 2009 and 2010 shows that the headline figures have not increased.

29.      In evidence, Mr Walbridge explained that there is no right or wrong answer on the issue of the multiplier to be applied to the EBIT under the multiples or earnings basis. It is a matter for the Court upon which he can only give guidance.  Applying a multiple of 8 would give rise to a valuation (after the 70% discount) of £1,486,121.40 and a multiple of 9 (again applying the 70% discount) of £1,673,000.

30.      In his view the only way for the husband to get a proper return for his shares would be for all four Initial Individual Shareholders to sell out together or for the husband to retire as a good leaver, which, as he interpreted the shareholders' agreement, could not take place until 2013 but even that in our view assumes that the other Initial Individual Shareholders or other employees are willing and able to fund such a purchase. A sale now he said  would in some way be a "distressed sale" by which he meant, in our view, that the husband would not in reality contemplate a sale of his shares alone at this stage. 

31.      With leave the wife called Mr Luke Smith of Foxleigh, Knight & Co.  His practice is local and he has more direct experience of the finance industry in Jersey.  In his view, the methodology applied by Mr Walbridge was sound, but he felt that his approach was over pessimistic.  In his view, the husband would never sell his shares for £1.3m unless forced to do so, bearing in mind the return he was achieving in terms of his salary, director's fees and dividends.  The extracts from the business plans presented to the board show, he said, ambitious targets for future growth, a need to develop an exit strategy to the next generation and to identify and cement relations with third parties (specifically private equity houses and corporate financial institutions) who could assist the exit process in 2014.

32.      By reference to a presentation given to the board by PWC that showed the multiples achieved in a number of sales of trust companies in recent years, he regarded a multiple of 8 as the appropriate multiple to be applied.  In reality, he said the market for the shares was with the husband's co-shareholders as no unconnected third party would be interested in trying to acquire a minority holding.  Having regard to the annual valuations, he felt the husband might apply a discount of 20% to attract the other shareholders to purchase if he wished to sell to that limited market at this stage, but subject to that, in his view there would be a sale by all four Initial Individual Shareholders in 3 to 7 years time.  In broad terms, he assessed the fair value of the husband's shares at £4M.

33.      The husband told us that he and the other Initial Individual Shareholders had worked together for a long time and had acquired ownership of FTC from the two previous owners, the first receiving £4.5M in 2004 and the second £6.5M in 2008.  The Initial Individual Shareholders are of the same generation, with the managing director being aged 50, the husband 50, one 49 and the other slightly younger at 44.  It was the ethos of the business to be owned by those who work in it and the aim was to pass on the shares down to the next generation of employees, although that may not be practicable. 19% of the shares have been placed with an employee benefit trust for the benefit of the employees.  The dividends that trust received were used to pay annual staff bonuses and although he was eligible as a beneficiary on a sale, the proceeds would go to the non equity holding employees.

34.      He had planned to retire between 50 and 55, but now intended working as long as he could.  He thought that a time would come for a sale, but not now.  Normally such sales were structured over a number of years, with a proportion being paid at sale and a balance contingent upon the performance of the company, in which he would have to continue to be employed.  In such a sale, he would obviously hope to get as much as he could.  Although he thought there would be a realisation event, it was difficult to quantify the consideration he would receive.

35.      Mr Smith talked of a time span of 3 to 7 years for the realisation of the shares, but that can only be a guesstimate.  No reliance, in our view, can be placed on the reference in the business plan to an exit in 2014.  These are rolling plans which are updated annually. Mrs Whittaker pointed to the fact that certain of the husband's liabilities come or did come to an end in 2013/14 (the second RBSI mortgage and his car loan) and to comments that the husband made to the wife during the marriage as to his aspirations and hopes. However in our view there is no real evidence that an exit will take place in 2014 or in any other given year.  Bearing in mind the age of the Initial Individual Shareholders, we think that all that can be safely concluded is that a realisation is likely to take place within 10 years when the majority of them will be 60 and we note that 10 years is the period Mrs Whittaker has suggested in the wife's open position as necessary to cover a future realisation.

36.      A number of English seminal cases pre White v White (2001) 1 AC 596 make it clear that where the business is not going to be sold, a precise valuation of the shareholding is unnecessary.  As was stated in Evans v Evans (1991) FLR 319:-

"While it may be necessary to obtain a broad assessment of the value of the shareholding in a private company it is inappropriate to undertake an expensive and meaningless exercise to achieve a precise valuation of a private company which will not be sold".

37.      In the light of this, and having heard the submissions of the experts and of the parties, we have drawn the following conclusions:-

(i)        It is not feasible for the husband's shares to be sold to an outside investor. The market is limited in reality to his co-shareholders or employees but he would not accept the kind of discount suggested by Mr Walbridge, unless forced to do so.

(ii)       His shareholding and employment are inextricably linked and the relationship between the Initial Individual Shareholders is such that they are likely to act together.  They will be looking to realise the maximum value for their shares, most probably by a sale to a third party or to the next generation of management (financed through the company).

(iii)       It was likely that such a realisation would take place within the next ten years. However the  risks associated with any business and the markets and environment in which they operate means that there can be no certainty that such a realisation will take place within that time frame or at all.

(iv)      On any such realisation, it is likely that the husband would receive at least £4M for his shares. 

38.      Thus, applying the language of the statutory criteria, it is our conclusion that the husband is likely but not certain to have a financial resource of the order of at least £4M in the foreseeable future i.e. within the next ten years.

39.      The husband's income is derived wholly from FTC.  In evidence, he told us that he expected to earn in total between £300,000 and £330,000 net per annum but on the figures supplied by Miss Benest he may not have taken into account tax on his director's fees. Working from those figures, his income monthly position is as follows:-

Net salary                                                                                     £11,378.01

Net dividend (4 x £31,472.10 p.a.)                                                   £10,490.70

Net Director's Fee                                                                         £1,666.67

Average net monthly income                                                           £23,535.08

This equates to a total annual net income of £282,420.96p.  The husband informed us that the company did from time to time pay a fifth dividend, but out of caution we do not think we should take that into account.

The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future

40.      In her affidavit of 9^th March 2011, the wife assessed her income needs at £3,806 per month or £45,672 per annum.  We have excluded from her figures £3,500 per month she put down for legal and accountancy fees.  She has no material liabilities, other than in respect of her legal fees and disbursements of £145,363.36.  She has no ability to discharge this liability other than through her income or through taking out a mortgage on her home.

41.      The husband's income needs have altered during the course of the hearing.  Under the second mortgage arrangements with RBSI, he was required to make capital repayments of £108,000 per annum over the next three years, so that his total mortgage costs came to £143,610.96 per annum.  In addition, his boat was costing him £26,834.64 per annum and the finance on his car £10,764 per annum. 

42.      According to his own figures, when taking into account the maintenance he proposed paying to the wife namely £2,177 per month or £26,124 per annum (slightly less we noted than the cost of his boat), the cost of his children and his own expenditure, his income needs were some £348,000 per annum; well in excess of his income which was clearly unsustainable. 

43.      The husband has since taken two steps which have substantially improved his cash flow:-

(i)        He has agreed to sell the boat.  This will bring in equity of £22,000 and reduce his annual outgoings by almost £27,000.

(ii)       He has re-financed the second mortgage over G by borrowing from Acorn over a term of 86 months (just over 7 years) with capital and interest payments of £4,990.40 per month or £59,884.80 per annum. His total annual costs for both mortgages are now reduced to £84,316.80 which constitutes a saving of some £60,679 although he will ultimately pay more in terms of interest on his second mortgage.

By these two steps the husband has reduced his annual outgoings by some £87,000 freeing up those funds for his benefit and that of the family.

44.      With these arrangements in place, the husband estimates  his monthly expenditure requirements to service debts alone as follows:-

£700,000 RBSI mortgage G interest only                                                     £2,036.00

£300,000 Acorn mortgage G (capital and interest)                                        £4,990.40

Lombard re car                                                                                          £897.18

Credit cards minimum monthly repayments                                                 £750

Monthly cost of debt (excluding legal fees)                           £8,673.58 or £104,082.96 pa

45.      Still proposing maintenance of £2,177 per month for the wife, he estimates the cost of providing for her and the children at £7,428.06 per month and his own basic living costs at £1,995.92 per month, which makes no allowance for haircuts, clothing, gym membership, holidays, entertainment, Christmas, birthdays etc. or for him to recommence payments to his SIPP.  The husband summarises his basic monthly expenditure as follows:-

Servicing debts                                                                                          £8,673.58

Financial support to wife and children                                                          £7,428.06

Basic personal living expenses                                                                   £1,995.92

Total                                                                                 £18,097.56 or £217,170.72 pa

46.      This will give him a monthly surplus income over basic expenditure of £5,437.52 which he says he will require to cover holidays and entertainment for the children and his additional living expenses as mentioned above, which in his affidavit of 14^th March 2011 he had assessed at £2,067.77 per month, giving him a balance of £3,369.75 per month.  This balance he says will be needed to make capital payments to address his debts as follows:-

Bank account overdraft                                                                               £24,110.02

Lombard loan re Aston Martin                                                                     £42,429.50

Credit cards                                                                                              £44,211.37

Legal fees                                                                                                 £73,050.97

Total                                                                                                         £183,801.86

Applying that balance to his debts Miss Benest calculated that he would be debt free in 58 months or 4.8 years.

The standard of living enjoyed by the family before the breakdown of the marriage

47.      As previously mentioned, the standard of living of the family before the breakdown was high.  Mrs Whittaker submitted that the family was living beyond its means and whilst this may have been so at stages, the very substantial income of the husband was clearly sufficient to sustain the family as one unit at that high level.  Whilst the wife may have left the finances to the husband, she is a capable person and must in our view take equal responsibility for the way the family lived.

The age of each party to the marriage and the duration of marriage

48.      The wife is 49 and the husband 50 and the marriage endured for 24 years.

Any physical or mental disability of either of the parties to the marriage

49.      This does not apply

The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family

50.      All of the assets that fall for consideration by this Court have been built up during the course of the marriage.  The husband is the main breadwinner and has been very successful at achieving his current position as a shareholder and director of a local trust company.  The wife has also worked for the major part of the marriage and has been the home-maker (and clearly very skilful at it) and carer for the children.  As made clear in White v White, there can be no bias in favour of the money earner and against the home-maker and child carer, and although their contributions have been different, fairness requires that those contributions be given equal weight.  We bear in mind that as a result of the joint decision in 2003 that the wife should cease working in the finance industry, her earning capacity, which admittedly is less than that of the husband, has been impaired. 

The conduct of each of the parties, if that conduct is such that it would, in the opinion of the Court, be inequitable to disregard it.

51.      Matrimonial misconduct is not an issue in this case, but the wife has alleged financial misconduct on the part of the husband and pleadings have been filed in that respect.  In essence, she alleges that the husband has set out to reduce assets in joint names and/or maximise his liabilities with the intention of defeating the chances of the wife of a fair settlement, in particular by

(i)        surrendering the insurance policies in 2008 and not accounting for the proceeds of £84,000;

(ii)       changing the mortgage on the former matrimonial home to interest only in 2008, thus freezing the equity;

(iii)      acquiring G with 100% mortgage and agreeing to repayment obligations totalling some £144,000 per annum;

(iv)      maintaining his SIPP contributions whilst failing to reduce his credit card debts;

(v)       taking no steps to reduce his life style.

52.      We have been referred to section 1.49 of the Ancillary Relief Handbook, 7^th edition by Roger Bird which contains the following commentary under the heading of "Financial Conduct":-

"Cases where it can be demonstrated that the behaviour of one party has had a clear (and, impliedly, detrimental) effect on the fortunes of the parties of the most usual examples of conduct having a real significance.  In one case, the husband had dissipated the family capital, and the court held that he could not be allowed to fritter away assets, and then claim as much of what was left as if he had behaved reasonably.  In another case, the husband, a farmer, had brought about financial disaster and his own bankruptcy; in the words of the judge, he had "obstinately, and unrealistically and selfishly trailed on to eventual disaster, dissipating in the process not only his own money but the family's money, his friend's money, the money of commercial creditors unsecured and eventually his wife's money".  Even so, he was not deprived of all entitlement but was restricted to the minimum sum needed to re-house himself.

These decisions may perhaps be contrasted with another, in which a wife had inherited her mother's estate and then sold part to her daughter at an under-value, thereby depleting her own assets.  The argument that this was "financial conduct" was rejected, and the actions of the wife were held to be clearly relevant as one of the circumstances."

The husband's actions have all been undertaken openly and there has been no dissipation of family capital.  There is some substance in the allegation that he has failed to take steps to reduce his life style but we do not think there has been financial misconduct on his part and the allegation was not pursued with any vigour at the hearing. We accept his explanation that the policies were surrendered and the mortgage on the former matrimonial homes converted to interest only as a result of cash flow difficulties that the parties were facing in 2008.  It became clear during evidence that the proceeds of the policies were used towards family expenditure.  We do not think that the husband purchased a house in his own name in order to prejudice the wife's claims but the substantial financial commitments he entered into are clearly relevant as one of the circumstances we have to take into account.

The value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring

53.      Pursuant to the provisions of Article 26 of the Matrimonial Causes (Jersey) Law 1949, neither party will be entitled upon the death of the other to any share or interest in the personal estate of the deceased person or to any rights of franc veuvage in the real estate of the deceased person, or to any rights of dower in the real estate of the deceased or any other person.  The wife will lose the chance of benefiting under the husband's two pensions. 

Position of the parties

54.      The wife seeks the following:-

(i)        Periodic payments of £5,000 per month or £60,000 per annum on the basis that:-

(a)       The husband reduces his debts (other than his mortgages) to zero by July 2013 when there should be a review.

(b)       Her application for a lump sum is adjourned pending the realisation of the husband's shares.  In the interim the husband's shares are to be settled upon trust for the joint benefit of the parties. 

(c)       In the event of her lump sum application being dismissed, she seeks increased periodical payments in the sum of £6,000 per month or £72,000 per annum.

(ii)       In the alternative, the wife seeks an order giving her 40% of the proceeds of any sale of the shares or a deferred lump sum of £1,514,000, payable upon the sale of the shares over the next ten years with increments to the extent that the consideration received by the husband exceeds £4.7M. Neither of these alternatives are the preferred options of the wife.

(iii)      In any event, other than a trust, the wife seeks appropriate injunctions over the husband's shares, pending their disposal.

(iv)      She seeks the adjournment of the application for a decree absolute until her application for a lump sum has been determined.

55.      The husband proposes the following:-

(i)        The dismissal of the wife's claim for a lump sum on the basis that there has been a fair allocation of the family assets.  The shares will not be sold for at least four years, at which time he would be able to pay off his mortgages and by agreement (the Court having no power to order a lump sum on a variation) make a lump sum payment to the petitioner by way of capitalised spousal maintenance.

(ii)       On the basis that the wife's income needs as set out in her affidavit of 29^th October 2010 amounted to £3,177 per month (after deducting Social Security, which is not now appropriate, as she is in work) and that she is capable of earning £1,000 per month, he proposes periodic payments of £2,177 per month or £26,124 per annum.

(iii)      There is no need for provision to be made for the wife's old age as she will be receiving periodic payments for their joint lives and he has undertaken to the Court to maintain her nomination in respect of his death in service benefit which will provide her with a payment equating to four times his salary, i.e. £720,000 which Miss Benest submitted is far in excess of what a capitalised maintenance calculation would be.

Decision - Lump sum

56.      White v White marked a fundamental change of attitude on the part of the English courts and has been followed in this jurisdiction.  Quoting from the judgment of Sir Philip Bailhache, Bailiff, in J v M [2002] JLR 330 at paragraph 28:-

"In the course of his judgment, Lord Nicholls stated that the overriding objective was to make a fair financial arrangement between the parties, giving first consideration to the welfare of the children.  He continued ([2001] 1 All E.R. at 8-9):

'Self-evidently, fairness requires the court to take into account all the circumstances of the case.  Indeed, the statute so provides.  It is also self-evident that the circumstances in which the statutory powers have to be exercised vary widely.  As Butler-Sloss, L.J. ... said in Dart's case, the statutory jurisdiction provides for all applications for ancillary financial relief, from the poverty-stricken to the multi-millionaire.  But there is one principle of universal application which can be stated with confidence.  In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles.  Typically, a husband and wife share the activities of earning money, running their home and caring for their children.  Traditionally, the husband earned the money, and the wife looked after the home and the children.  The traditional division of labour is no longer the order of the day. Frequently both parents work.  Sometimes it is the wife who is the money-earner, and the husband runs the home and cares for the children during the day.  But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party when considering para. (f) of s.25(2) of the 1973 Act, relating to the parties' contributions.  This is implicit in the very language of para. (f): '...the contribution which each of the parties has made or is likely ... to make to the welfare of the family, including any contribution by looking after the home or caring for the family'. If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets.  There should be no bias in favour of the money-earner and against the homemaker and the child-carer.  There are cases, of which the Court of Appeal decision in Page v Page [1981] 2 FLR 198 is perhaps an instance, where the court may have lost sight of this principle.

A practical consideration follows from this.  Sometimes, having carried out the statutory exercise, the judge's conclusion involves a more or less equal division of the available assets.  More often, this is not so.  More often, having looked at all the circumstances, the judge's decision means that one party will receive a bigger share than the other.  Before reaching a firm conclusion and making an order along these lines, a judge would always be well advised to check his tentative views against the yardstick of equality of division.  As a general guide, equality should be departed from only if, and to the extent that, there is a good reason for doing so.  The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination.'

29.      We respectfully agree with all these sentiments.  The touchstone in all cases involving a division of matrimonial assets is fairness.  The court must try to achieve fair financial arrangements between the parties, and the welfare of the children is a primary consideration.  There is no place for discrimination between husband and wife.  Where they have both, by their own efforts, built up the family assets, even if their contributions are different in nature, fairness requires that those contributions be given equal weight.  There is no reason why any surplus of assets, once the reasonable needs of the parties have been satisfied, should automatically go to the husband.  Nonetheless a ruthless application of the principle of equality will seldom lead to fairness.  The court is required to take into account all the circumstances of the case."

57.      The policy of the Court is to try to secure wherever possible a "clean break" so that the parties may put the failure of their relationship behind them and get on with their lives (see P-S v C [2006] JLR 463 at paragraph 20).  The wife is not seeking a transfer of any of the shares in FTC to her now.  Such a transfer could only be made with the consent of the other Initial Individual Shareholders and that would not be likely to be forthcoming bearing in mind the ethos of the company that its shareholders should be employees.  There are no other assets from which the husband could pay a lump sum or on which a lump sum payment could be financed.  His house is already fully mortgaged and he cannot charge his shares in FTC without the consent of the other Initial Individual Shareholders.  There is, in any event, little scope for the servicing of any further material borrowing. In the circumstances, the wife does not seek the payment of a lump sum now accepting that a clean break cannot be achieved at this stage.

58.      Miss Benest submitted that in any event the wife had received a fair share of the capital assets and accordingly her claim for a lump sum should be dismissed.  Applying the valuation as advised by Mr Walbridge, the capital assets falling for distribution were summarised by Miss Benest as follows:-

Net proceeds of sale of former matrimonial home                                          £937,933.87

Shareholding in FTC per Walbridge valuation                                                £1,343,183

SIPP                                                                                                        £280,123

Aviva pension                                                                                            £57,191.06

Boat equity                                                                                               £22,603.92

Wife's car                                                                                                 £23,000

Total                                                                                                         £2,664,034.85

59.      On this basis, the wife has received 36% of the capital assets and 97.7% of the liquid assets (namely the net proceeds of sale of the former matrimonial home and the car).  She has the vast majority of the copper bottomed assets, leaving the husband in the main with the risk laden assets.

60.      Miss Benest argued that a discount should be applied to the value of the husband's pensions.  It was common knowledge amongst practitioners, she said, that the Family Registrar often used a one third discount, and that was the discount most often applied by practitioners.  Furthermore, she submitted that B v C [2005] JRC 169 was authority for the proposition that where there is to be no clean break, the value of the pensions should not be included in the capital assets schedule for distribution. In that case, the husband was 62 and the policy valued at £72,000 was close to becoming a pension in payment that had to be wholly applied in the purchase of an annuity.  There were a substantial number of properties to be allocated between the parties, but insufficient to achieve a clean break.  Birt, Deputy Bailiff, said this at paragraph 23(vii):-

"We do not consider that the Norwich Union pension plan should be taken into account when allocating capital.  This is not a case where there is a clean break.  The husband will continue to pay maintenance.  When the Business is eventually sold, the maintenance which he pays to the wife will need to be reviewed in the light of his then income.  At that time, his income will include the Norwich Union pension and it will therefore be taken into account at that stage in its income form when assessing the amount of maintenance which the husband should then pay the wife.  It would be wrong therefore to take it into account when considering the allocation of capital."

61.      We were referred to two examples in which the Family Registrar had applied discounts, namely T v B [2008] JRC 077A and S v L and C [2009] JRC 044A, but in Marshall v Downes [2010] JRC 115B, a case involving a clean break after a marriage of some 7 years between a husband who was aged 58 and a wife who was aged 48, the Royal Court endorsed an apparent decision of the Family Registrar to apply no discount to the pension.  Quoting from the judgment of Sir Philip Bailhache, Commissioner, at paragraph 26:-

"Fifthly, counsel submitted that insufficient regard had been paid to the different nature of the family assets, and that the wife had received the bulk of the "copper-bottomed" assets, including the cash in the Scarborough account.  In particular, counsel contended that it was the invariable practice of the registrars to discount the capital value of a pension fund.  No authority could be provided for this proposition, which was not accepted by counsel for the wife.  The Registrar did refer to this matter in the following terms:-

"The PECRS pension is a final salary scheme pension.  In T v B (2008) Unreported judgment, the [Family] Registrar did discount the value of the pension fund. It is an illiquid asset, so must be viewed in this light.  However, this is to be looked at considering the overall fairness of the situation".

Although the Registrar did not expressly say so, it seems that she rejected the submission that the value of the PECRS pension should be discounted.  Was she right to do so?  In the absence of any rationale for such a discount, we think that the Registrar's decision was entirely correct.  The PECRS pension, which is generally subject to inflation proofing increases year on year, is an immensely valuable asset.  The pensioner may die prematurely, but equally may live on into a very ripe old age.  It may be illiquid, but we can see no logical reason for discounting the value of a gold plated asset of that kind."

62.      In Maskell v Maskell (2001) EWCA Civ 858, the judge at first instance had allocated the matrimonial home and the husband's pension fund between the parties attributing to the husband's pension fund its cash equivalent transfer value.  Setting aside the order Thorpe LJ said this at paragraph 6:-

"That passage seems to be fundamentally flawed, for the judge is making the seemingly somewhat elementary mistake of confusing present capital with a right to financial benefits on retirement, only 25% of which maximum could be taken in capital terms, the other 75% being taken as an annuity stream.  He simply failed to compare like with like.  I have a grave anxiety that the district judge made the same mistake."

63.      Martin-Dye v Martin-Dye (2006) EWCA Civ 681 concerned the division of assets involving very valuable in payment pensions where Thorpe LJ drew a similar distinction albeit in relation to a pension in payment:-

"47.    In the light of the fresh evidence it is necessary to rule on the question of principle raised by paras 3-6 of the grounds of appeal and elaborated in paras 5-7 of the appellant's skeleton.  In sum it is there submitted that the courts below erred in principle in debiting against the appellant's entitlement to 43% of the assets his pension in payment at the value supplied by BA.  Pensions in payment, being different in kind to other available assets, should have been apportioned by means of a pension sharing order.

48.      The arguments in support are self-evident.  A pension in payment is no more than a whole life income-stream akin to an annuity.  It cannot be sold, commuted for cash or offered as security for borrowings.  It has no capacity for capital appreciation.  The benefit does not survive the death of the scheme members and thus cannot form part of his estate.  Thus there are obvious distinctions between a technical value ascribed to a pension in payment and a market value ascribed to a realisable asset such as a freehold, a portfolio of shares or a work of art.  These distinctions have been partially drawn in previous decisions of this court: see Cowan v Cowan [2001] EWCA Civ 679, [2002] Fam 97, [2001] 2 FLR 192 and Maskell v Maskell [2001] EWCA Civ 858, [2003] 1 FLR 1138."

In that case the English Court of Appeal was able to achieve a fair distribution of the assets by making a pension sharing order, a statutory tool not available to this Court.  Neither of these decisions were drawn to the attention of the Courts in B-v-C and Marshall- v -Downes and in the latter case Miss Benest submitted that the Court was not invited to address its mind to the fact that the recipient of a pension does not receive the value of the capital, save to the extent that a surrender is permitted, but an income which terminates on death with the loss of the remaining capital. 

64.      In our view the decisions in B-v-C and Marshall- v- Downes are fact specific and did not seek to lay down general principles to the effect that in all cases involving a clean break the full value of pensions should be taken into account and in all other cases the value of pensions should not be taken into account at all. What is clear is that in sharing out capital assets the Court should always take into account the nature of those assets and in particular the distinction between the technical value of pensions and the value of realisable assets such real property or a portfolio of listed shares. We think those distinctions were taken into account in both B-v-C and Marshal-v-Downes. Whether it is fair to include pensions at their full value or at a discounted value or not at all will depend upon the facts of each case, the circumstances of which will vary enormously.

65.      We agree with Miss Benest that for the purposes of ascertaining whether the wife has already had a fair share of the available capital assets, the SIPP and Aviva pension should be discounted taking into account the nature of those assets.  It additionally transpires that the SIPP has invested some £205,000 into a solar farm  in Spain on the strength  of tariff subsidies due to be paid by the Spanish government upon which it has subsequently reneged, thus reducing the income which in turn could trigger the bank loan covenants.  Applying a one third discount to the SIPP and Aviva pension would increase the wife's share of the capital assets to 38%.

66.      Miss Benest then sought in reliance on B-v-C to discount the value of the SIPP and Aviva pension entirely, which on the facts of this case we do not consider to be fair. They are assets built up during the course of the marriage to which the wife has made an equal contribution and should be taken into account at a discounted value when considering whether the wife has already received a fair share of the capital assets.

67.      A more substantive difficulty for the Court is placing any value on the husband's shares pending a realisation let alone accepting the discount suggested by Mr Walbridge on the value of the shares.  As Nicholas Mostyn QC commented in GW v RW (Financial Position: Departure from Equality) (2003) 2 FLR 108 at paragraph 65 in relation to discounts:-

"Discounts crop up in a number of areas when the valuation of assets is undertaken in ancillary relief proceedings.  They arise in relation to the valuation of minority shareholdings in private companies; in the valuation of substantial blocks of publicly quoted shares, where it is said that a sale would drive down the price; and, as here, where it is said that the assets are illiquid, risky or deferred.  Although the technique has a respectable pedigree it must be recognised that it is one that is devoid of any science and is never more than a guess by the expert valuer of what lesser price than face value a hypothetical purchaser would pay for the asset in question."

In that case, the assets in question were the subject of a dispute about discounts and a sharing order following Wells v Wells (2002) FLR 97 was found to be the appropriate solution; an option that is not available in this case.

68.      The shares are inextricably linked to the husband's employment, are not for sale and in reality cannot be sold to an unconnected party.  In a sale to another Initial Individual Shareholder or to an employee, we do not think that the husband would contemplate for one moment selling his shares for £1.3M, bearing in mind what he receives from that investment.  In reality, as we have found, the Initial Individual Shareholders will look to maximise the value of their shares by selling together at some point in the foreseeable future. Accordingly, we think it is artificial pending a realisation to place a value on the shares now and then to apply a discount. We conclude that pending a realisation their main value is as an income producing asset. 

69.      Mrs Whittaker seeks an adjournment of the wife's lump sum application until the shares are actually sold at which point, if a substantial sum was realised, the wife would be likely to receive a share of it in addition to the share of the capital she has already received. Unless there is such an adjournment, the wife can foresee a situation in which the husband in three years' time sells his shares for say £5M, repays his mortgages and thus has a house worth £1m mortgage free, cash of £4m and the benefit of his pensions (the SIPP having received contributions at the rate of £33,240 per annum in the meantime --the husband's contributions being matched by those of the company).  She would no longer stand to benefit from his death in service benefit.  She would own her house and continue to benefit from the joint lives order for periodical payments but on his death, those would cease and she would have no recourse to his estate and no pension to secure her in her old age. Such an outcome she says would be unfair. Furthermore a realisation at that level might enable a clean break to be achieved which is desirable.

70.      There is considerable force in these arguments but Miss Benest retorts that these divorce proceedings must come to an end.  Both parties deserve to know where they stand and to be free to get on with their lives.  Both parties gave evidence as to the stress involved in conducting the proceedings, the costs of which have been substantial.  To adjourn the lump sum application would be to leave the prospect of another costly set of hearings hanging over their heads indefinitely.

71.      It is clear that the Court has the power to adjourn the lump sum application, but upon what principles should that power be exercised?  In MT v MT (Financial Provision - Lump Sum) (1992) 1 FLR 362, the parties had lived beyond their means for many years in contemplation of the husband inheriting from his wealthy German father from which inheritance the husband could not be excluded.  The parties had no other capital and the wife would be harshly done by if she did not have eventually a share commensurate with her needs and the amount of capital available.  The father was 83 and likely to die within a few years.  The husband's attitude towards providing for the wife by way of periodical payments gave cause for concern and reliance upon periodical payments would place her in a precarious position.  A clean break, which was desirable, could only be achieved by an adjournment.  The wife's lump sum application was therefore adjourned until the death of the father.

72.      In D v D (Lump Sum: Adjournment application) (2001) 1 FLR 633 the judge at first instance adjourned the wife's application for a lump sum on 12^th June 2000 because there was a real possibility that the husband would receive a substantial additional capital sum under an executive incentive scheme payable in 2001 and 2002 i.e. within two years.  The adjournment was upheld on appeal. It was held that whilst the policy of the law is that in general the matter of a lump sum should be disposed of once and for all, there are rare cases where an adjournment is appropriate, namely if:-

(i)        there is a real possibility of capital from a specific source becoming available in the near future;

(ii)       an order for an adjournment is the only means whereby justice could be done to the parties; and

(iii)      in the exercise of its discretion the Court concludes that it is fair and reasonable to order the adjournment.

73.      In A v C and B [2003] JLR N 27, the Registrar held that although an application for an award of a lump sum should normally be conclusively dealt with at once, the Court would be prepared to grant an adjournment if (a) one spouse received a particular sum, e.g. a pension in the near future and (b) the period of adjournment is no more than four to five years.   The limit of four to five years appears to be based on certain dicta of Winter J in Roberts v Roberts (1986) 2 FLR 152 which Bracewell J in MT found to be obiter.  There would not appear to be any such fixed time limit under English law but as a matter of ordinary English "near future" means "very soon" or "within a short time". 

74.      We accept the principles set out in D v D as providing helpful guidance to this Court and that they should be applied to the facts of this case.  Is this one of those rare cases in which an adjournment should be ordered?  There is no question that there is a real possibility of capital from a specific source, i.e. the shares, becoming available but will it become available in the near future?  We have found that a realisation of the shares is likely but not certain to take place over the next ten years.  Any adjournment would therefore be for a period potentially of ten years.

75.       In MT the death of the father was expected in a few years and in D v D there was certainty that any bonus would be paid within two years. In this case there is no real evidence that a realisation will take place very soon or within a short time; an adjournment would thus be too open ended. Furthermore an adjournment is not the only means by which justice can be done. Unlike the wife in MT, the wife in this case has already received the vast majority of the liquid assets giving her a house mortgage free. Apart for the boat, there is nothing more that can now be transferred to her. Furthermore she will continue to benefit from periodical payments for the joint lives of the parties, thus sharing in the performance of the husband's shares.

76.      For these reasons we decline to adjourn the application for a lump sum.

77.      In the alternative the wife seeks an order that she receive 40% of the net proceeds of any sale whenever that takes place or an order for a deferred lump sum of £1.5m payable on the sale of the shares over the next ten years with increments  to the extent that the consideration exceeds £4.7m. For the reasons set out above we have found that until the shares are actually sold their main value is as an income producing asset and therefore we have no fair means by which to arrive at 40% or £1.5m as suggested by Mrs Whittaker or any other percentage or figure. Whilst we have found that the husband is likely to realise at least £4m from a realisation of his shares over the next ten years, we have no means of knowing what consideration will actually be paid, on what terms and how such a sale would be structured. Nor do we know what the needs and circumstances of the parties might be over such a long period. To make such orders now would be to base them upon speculation with the very real possibility of causing injustice to one or other or both parties. We decline to make such orders.

78.      The wife's application for a lump sum will therefore be dismissed.

Decision-periodic payments

79.      It is helpful to set out the guidance given by the House of Lords in Miller v Miller; McFarlane v McFarlane (2006) UKHL 24, where Lord Nicholls said this under the passage entitled "The requirements of fairness":-

"[4]     Fairness is an elusive concept. It is an instinctive response to a given set of facts.  Ultimately it is grounded in social and moral values.  These values, or attitudes, can be stated.  But they cannot be justified, or refuted, by any objective process of logical reasoning.  Moreover, they change from one generation to the next.  It is not surprising therefore that in the present context there can be different views on the requirements of fairness in any particular case.

[5]       At once there is a difficulty for the courts.  The matrimonial Causes Act 1973 gives only limited guidance on how the courts should exercise their statutory powers.  Primary consideration must be given to the welfare of any children of the family.  The court must consider the feasibility of a "clean break".  Beyond this the courts are largely left  to get on with it for themselves.  The courts are told simply that they must have regard to all the circumstances of the case.

[6]       Of itself this direction leads nowhere.  Implicitly the courts must exercise their powers so as to achieve an outcome which is fair between the parties.  But an important aspect of fairness is that like cases should be treated alike.  So, perforce, if there is to be an acceptable degree of consistency of decision from one case to the next, the courts must themselves articulate, if only in the broadest fashion, what are the applicable if unspoken principles guiding the court's approach.

[7]       This is not to usurp the legislative function.  Rather, it is to perform a necessary judicial function in the absence of parliamentary guidance.  As Lord Cooke of Thorndon said in White v White [2001] 1 AC 596, 615, there is no reason to suppose that in prescribing relevant considerations the legislature had any intention of excluding the development of general judicial practice.

[8]       For many years one principle applied by the courts was to have regard to the reasonable requirements of the Claimant, usually the wife, and treat this as determinative of the extent of the Claimant's award.  Fairness lay in enabling the wife to continue to live in the fashion to which she had become accustomed.  The glass ceiling thus put in place was shattered by the decision of your Lordships' House in the White case.  This has accentuated the need for some further judicial enunciation of general principle.

[9]       The starting point is surely not controversial.  In the search for a fair outcome it is pertinent to have in mind that fairness generates obligations as well as rights.  The financial provision made on divorce by one party for the other, still typically the wife, is not in the nature of largesse. It is not a case of "taking away" from one party and "giving" to the other property which "belongs" to the former.  The Claimant is not a suppliant.  Each party to a marriage is entitled to a fair share of the available property.  The search is always for what are the requirements of fairness in the particular case."

80.      In addition to this reasoning, Baroness Hale of Richmond at paragraph 139 indicated as follows:-

"[139]  But while need is often a sound rationale, it should not be seen as a limiting principle if other rationales apply.  This was the error into which the law had fallen before White.  Need had become "reasonable requirements" and thus more generous to the recipient, but it was still a limiting factor even where there was a substantial surplus of resources over needs: see Page v Page (1981) 2 FLR 198.  Counsel would talk of the "discipline of the budget" and suggestions that a wife's budget might properly contain a margin for savings and contingencies, or to pass on to her grandchildren, were greeted with disbelief.

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

[141]   A third rationale is the sharing of the fruits of the matrimonial partnership.  One reason given by the Law Commission for not adopting any single model was that the flexibility of s 25 allowed practice to develop in response to changing perceptions of what might be fair.  There is now a widespread perception that marriage is a partnership of equals."

81.      In this case the husband has an annual income net of tax of at least £282,000, a sum which on any analysis should be more than sufficient to meet the reasonable needs of both parties.  This has been a long marriage to which each has made an equal contribution to the assets, all of which have been acquired during the marriage. Furthermore, the mutual decision that the wife should stop working in 2003, thus putting her out of the job market for some eight years, has placed her at an economic disadvantage that merits an award which includes an element of compensation for relationship-related disadvantage.

82.      In V v V (Financial Relief) (2005) 2 FLR 697, the husband (aged 58) and the wife (aged 57) had been married for 30 years and had adult children.  The former matrimonial home was sold and the proceeds divided so that there was no issue as to the parties' accommodation, but Coleridge J said this at paragraph 36 in relation to the wife's share of the income derived from the husband's company, which had no real value other than as an income stream:-

"[36]   The income from SS Ltd is, on one view, the most valuable asset in this case.  It has been acquired following a very long marriage and, as I have indicated, it is part of a continuum, so far as the generation of income from such a source is concerned.  I ask myself the question: is it fair, in those circumstances, for this husband, or indeed a husband in similar circumstances, to be left with double the wife's disposable income in circumstances where it is not suggested there should be a clean break?  The net effect of the district judge's current division is that, as he has set out, the wife receives one-third of the net income, the husband two-thirds, ergo 100% more than the wife.

[37]     There is almost no guidance or authority in relation to the way in which the court should determine this aspect of an ancillary relief claim, save in circumstances where the incomes are huge.  They provide no assistance to me whatever.  This is not such a case.  This is a case of a solid, secure income which is capable of providing decently for both sides, although, obviously after division, will lead to a considerable drawing-in of horns by both husband and wife.  Again, there can, of course, be no hard-and-fast rules in these cases, particularly in relation to the division of available income - s 25 are the only real criteria.  However, in my judgment, the district judge did err in this limited respect.  He should have given the wife a greater proportion of the available income, particularly after a marriage of this very great length.  To fail to do so did not fully recognise her contribution over the length of this marriage.

[38]     In my judgment, she should have 40% of the income, and the husband 60%.  In this way, the husband is still 50% better off than the wife but that is to recognise Mr Bromilow's point that the parties no longer are in a partnership and the husband is the person generating the income.  By that route, I would increase the periodical payments order set by the district judge to a total of £25,000 pa (£2,085 per month), which represents exactly 40% of the parties' joint earning capacities."

83.      The facts in V-v-V can be distinguished to this extent namely that the husband in this case, having transferred all the proceeds of sale of the former matrimonial home to the wife, had no funds with which to acquire a house of his own and has the burden of maintaining the children, a burden which is likely to rise, but even so his proposals hardly seem fair.  He proposes to pay periodical payments of £26,000 per annum which represents 8.8% of their joint incomes of £294,000 per annum (the husband's net income of £282,000 and the wife's gross income of £12,000) and 9.2% of his income.  Adding the cost to the husband of the children of £44,709, he will be paying a total of £70,709 per annum for both the wife and the children, which equates to some 24% of their joint incomes and 25% of his income.  It is of some note that the husband sets his personal income needs (excluding expenditure to service his debts) at £4,063.69 per month or £48,764.28 per annum, nearly twice that which he proposes paying to the wife.  The Court was able to identify very considerable savings that he could make in his personal expenditure.  For example the husband told us that he sees no point in selling his Aston Martin, as he would have to fund the negative equity and purchase an alternative car in its place. In our view the sale of this car is a serious option for him which, if he purchases a much more modest vehicle, will have the benefit of materially reducing his annual outgoings.

84.      Miss Benest drew our attention to the following passage of the judgment of Coleridge J in N v N (Financial Provision: Sale of Company) (2001) FLR 69, which concerns the division of capital assets but the sentiments of which can equally apply to the division of income:-

"As is glaringly apparent from this case, the theory behind White is one thing.  But the actual practicalities involved in valuing, dividing up, and/or realising certain species of assets making the attaining of the White objective sometimes either impossible or only achievable at a cost which may not overall be in the family's best interests.  In this regard of one thing I am convinced.  I am sure the House of Lords did not intend courts to exercise their far-reaching powers to achieve equality on paper if in doing so they, Samson-like, brought down or crippled the whole family's financial edifice to the ultimate detriment of the children (whose interests, of course, remain the top priority in this and every case).  More than ever in the new climate, especially where the facts are similar to the present (where the award is likely to be larger than before White), the court, in my judgment, must be creative and sensitive to achieve an orderly redistribution of wealth, particularly where this involves the realisation of assets owned by either of the parties."

85.      We heed that warning, but it is not fair, in our view, for the husband to burden himself with debt to the extent that the wife is deprived of a fair share of the family income.  We do not think that it is unreasonable for him to aspire to own his own house, but we question the wisdom of his incurring £1M in debt in doing so, the servicing of which (£84,316) eats disproportionately into the family income.  It is open to him to dispose of his house and acquire something considerably more modest thus reducing his mortgage commitments.

86.      In our view, the husband's proposals fail to recognise the wife's contribution over the length of the marriage and the need for her to be compensated for relationship-related disadvantage. The degree of income inequality that would result is unjust. She should have a greater proportion of the available income which we assess, tempered by the husband's liabilities, at £60,000 per annum which equates to 20.4% of their joint incomes and 21.2% of his income.  Adding the cost of the children, the husband will then be paying £104,709 per annum for the support of both the wife and the children, which equates to 35.6% of their joint incomes and 37.1% of his income.  Using round figures that leaves the husband some £177,000 per annum by way of disposable income from which to provide for his accommodation, personal needs and to service his debts; an income which is nearly two and a half times that of the wife. Even accepting that the wife has free accommodation and he does not and that she plays no role in the generation of his income, this is arguably still  too small a proportion in our view, but it is the highest that we believe we can safely order in the light of the husband's liabilities. Furthermore we think it fair that the wife should, through lower periodical payments, share some of the burden of discharging those liabilities which can be related back to the time when the parties were together.

87.      There should be a review in three years' time, namely in 2014, when we would have expected the husband's financial position to have improved materially from a reduction in his expenditure and his liabilities. We also bear in mind that we have assessed his annual income cautiously and that if a fifth annual dividend is paid in this and the following years that will enable him to accelerate the reduction of his liabilities.

Decree absolute, trust and injunctions

88.      The wife seeks a deferment of the granting of the decree absolute, principally because it would defeat her right to be a beneficiary under a trust of the shares in FTC within the terms of the shareholders' agreement, but we agree with Miss Benest that there can be no objection to the grant of a decree absolute in the event of the wife's claim for a lump sum being dismissed.  We will therefore grant the husband's application for a decree absolute.  The dismissal of the wife's claim for a lump sum means that the wife's proposal that the shares should be held in trust falls away.

89.      It was not immediately apparent to us why, in the light of the decision we have made, there is now any justification for the imposition of injunctions over the husband's shares bearing in mind in particular the restrictions that exist over them under the shareholder's agreement, but we are prepared to hear further submissions on this should the wife wish to pursue the matter.

Summary 

90.      In conclusion:-

(i)        We accept the husband's undertakings and approve the consent orders in the document handed to us by counsel on the 4^th May 2011.

(ii)       The wife's application for a lump sum will be dismissed.

(iii)      The husband shall pay to the wife during their joint lives or until her earlier remarriage or further order the sum of £5000 per month or £60,000 per annum to be reviewed on or before 30^th June 2014 and in any event in the event of any materiel change of circumstances of either party both before and after 2014. These payments shall be increased annually in accordance with the Jersey Retail Prices Index on the anniversary of the order being made.

(iv)      We will grant the husband's application for the decree absolute

91.      We invite counsel to draft up an Act of Court reflecting the above for consideration when this judgement is handed down.

Authorities

Matrimonial Causes Act 1973.

White v White (2001) 1 AC 596.

Evans v Evans (1991) FLR 319.

Ancillary Relief Handbook, 7th edition by Roger Bird.

J v M [2002] JLR 330.

P-S v C [2006] JLR 463.

B v C [2005] JRC 169.

T v B [2008] JRC 077A.

S v L and C [2009] JRC 044A.

Marshall v Downes [2010] JRC 115B.

Maskell v Maskell (2001) EWCA Civ 858.

Martin-Dye v Martin-Dye (2006) EWCA Civ 681.

MT v MT (Financial Provision - Lump Sum) (1992) 1 FLR 362.

D v D (Lump Sum: Adjournment application) (2001) 1 FLR 633.

A v C and B [2003] JLR N 27.

Roberts v Roberts (1986) 2 FLR 152.

Miller v Miller; McFarlane v McFarlane (2006) UKHL 24.

V v V (Financial Relief) (2005) 2 FLR 697.

N v N (Financial Provision: Sale of Company) (2001) FLR 69.