Matrimonial - application for ancillary relief by the first respondent.
Before : |
W. J. Bailhache, Q.C., Deputy Bailiff, and Jurats Marett-Crosby and Blampied |
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Between |
Z |
Petitioner |
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And |
Y |
First Respondent |
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And |
D |
Fourth Respondent |
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Advocate M. J. Haines for the Petitioner.
Advocate N. S. H. Benest for the First Respondent.
Advocate S. A. Franckel for the Fourth Respondent.
judgment
the deputy bailiff:
1. The Court now delivers judgment in relation to the First Respondent's application for ancillary relief arising out of a divorce petition filed by the Petitioner which was heard on 28th - 31st October, 2014. The husband's application was filed on 26th August, 2011, and the ancillary relief litigation has therefore taken some three years and two months to come to trial. The Fourth Respondent is the First Respondent's father. The Second and Third Respondents, who are no longer parties to these proceedings, are the Fourth Respondent's second son and wife respectively. In this judgment we will refer to the Petitioner as the wife, the First Respondent as the husband and the Fourth Respondent as "D" or "the father".
2. The wife and the husband commenced co-habitation in or about 1991. There were two children issue of the union, one born in January 1997 and the other in August 2003. The husband and the wife subsequently married in August 2005. There is agreement that before the date of the marriage, the husband had raised with the wife the possibility of the two of them entering into a pre-nuptial agreement, but the wife refused. The day before the marriage, an agreement was made between the husband and other members of his family which purported to record the true ownership of shares in a number of companies in which the husband was the registered shareholder. In effect, this was an agreement to transfer shares in some of those companies out of the name of the husband into the names of his brother, mother, and father. On 30th June, 2009, the husband and the wife separated and the wife moved out of the matrimonial home the following day. A decree nisi was granted on 24th August, 2011. Since that date there have been numbers of hearings before the Family Registrar and in this Court and, sadly, enormous legal fees have been incurred by all the parties. The assets and liabilities are now broadly agreed.
1. |
The equity value in 10, King's Park |
£120,000 |
2. |
The equity value in the former matrimonial home |
££322,500 |
3. |
The equity value less than the cost of sales in Units 14, 17 and 18 Gloster Hotel |
£687,300 |
4. |
Balance on escrow account |
£188,817 |
|
|
£1,318,617 |
Maison Blanche Loan |
£150,987 |
Acorn Finance |
£77,658 |
D Wheatley |
£10,000 |
D |
£335,196 |
RBS Credit Card (in his father' name) |
£24,866 |
ICN Toole & Co |
£7,523 |
School B |
£4,760 |
Income Tax |
£636 |
Household Insurance |
£742 |
Outstanding legal fees |
£375,704 |
|
£988,072 |
Pension Pot (CETV as at 7.10.11 |
£10,141 |
Jewellery |
£22,000 |
|
£32,141 |
Antonia Cook |
£1,184 |
Legal Fees |
£280,500 |
|
£281,684 |
3. In addition, both husband and wife have a car and have bank accounts. Both cars are currently registered in the name or to the order of the husband who has agreed to transfer into her name the car which the wife uses. It is agreed that the cars and the relatively small sums standing to the credit of the parties in their bank accounts stay where they are and do not fall to be taken into account. The same applies to the wife's modest pension pot and jewellery. In relation to her jewellery, we add that the wife places a much lower value on it, namely £4,500. Given that the jewellery is not taken into account in the approach to the orders being made, the difference in valuation is not material.
4. Although it is not an asset which is available to the spouses, we note that from an earlier hearing regarding the Chateau Valeuse development, the husband is notionally to be credited with the sum of £950,000 arising out of the transfer of his interest in that development to his father for no consideration in October 2007. This was the subject of a judgment of this Court handed down on 11th September, 2014, and reported at Z-v-Y (Matrimonial) [2014] JRC 170.
5. Until their eldest child was born, the wife worked in the financial services industry in different capacities, but following the birth of that child, she made her contribution to the family life as partner, wife and mother. She has not been involved to any significant extent in the husband's business. He does not have significant academic qualifications, but he has been successful as a property developer, sometimes on his own, although mostly in partnership with his father. That partnership has been mirrored by similar partnerships between D and his other sons. Indeed one of the complications in the present case has been the modus operandi of D in the sense that many of the assets which have been registered in the different names of the family members do not in fact belong beneficially to those family members at all but are subject to other beneficial interests. Another complication has been that it appears not to have been uncommon for the various property developments within the family to have been funded with borrowed money, the security for which does not necessarily reflect the equity shares in the development in question. Thus, for example, the Chateau Valeuse development was initially funded by borrowing secured against assets of both the husband and his father at a time when the development belonged to the husband, and this continued after the development was transferred from the husband to his father. This feature has undoubtedly caused some of the costs to have been incurred in this case because the wife was understandably cautious about accepting statements from the husband as to where the beneficial interest lay in particular properties or developments.
6. The former matrimonial home is a substantial property comprising two units of accommodation. The first is occupied by the husband and comprises three bedrooms with some reception rooms and office accommodation. The second unit is occupied by D and his wife, and has been so occupied since approximately 1997. There are substantial grounds. The property is, we are told, not easily divisible. Both the husband and the wife accept:-
(i) That D and his wife have an equitable 50% interest in the value of the former matrimonial home even though title to the property is registered in the name of the husband. There does not seem to be full agreement as to whether the unit occupied by D and his wife has the same value as the unit occupied by the husband, but it probably does not matter very much for these purposes because the overall 50% equity interest has been agreed.
(ii) The former matrimonial home has been the home of the children of the marriage and given the shared care arrangements for them, they continue to live there while living with the husband. That property therefore must have some natural appeal for them not only because of the extensive grounds but also because of its history as their family home while they have been growing up and because the presence of their grandparents next door provides continuing stability. It is not always possible to preserve the former matrimonial home for the benefit of the children, but where it is possible to do so it is obviously desirable, particularly where there is not only the emotional attachment to the property but also to the grandparents who live in it as well.
7. At all stages, both parties addressed us on the basis that the Court should make an order which established a clean break between them. The wife's open position was that the matrimonial pot had a value of £2,268,616.96. The wife's asset figures were broadly the same as those of the husband. The difference between them lay in the wife's addition to the assets within the matrimonial pot of the sum of £950,000 which Advocate Haines contended reflected the Court's judgment in relation to the transfer of the husband's share in Chatval Limited to D for no consideration when that share had a value of £950,000. Accordingly whereas the husband contended that the matrimonial pot, less sundry monies in bank accounts, cards and personal items of jewellery was in the total amount of £1,336,317, the wife came up with a matrimonial pot of £2,268,616. In order to divide the assets which formed part of the matrimonial pot, the wife therefore contended that she should have an immediate payment of £950,000 to equalise the financial misconduct figure which flows down from the last hearing; should have a sum of £125,000 to reflect further financial misconduct of the husband since the date of separation, during which period the husband has she claimed spent wantonly in excess of his income; both parties should be debited from the matrimonial pot with the sum of £21,000 to be placed into a joint account to meet school fees and the balance should be shared equally. Thus the wife was due to receive £1,184,658.50 and the husband the sum of £1,059,658.50 of which he had already received £950,000 through the financial misconduct notional attribution from the last hearing. In cash terms, the husband would receive £109,658.70.
8. When one looks at the assets which are actually available, it is perfectly apparent that it is impossible to allocate to the wife the sum of nearly £1.185 million without requiring either the sale of the former matrimonial home or a further borrowing by the First Respondent, whether from a third party or from the wife herself with some deferred payment of a part of the outstanding amount. A sale would almost certainly require that D and his wife, now in their 80s, should also give up their home, because the property is not easily subdivided. That outcome did not seem to us to be obviously fair.
9. The husband's open position on the first morning of the hearing was that from the realisable matrimonial pot of £1,336,317, one deducted some third party debts totalling £268,271, a provision for one year of school fees and a provision for 12 months outgoings for the husband. This left a total of £1,030,438 and on the basis that the husband would remain in the former matrimonial home, that matrimonial pot was further depleted by £322,500 leaving a total of £707,938 for division. It was proposed that £100,000 of that be provided to the husband, with the balance being made available to the wife. This would leave her with a sum of money to buy a property, perhaps for £450,000, with sufficient cash left over to use £50,000 as a living expenses fund, and still reduce her indebtedness to her lawyers by £100,000. The husband would also be left with significant debts. In summary, the parties would emerge from the divorce, on this open position, with their interests shown in tabular form as follows:-
Equity in former matrimonial home |
£322,500 |
Cash |
£132,232 |
Less debts |
£719,801 |
|
-£265,069 |
Cash |
£607,938 |
Less debts |
£281,684 |
|
£326,254 |
10. On the first morning of the week set aside for hearing, the Court expressed concern about the extent of legal fees already incurred. We indicated that we thought the husband had made a good start, but that he had not yet gone far enough, and that we thought he should be looking to ensure that his wife had a house in which to live, without debts. On the other hand, we pointed out to the wife's lawyers that the notional sum of £950,000 carried forward from the last hearing in relation to Chatval Limited was indeed notional, and not represented by hard cash or any fixed assets which would be necessarily available for a split between husband and wife. We urged the parties to have further discussions and attempt to reach a settlement which would leave them both with an opportunity to emerge from the divorce with dignity and without further heavy costs being incurred. We adjourned, initially until 2:30pm that afternoon but as it turned out until 10am the following day for such discussions to take place.
11. The result was no settlement of the issues between the parties but some revised open positions. The wife retained the view that the total matrimonial pot including the notional sum was £2,268 million and contended that this should be split equally between husband and wife. She was prepared to allow the husband an additional £150,000 more than her, given his existing indebtedness, and she therefore asserted that the right division was £1,209,308 for the husband and £1,059,308 for her. Allowing the husband £1,209 million of which £950,000 had already been notionally received would mean that he would be due a cash sum of £259,308. This was still less than the value of his equity in the former matrimonial home, and therefore would still have required that property to be sold or a borrowing to be made somewhere to make up the deficit. Just as the open position lodged prior to trial was unrealistic, in our judgment the revised open position was equally unrealistic. We record that on the second morning of the hearing we adjourned for a further 15 minutes with the request that Advocate Haines take further instructions from the wife and ensure that he advise her fully on the litigation risks of continuing with the line which had been disclosed by that open position. We have no doubt that he did so. He lodged with us a final revised open position which allowed £900,000 to the wife and £418,617 (plus the notional sum of £950,000) to the husband.
12. By contrast, the husband's revised open position on the second morning of the trial took the starting figure of £1,318 million, and deducted from that the former matrimonial home which was to be allocated to the husband so that his, his children's and his parents housing needs would be met. As to the residual pot for division, namely £996,117, the husband contended that deduction in the total sum of £266,021 should be made for debts due to Maison Blanche, Acorn Finance, one year's children's school fees and the husband's living expenses for one year. That would leave the wife with the balance of £730,096. In essence, the husband would have received the former matrimonial home valued at £322,500 plus his living expenses of £32,000 and would be left with debts in excess of £750,000. His net debt position would be somewhere between £405,000 and £437,000. By contrast the wife would have received a cash sum which after payment of her debts would leave her with net assets of nearly £450,000. Thus it was said that her asset position compared with his net debt position showed a difference of some £853,000 which addressed the finding of financial misconduct in the notional sum of £950,000.
13. Regrettably, the wife was not able to accept the husband's revised open position and Advocate Haines sought leave to make a further financial misconduct application in respect of the spending of the husband after the date of separation which it was said was wanton and should be taken into account for the purposes of the division of assets. It is to be noted that this application, even if successful, would not create new assets for division; but the approach taken by the wife was that it was relevant to conduct this exercise because when the Court came to allocate assets between the parties, the figures found to represent financial misconduct should first be taken into account before the Section 25 factors were considered thereafter. This is an important point of principle, to which we now turn.
14. The statutory legislation governing cases of the present kind is the Matrimonial Causes (Jersey) Law 1949, and the relevant articles for these purposes are to be found between Article 25 and Article 35. Within these articles are found the provisions conferring jurisdiction upon the Court to make orders in relation to ancillary matters consequent upon divorce. The most relevant articles for present purposes are Article 28 and 29 of the Law which enable the Court to order a transfer or settlement of property and to make financial provision for parties to a marriage in cases of divorce. The opening language of Article 29(1), which reflects also similar language in other articles, is in these terms:-
"Where a decree of divorce, nullity of marriage or judicial separation has been made, the Court may, having regard to all the circumstances to the case including the conduct of the parties to the marriage insofar as it may be inequitable to disregard it and to their actual and potential financial circumstances, order..."
15. There are some earlier provisions in relation to children at Article 25.
16. Although the language is not identical, Section 25 of the Matrimonial Causes Act 1973 in the United Kingdom makes similar provision:-
"It shall be the duty of the court in deciding whether to exercise its powers ... and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of 18.
(2) As regards the exercise of the powers of the court in relation to a party to the marriage, the Court shall in particular have regard to the following matters -
(a) 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 earning capacity 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;
(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c) the standard of living enjoyed by the family before the breakdown of marriage;
(d) the age of each party to the marriage and the duration of the marriage;
(e) any physical or mental disability of either of the parties to the marriage;
(f) the contribution 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;
(g) 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;
(h) in the case of proceedings for divorce or nullity of marriage, 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."
17. We note in passing that in the United Kingdom, as in Jersey, the child's welfare is not the paramount consideration of the Court as it is under the Children Act 1989 and the Children (Jersey) Law 2002, but it is in the language of the United Kingdom statute a first consideration, and in the approach taken in the courts in Jersey a very important consideration.
18. The list of factors set out in Section 25 have for convenience been called "the Section 25 factors" and have been applied as the relevant considerations for the courts of Jersey when exercising powers to grant ancillary relief upon divorce or judicial separation.
19. Advocate Haines submits that when it comes to questions of financial misconduct, the Court should deal with such issues first and identify if there is evidence of dissipation of assets, and then ask the question whether it is inequitable to disregard that dissipation. This, it is said, is an exercise the Court should go through before taking into account the other Section 25 factors. Advocate Haines has spent some time both in terms of evidence and submission going through what he asserted to be the evidence of financial misconduct of the husband in this case, and having asserted that it was misconduct which it would be inequitable to disregard, he then asked us to make relevant orders in favour of the wife so as to put her in the position she would have been in if the husband had not acted in that way. In support of these submissions, Advocate Haines relied in particular on the case of Norris v Norris [2002] EWHC 2996, at paragraphs 74-77. Having looked at the expenditure of the husband, Bennett J reached the conclusion that there had been a total overspend of £350,000 for the period 1st July, 2000 - 30th September, 2002, financed by the husband dipping into this capital. The judge then went on:-
"77. The overspend, i.e. the expenditure of over income of £350,000 in a little over two years, at a time when he was about to and then did enter into protracted litigation with the wife, can only be classified as reckless, and particularly at a time later on when the dot.com and the stock market collapsed. A modest overspend in the context of a rich man would be understandable and could not be classified as reckless. But in the circumstances of this case, as I have set them out, in my judgment, the scale and extent of the overspend was reckless. I do not think it appropriate to add back the entire overspend, but I do not consider it unfair to add back into the husbands assets the figure of £250,000. In my judgment, there is no answer that the husband can sensibly give to the question, "why should the wife be disadvantaged in the split of the assets by the husband's reckless expenditure?" A spouse can, of course, spend his or her money as he or she chooses, but it is only fair to add back into that spouses assets the amount by which he or she recklessly depletes the assets and thus potentially disadvantages the other spouse within ancillary relief proceedings."
20. Advocate Haines also relied on the case of Evans v Evans [2013] 2 FLR 999. In that case, the wife contended that $1.5 million should be added back to the parties' resources to reflect excessive expenditure by the husband over a 20 month period, excessive use of a private jet and an amount appropriated by the husband from joint funds. Moylan J referred to the need to conduct a notional reattribution very cautiously by reference only to clear evidence of dissipation in which there was a wanton element, taking up dicta from Wilson LJ in Vaughan v Vaughan [2008] 1 FLR 1108, and he then went on:-
"106. In addition, reattribution must be justified. During the course of his judgment, Wilson LJ referred to a passage in the judgment of Cairns LJ in Martin -v- Martin [1976] Fam 335 [1976] 3 WLR 580 at 242 and 586 respectively:
"... a spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to if he had behaved reasonably."
If it were otherwise, parties would have little incentive to behave reasonably but rather would have an incentive to spend what they could pending resolution. However, in addition, reattribution must be justified in the context of the case. It is a form of conduct and as such it must be "inequitable to disregard it".
107. There is, therefore, an evidential element - is there clear evidence of wanton dissipation - and a legal/discretionary element - would it be inequitable to disregard it or, to put it another way, is notational reattribution required in order to achieve an outcome which is fair?"
21. Accordingly it was submitted by Advocate Haines that the issue was one of fairness and one should deal with financial misconduct issues first in order to identify what was the pot for distribution between the parties.
22. There are however passages later on the judgment of Moylan J in Evans which do not assist this submission. Having found that the wife in that case had only partly established the evidential foundation for a notional reattribution because both parties were spending at a prodigious rate, the judge went on in this way:-
"114. In addition, I must consider whether I should effect a notional reattribution. Is it required in order to achieve an outcome which is fair? Given that the assets in this case, to which I would be making a notional reattribution, are estimated, including the Confluence shares, in the region of £40 million, I do not consider that the reattribution of approximately $425,000, or even, say, $700,000, is justified. It is no more than about 1/2 % of the total wealth which, if reattributed, would give the wife an extra 0.5/1% (i.e. half of half %). This degree of adjustment, in this case, is not necessary in order for a fair result to be achieved. Even if I had concluded that a greater level of extravagance had been established, I would have been likely to come to the same conclusion."
23. It seems to us to be clear from that passage that the judge did not regard the notional reattribution to be an exercise which was to be conducted first so as to identify the size of the matrimonial pot the division of which would then be considered on the application of Section 25 factors.
24. It is also to be noted that both Norris and Evans were big money cases. In both cases it would have been possible to reattribute some assets without particular difficulty. Advocate Haines submitted that the principle of reattribution for financial misconduct should be applied regardless of whether it was a big money case or not. We do not say that financial misconduct should only be taken into account in big money cases. That is not the position at all. However, if the financial misconduct, taken fully into account, in what we may describe as the ordinary ancillary argument cases would result in an unfair conclusion, then the Court should temper its approach because the overriding requirement is to achieve a fair result.
25. This overriding requirement came to the fore in the case of Vaughan v Vaughan [2007] EWCA Civ 1085 [2008] 1 FLR 1108. There the Court of Appeal was dealing with an appeal by the husband against a decision of the circuit judge to set aside the order of the district judge. This was not a big money case. The district judge had not treated the husband's profoundly irresponsible expenditure in a principled way, as the circuit judge had found. The Court of Appeal upheld the approach which the circuit judge took that in that respect but it then went on to say that one had to apply the principle of reattribution very cautiously (as Moylan J recognised in Evans) and the Court of Appeal went on to reach the conclusion that the order of the district judge as a whole had on the facts in that case been appropriate and the circuit judge ought not to have interfered with it even though the district judge had shown errors of reasoning on the way. What is clear from an analysis of the judgment of the Court of Appeal in Vaughan is that the question of financial misconduct was only one of the factors which fell to be considered.
26. In our judgment, this is furthermore made quite plain in England and Wales by the decision of the House of Lords in the case of White v White [2000] 2 FLR 981. This was a relatively big money case as well in that the overall net assets of the husband and wife were assessed at approximately £4.6 million. The judgments in the House of Lords were focussed on the approach to be taken in the application of Section 25 of the 1973 Act. Having found that the implicit objective was to achieve a fair outcome in financial arrangements on or after divorce, giving first consideration where relevant to the welfare of children, the House of Lords emphasised that fairness required the Court to take into account all the circumstances of the case, and in particular, required that there was no place for discrimination between the husband and the wife and their respective roles. The division of labour should not prejudice or advantage either party when considering their contributions to the welfare of the family and it mattered not which spouse earned the money and built up the assets if the other spouse was making a contribution in a different way. It was said that a judge should check his tentative views against the yardstick of equal division, and as a general guide, equality should only be departed from if and to the extent that there was good reason for doing so. All their Lordships agreed with the speech of Lord Nicholls of Birkenhead. At page 992, his Lordship said this:-
"The statutory provisions lend no support to the idea that a claimant's financial needs, even interpreted generously and called reasonable requirements, are to be regarded as determinative. Another factor to which the Court is bidden to have particular regard is the available resources of each party. As my noble and learned friend Lord Hoffman observed in Piglowska -v- Piglowski [1999] 2 FLR 763, 782, [1999] 1 WLR 1360, 1370, S25(2) does not rank the matters listed in that subsection in any kind of hierarchy. The weight, or importance, to be attached to these matters depends upon the facts of the particular case. But I can see nothing, either in the statutory provisions or in the underlying objective of securing fair financial arrangements, to lead me to suppose that the available assets of the respondent become immaterial once the claimant wife's financial needs are satisfied. Why ever should they? If a husband and wife by their joint efforts over many years, his direct view of his business and hers indirectly at home, have built up a valuable business from scratch, why should the claimant wife be confined to the court's assessment of her reasonable requirements and the husband left with a much larger share? Or, to put the question differently, in such a case, where the assets exceed the financial needs of both parties, why should the surplus belong solely to the husband? On the facts of a particular case there may be a good reason why the wife should be confined to her needs and the husband left with the much larger balance. But the mere absence of financial need cannot, by itself, be a sufficient reason. If it were, discrimination would be creeping in by the back door. In these cases, it should be remembered, the claimant is usually the wife. Hence the importance of the check against the yardstick of equal division.
There is much to be said for returning to the language of the statute. Confusion might be avoided if courts were to stop using the expression "reasonable requirements" in these cases, burdened as it is now with the difficulties mentioned above. This would not deprive the court of the necessary degree of flexibility. Financial needs are relative. Standards of living vary. In assessing financial needs, the court will have regard to a person's age, health and accustomed standard of living. The court may also have regard to the available pool of resources. Clearly, and this is well recognised, there is some overlap between the factors listed in S25(2). In a particular case there may be other matters to be taken into account as well. But the end product of this assessment of financial needs should be seen, and treated by the court, for what it is: only one of the several factors to which the court is to have particular regard. This is so, whether the end product is labelled financial needs or reasonable requirements. In deciding what would be a fair outcome, the Court must also have regard to other factors such as the available resources and the parties' contributions. In following this approach the court will be doing no more than giving effect to the statutory scheme."
27. We see no reason to distinguish the financial need factor from the financial misconduct factor. In either case it is just one of many possible relevant factors.
28. Conduct is to be taken into account insofar as it would be inequitable to disregard it and the construction of that language has of course been the subject of consideration in this Court in J v H [2014] JRC 140A. Insofar as one is considering financial misconduct, it is also clear from the authorities that one distinguishes, generally, between financial misconduct before the parties have separated (unless the misconduct relates to an expected separation) and conduct after the separation where, as we put it in J v H "one spouse deliberately squanders assets in the belief that it will not adversely affect his or her ultimate entitlement or seeks to pressurise the other by inhibiting or denying access to the wherewithal to live or to obtain necessary advice." It is clear from Norris and Evans that in England and Wales the approach taken is that the financial misconduct after separation should be reckless or wanton - and just as we indicated in J v H that the categories of financial misconduct were not closed, we would adopt the approach in England and Wales requiring the misconduct to be wanton as appropriate also in this jurisdiction. If a spouse after separation indulges in grossly excessive expenditure knowing that it will diminish the matrimonial assets available for distribution but will not affect proportionately his or her entitlement to a share of those assets, that financial misconduct may be taken into account. Even so, it remains only one of the Section 25 factors and in our judgment, it is clear from the decision of the House of Lords in White v White that that is the case in England and Wales as well. When one looks at the order which ultimately falls to be made, it is a question of the overall fairness of the order, in the round, having regard to all the relevant Section 25 factors of which financial misconduct, if it exists, is one.
29. We now apply the Section 25 factors in this case on that principle.
30. There are two elements to the issue of financial misconduct. The concluding paragraphs of the Court's judgment in relation to the Chateau Valeuse development are as follows:-
"135. In this case, the Court has found that the First Respondent [the husband] had an interest in the Chateau Valeuse development well past the incorporation of CL and the acquisition of title by that company to the Chateau Valeuse Hotel. It is contended by all parties before us that he no longer has that interest, and we have found that the effective date for relinquishing that interest was 4th October 2007. At that time, we have found as a fact that the First Respondent made the transfer to the Fourth Respondent in order to hide the asset from his wife's gaze, should matrimonial proceedings be commenced. In doing so, he disposed of a valuable asset for no consideration but in our view without any doubt that at some future date the benefits of it might be returned to him in one shape or another.
136. We regard this as financial misconduct which the Court ought to take into account when the substantive hearing takes place in October, and that the First Respondent should notionally be credited with having in his hands the value so transferred, namely the sum of £950,000. That is likely to have an impact on how the remaining matrimonial assets are apportioned. We make that order accordingly."
31. The first thing to note from these paragraphs is that the Court did not say that the husband would be treated as having £950,000 in his hands. The word "notionally" was included quite deliberately. The Court went on to emphasise that the finding would have an impact on how the remaining assets were apportioned. It is not to be overlooked that the benefit of the asset transferred was received by D. It is clear from the evidence we have seen that he maintains a running ledger (the blue book) in which he records monies advanced for the benefit of and received from his different children in order that he can be fair as between them all. As is plain from the tables set out at paragraph 2 of the present judgment, the husband contends that he owes his father a total sum of approximately £335,000. In addition, his father has apparently incurred legal fees of some £200,000 in respect of the claims made by the wife in these proceedings and we have no doubt that from his perspective, those costs would be treated as an expense for which he should be reimbursed by the husband. Finally we note that in the context of the issues which have been agreed in the present case where equity values have been attributed to the units at The Gloster Hotel and to 10, Kings Park, the husband will be looking to his father to produce approximately £170,000 in relation to these assets to enable the Gloster units to be sold and the charges reimbursed and to retain the value of 10, Kings Park for the benefit of D and his wife. It may be that if one were looking at this question from the perspective of the moral obligations of D towards the husband, consistently with the Court's judgment in relation to Chateau Valeuse, D would be entitled to make a deduction against the sum of £950,000 of some £705,000, although this point is academic for reasons to which we will now turn.
32. The Court has already rejected the wife's claims that D should be ordered to account for the value of the husband's interest in Chateau Valeuse that was transferred to him without consideration in October 2007. It is to be noted that that value therefore does not represent an asset which can be paid into or treated as part of the matrimonial pot. At its highest, it is an asset which could notionally be treated as having been received already by the husband, although we emphasise that we also accept the points which Advocate Benest has made on behalf of the husband. First of all the transfer of value was made in October 2007 some 18 months before the parties separated, and there is no guarantee therefore that even if the value transferred had been paid up in October 2007 it would all still have been available in June 2009 because it is clear from the standard of living which the husband and the wife enjoyed that they spent heavily. Secondly, we accept that as the £950,000 asset does not in fact exist as part of the matrimonial pot, the notional advantage which the Court has found is to be attributed to the husband may well be reflected in a division of assets that leaves the wife with a positive cash sum and the husband with a net amount of debt even if some of the assets remained with him.
33. The second element of financial misconduct really took up most of the hearing during the week beginning 28th October. Essentially, the wife was contending through Advocate Haines that there had been substantial excessive overspending since the date of separation which had never been properly accounted for and amounted to financial misconduct which should be taken into account. In the open position as at 27th October, 2014, the wife contended that there was a surplus of income over reasonable expenditure of £279,252, which should be divided equally, and that the wife should therefore receive £139,626, give or take a few pennies.
34. The thrust of Advocate Haines' submissions in this respect was that the Court was entitled to look at the matter globally. He presented some sheets of income and expenditure. The income and expenditure sheet for the period July 2009 to 30th September, 2014, showed income of £775,408, and the expenditure sheet showed allegedly reasonable outgoings of £449,556, giving a net figure of £325,862. This is not quite the same figure as is reflected in the wife's open position as at 27th October, but the reality as far as the wife is concerned is that it is simply too difficult to identify where money has been spent. All one can be sure about, suggested Advocate Haines, is that money has been wantonly overspent because an analysis of reasonable expenditure would leave a substantial credit balance from the identified income, and that balance could not be found anywhere.
35. Advocate Haines at one point took an alternative approach. Relying upon the husband's affidavit sworn on 22nd October, 2014, he noted that at paragraph 26 the husband agreed that there was a "more accurate spending figure during the 63 months since separation of just short of £1.3 million. Removing from that figure the payments of interest towards his father and monies spent in terms of legal fees, one was still left with a spending figure of something in the region of £1.1 million which was grossly in excess of the income figure of £775,408.
36. Advocate Haines also placed reliance on the fact that in 2007, the husband had increased his bank loan secured against the former matrimonial home by some £280,000, of which £185,000 had been put into the Collingwood development. That input of money was subsequently repaid out of the sales of the Collingwood units, but the extra borrowing of £280,000 was never repaid. Advocate Haines posed the rhetorical question of "where has the £185,000 gone?"
37. In this hearing, the husband has put before us spreadsheets analysing his expenses, whether put through his own personal accounts or credit cards or through accounts maintained by the companies in which he has an interest. Although we were told that the wife had received a draft of these spreadsheets some two weeks before trial, Advocate Haines advised us that he was not able to accept that they were accurate. The husband told us in evidence that he had spent a good deal of time ensuring an accurate analysis of the various payments which had been made, and we understood from Advocate Benest that the spreadsheets had been compiled from the information provided by the husband and lodged at her office. She informed us that Advocate Haines had been given the opportunity of inspecting the base material if he wished although he has not availed himself of that.
38. We have certainly not been able to verify every entry which has been made, but we have performed a number of cross checks in relation to the entries we have seen on the spreadsheets with the entries which appear on either bank account or credit card statements, and this cross check does not lead us to doubt the accuracy of what is contained in the spreadsheets. We have noted that there have been some relatively high withdrawals of cash, although these are not at such levels as raise a suspicion of impropriety, and there are quite a number of debits in the "Other" columns, which could reflect anything. Nonetheless, we found the spreadsheets to be helpful and we have accepted that they are broadly accurate.
39. We have found ourselves able to draw the following conclusions in this respect. First of all we are satisfied that the husband has made full disclosure. In reaching that conclusion we have had regard both to the spreadsheets and to the movement in the various directors loan accounts shown in the company accounts presented to us and to the evidence which we heard from the husband. We do not think the husband has been hiding money by the spending which has taken place since the date of separation. We recognise that a good deal of cash has been withdrawn, and we accept that some of the spending has been extravagant - indeed the husband has admitted it, and in the injunctive proceedings, the Court itself has previously expressed a view on this subject. We agreed with many of the criticisms which Advocate Haines made of the husband's schedule of expenses, and considered that that schedule also showed some extravagant spending. However we do not take the view that this was wanton or reckless spending. In the context of the way in which the parties had previously lived, there was not much change during 2009 and 2010 in the husband's pattern of spending. They had always spent in that way. Furthermore, the husband was accustomed to having considerable borrowings, and to utilising such borrowings for the purposes of day to day living. We broadly accept the view espoused by Advocate Benest that in 2009/2010, the husband could not have expected that the hip operations that he underwent would not be immediately successful, and that he would not be able to work for an extended period of time, and we also accept that he did not anticipate what Advocate Benest described as a litigation juggernaut in respect of ancillary matters. Furthermore, on the basis of their previous experience of income and expenditure, the 2009/2010 income included the profits from Collingwood and the husband might have thought - not unreasonably given previous experience - that he could afford to meet the expenses which he incurred. It was only more latterly that he realised that he would have to spend less, but of course at that stage he was committed to maintaining two different households and to servicing ever increasing amounts of debt without any compensating income.
40. In the circumstances, we reject the wife's contention that there has been financial misconduct in the husband's excessive spending since the date of separation which we ought now to take into account.
41. Present arrangements in relation to the former matrimonial home are set out at paragraph 6 above.
42. We note that given that the business of the husband has been that of property developer, the evidence the Court has heard both on the last occasion and on the present occasion points to the use of the former matrimonial home as security for loans which the husband has taken out in order to finance his different property developments. We will look at the future earnings prospects for the husband later in this judgment, but for the time being it is right to note that maintaining the former matrimonial home as a resource available to him is also likely to assist him in the context of those earnings. By contrast, removing it and therefore removing access to an asset which provides security for bank borrowings has a negative impact.
43. Finally, the interest of the grandparents in the former matrimonial home is not just an equity interest in the sense of reflecting a cash investment. It has been their home for the last 17 years or so. It is contended by the wife that she does not see the sale of the former matrimonial home as integral to her proposals for resolution of the division of the matrimonial pot. For our part, as we have already indicated, we could not see how the initial opening position of the wife was consistent with such a contention. We do not think that even the final open position of the wife is consistent with the retention of the former matrimonial home. As a result, a factor in our assessment of the overall fairness of what we are about to order is that it would be wrong to make an order which in effect forces the grandparents out of occupation of their home for many years, a home in which they have a 50% equitable although no legal interest. We emphasise in this respect that we are not necessarily accepting that an equitable interest of itself has any standing under the law of Jersey which is capable of being enforced in the Courts - but for the purposes of an assessment of a fair outcome in matrimonial proceedings of this kind, we do think it is a factor which we are entitled to take into consideration because the wife does not contend they do not have such an interest.
44. The husband left school at 16 with two O levels to his name. Having had various jobs from time to time, his main employment over the period of the marriage and indeed before it, has been as a property developer, sometimes on his own and sometimes with his father. He has not worked since approximately 2011 as a result of his hip operations and latterly as a result of stress. We have assumed that once the current proceedings have been concluded the stress will be released and that he will return to work. However we think his future earnings will almost certainly be dependent upon property development as in the past, at least if they are to be significant. In that context, he will need to have access to capital. We also note that the climate for property development in Jersey is not now straightforward. This is not to say that opportunities do not arise, but we certainly do not think that there will be any immediate availability of income from property development for the husband. Assuming that after delivery of this judgment he is able to resume work within a reasonably short delay, he will still have to find a property which could be suitable for development; still have to obtain the funds with which to carry out that development; conduct whatever building work needs to be conducted, and subsequently realise its profits. Given the shortage in assets available for security, the extent of the borrowing is likely to be limited, and therefore the extent of the development project likely to be similarly contained. The prospects for the husband are not easy, although of course it may be different if D should subsequently take the view that he is prepared to invest again in his son's future. We do not think that we can rely on that for present purposes for the reasons we will address later in this judgment.
45. The wife has been out of the employment market since 1997 and although she had a reasonably good job in the financial services industry up to that time, the skills which she then had must surely now be in need of some updating. During the last three years she has taken an arts course. She very candidly indicated that she first subscribed for that course upon the basis that it would assist her in building up her confidence, and in addition she had a friend undertaking that course at the same time. We can see that the course may well have had advantages in those respects, but it may be that from a purely commercial prospective, that course was not the obviously sensible course to take for the purposes of maximising the wife's potential in the future employment market. We think that the wife will have to go back to work, and indeed her children are now of an age where that will be less of a problem than hitherto. There is bound to be some delay before she obtains employment which she will find satisfactory, and it may well be that her future earnings will be limited. On the other hand, we are satisfied that she is an intelligent and able woman, and that something will come her way, albeit perhaps not immediately.
46. It is right to record that we are slightly concerned about the future earnings prospects for both the husband and the wife and we have looked at the division of assets against the background that we should secure the best possible basis for both of them in the future.
47. When Advocate Haines was pressed on how the proposals which he had to make for the division of assets would in practice be funded, he indicated that the husband would have to use family money. He accepted that we could not make orders against D, but he thought the Court was entitled to proceed on the basis that D would in fact put in more money to fund his son's obligations. In his evidence before us, D said that he would not be putting any further resources up for the benefit of the husband, his son. He had three sons, and two grandchildren from a deceased daughter, and it was reasonable that he should have regard to all his family obligations, and not simply a family obligation towards the husband. Furthermore, it was apparent from what he told us that although it may be that he is asset rich, there are very significant liabilities charged against those assets. We recognise that there is the potential for financial embarrassment for him, and we see no reason why, in his early 80s, D should face the pressure of further borrowings. We accept his statement that he will not put up further funds to assist the husband in this case at present, other than those which he is committed to put up through the payments for 10, Kings Park and to ensure the charges in relation to the Gloster units are repaid, and furthermore we do not think it would be reasonable to require him to do so, even if we could. On the latter point, we are satisfied that we cannot do so even if we had thought it appropriate and we accept the principles contained in the case put before us by Advocate Franckel namely TL v ML and others [2006] 1 FLR 1263. In that case, Nicholas Mostyn QC, sitting as a Deputy High Court Judge was dealing with a submission by the wife in financial relief proceedings that, in assessing the husband's resources, the Court should include the bounty that the husband was likely to receive from his parents. The wife in that case was contending that the order should be based upon some judicial encouragement to the parents to make funds available to the husband to meet her claim. In his judgment, the Deputy High Court Judge said this:-
"101. The correct view must be this. If the Court is satisfied on the balance of probabilities that an outsider will provide money to meet an award that a party cannot meet from his absolute property, then the Court can, if it is fair to do so, make an award on that footing. But if it is clear that the outsider, being a person who has only historically supplied bounty, will not, reasonably or unreasonably, come to the aid of a payer, then there is precious little the court can do about it.
...
109. I do not believe that it would be proper or principled of me to make an award that ranges outside the assets or income that are H's as of right. So far as H's income is concerned, I take the entitled figure to be £83,000 even though this is dependent on his father's generosity. Nobody has suggested that this is going to be altered.
110. The question is whether it would be proper to appropriate the entirety of his entitled assets and income on the footing that CL and RL will provide his support for income and housing from their resources. I do not believe that this would be proper. This would be improper pressure on CL and RL."
48. It appears to us that the principles adumbrated by Mr Mostyn QC are correct. We do not think that it would be appropriate to put D under any further pressure in this case, even if we had considered that he was acting unreasonably by refusing to put further monies in. However, as we have indicated, we do not think his approach is unreasonable given the obligations which he has to other members of his family, and given his age.
49. On 25th May, 2012, there was registered in the Royal Court a note of hand due by the husband to Maison Blanche Private Investments Limited in the sum of £150,000. The terms and conditions of the loan are set out in an offer letter dated 24th May, 2012. The facility was granted for the term of 24 months and the loan was therefore due for repayment on 24th May, 2014. Interest was payable at the rate of 7.75% per annum, monthly in arrears, but in the event of a failure to make any contractual payments due, the interest rate increases to 15% for as long as the default persists. We were informed that it is understood that the date for repayment has been put back until May 2015, but we note from the statement of account that penalty interest is now being charged. The debit is secured against the former matrimonial home. It appears from the documentation we have seen that the Maison Blanche loan takes effect as a second charge against the property behind the registered loan granted by Barclays Bank Plc in 2007. It is unclear whether Maison Blanche Limited is aware that the Barclays loan remains outstanding, and it is unclear if Barclays is aware that a Maison Blanche loan has been taken out.
50. Acorn Finance is an unsecured creditor of the husband. Previous debts due by the husband to that company in 2010 were discharged then, but he took out a further loan of £30,000 in August 2012, due for repayment the following year. In October 2012, the husband borrowed a further sum of £40,000 from Acorn Finance, this loan being due for repayment by October 2013. In September 2013 the two loans were consolidated with a fresh loan in the sum of £75,999 which was due for repayment on 30th March, 2014. In fact the loan arrangements were rolled over with a further loan, the balance of which on 3rd September, 2014, was in the sum of £77,657.54. That loan is due for repayment on a monthly basis with the final payment being due on 1st April, 2015. It is apparent for that in fact interest only is being paid at the moment. The interest rate is unclear from the documents but it appears to be in the order of 12%.
51. There are therefore two problems with these loans. The first is that the interest rate is expensive, and in effect the husband is being driven deeper and deeper into debt. The second is that by April/May 2015, the capital sum under these loans will be due for repayment, and if not repaid at that time and no other refinancing is available, the risk is that the husband's other loans including the debt to Barclays Bank Plc will be called as well and enforcement procedures taken against the only asset remaining in his ownership, namely the former matrimonial home.
52. In his submissions Advocate Haines did not really contest that these problems existed. His answer was that refinancing was a matter for the Y family, which would simply have to help out. If the family was not prepared to help out, then the equity lay nonetheless in his client having the larger share of the existing assets even if that caused the husband to enter bankruptcy because of the Court's earlier finding in relation to financial misconduct and indeed because, in his submission, the loans taken out with Maison Blanche Limited and Acorn Finance were a direct result of further financial misconduct on the part of the husband by his wanton overspending since the date of separation.
53. We have already found that the somewhat extravagant spending of the husband is not to be held against him as wanton financial misconduct. We think that notional sum of £950,000 will be reflected in the equity of our final order. We do not think it is reasonable to leave the husband with these two loans from Maison Blanche and Acorn Finance with all the potential chaos which will flow if they are not repaid.
54. We note that the parties are in their middle to late 40s, and that although the marriage only took place in 2005 and the parties separated in 2009, they have in fact been living together as man and wife since 1991. In the circumstances, neither party suggested we should not treat this marriage as one which started when the parties originally cohabited, which we do, and it is therefore of a reasonably long duration.
55. As we have indicated, the financial contributions were made by the husband after the first child of the union between them was born. We accept that it was by agreement that the wife ceased work in the employment market and became a full time mother, partner and wife. That contribution is to be measured equally with the contribution of the husband.
56. There is no doubt that the parties lived together with a reasonably extravagant lifestyle. There were at least two holidays each year, one of them involving long-haul flights. Sometimes there were more than two holidays. It was the husband's modus operandi, like that of his father, to take advantage of borrowed money for the purposes of his business. It is fortunate that interest rates have generally been low during the more recent past. Had interest rates been at the level which applied in the 1980s, there is no way that the husband and wife could have lived the lifestyle they did.
57. We think the lifestyle has already become slightly contained, and that it will undoubtedly be liable to further restrictions in the future. Unless there is a marked turn around in the family fortunes, and it is not easy to see where this will come from, the opportunity for extravagant living will not return any time soon. We recognise that the husband, by retaining the former matrimonial home, is likely to be living in much grander accommodation than the wife, but then he will be saddled with the debt.
58. The eldest child leaves School A in July 2015. The youngest child is currently at School C. Amongst all their many disagreements, the husband and the wife are fortunately agreed to a large extent in relation to the arrangements for their sons. There is a shared care arrangement, which seems to be working perfectly well and it is possible that it may be the subject of some variation by agreement in the next few months. The only disagreement which arises concerns the future schooling of the younger child. He has already had to move schools once from School B to School C and the wife is understandably worried that a further change of school would be damaging for him. She accordingly asks us to reserve the sum of £42,000 out of the matrimonial pot to put aside for schooling for the younger son until he has completed his A levels. The husband has the same concerns but is also aware that with their present state of finances, private schooling may be out of reach. He proposes that the younger son remains at School C until the present academic year finishes, in the hope that by then the financial arrangements will have settled down sufficiently that the parents can see if there is a way forward to keeping him in private education. To that, the wife responds that D has previously paid for schooling for his grandchildren, and that this should be available. We cannot make any order against D in that respect, and we do not think that we should assume that he will do so, but we do note that if we made that assumption, there would be no need to put aside any further sum of money out of the matrimonial pot.
59. The present financial arrangements for the husband, in the light of the order we are about to make, are tight in the extreme. We do not think he should be further burdened with an expense which may not be capable of being met. We are satisfied that if it can be met, he and the wife will do so. We propose to endorse the husband's approach to the question of schooling for the younger son and have reserved out of the matrimonial pot an allowance to the wife to pay those fees for the present academic year. There is of course liberty to apply if the parties cannot reach any agreement by mid-summer next year, but we also add that it is in the interests of the children that the father does not face financial ruin. We are not prepared to go further than private schooling for the current academic year at present.
60. In our judgment the husband's most recent open offer is close to if not at the top of what he could reasonably be expected to offer. It has proceeded upon the premise that he will retain the former matrimonial home, and he therefore has that equity value of £332,500. From the remaining divisible pot of £996,117, there is to be deducted the repayment monies for Maison Blanche and Acorn Finance, the husband's living expenses of £32,000 for 12 months and £5,541.08 in respect of the children's school fees until the summer of 2015. The balance of £729,930.72 would be for the wife. Her asset position therefore, after payment of all legal fees and debts will be in the sum of £448,246.72. The husband will have a net debt position of somewhere between £405,000 and £437,000. The contrast between the two is up to £885,246, which we think sufficiently fairly reflects the notional £950,000 finding of financial misconduct.
61. In order to meet the sums of money which will need to be paid to the wife, the husband's assets other than the former matrimonial home will have to be liquidated, and D has agreed to provide cash to cover the shortfall in the proceeds of sale from the Gloster units and the value of 10, Kings Park which has been agreed to form part of the matrimonial pot. Insofar as the realisation of the Gloster units is concerned, the wife proposed through Advocate Haines that the shares in Gloster Hotel Limited should be transferred to her so that she could arrange an orderly sale of the properties. Advocate Haines said the wife was concerned to conduct the sale herself because otherwise the realisation of assets might be indefinitely delayed. We note that she currently has obtained injunctions restraining the sale of the remaining units and of course those proceedings will at some stage need to be withdrawn to permit the sales to proceed.
62. Advocate Benest submitted that if the wife took the Gloster shares she would lose her first time buyer status, which gives relief on stamp duty in respect of the purchase of freehold property up to a value of £450,000. In addition, the transfer of shares in Gloster Hotel Limited from husband to wife would itself attract a stamp duty under the rules relatively recently adopted by the States.
63. We do not think it is appropriate to make an order for the transfer of shares in Gloster Hotel Limited. However we do recognise the concern of the wife that the units should be realised on a timely basis. To the extent that the injunctions prevent the placing of the Gloster units on the market for sale and the putting in place of necessary marketing arrangements, we vary them now. We direct that all arrangements made by the husband for placing these units on the market for sale should be notified to the wife, as should all offers received. The husband should not accept less than the sum of £302,500 in relation to Apartment 14, £290,000 in relation to Apartment 17 and £287,500 in relation to Apartment 18 without the consent in writing of the wife. To the extent that the Gloster units realise more than a total of £862,300, the net surplus shall be shared equally between the husband and the wife. The units are currently tenanted, and the tenants will have to be given notice, presumably as the husband suggested in his evidence such that vacant possession is yielded up in the New Year. The injunctions obtained by the wife remain in place only insofar as they restrain the completion of the sales of Units 14, 17 and 18 Gloster Hotel and shall be released without further order of the Court.
(i) On the undertaking to the wife's lawyers by the lawyers instructed in the sale of the units to apply the proceeds of sale in accordance with paragraph 65 below; and
(ii) With the written consent of the wife.
To this extent the injunctions remain and there is liberty to apply.
64. The sum of money which we are ordering the husband to pay the wife should be paid in the following manner:-
(i) The escrow account of £188,816.96 should be applied as follows. First of all, the husband's loan from Acorn Finance should be repaid. This will account for £77,657.54 plus any further interest accruals since 3rd September, 2014. Secondly, the sum of £5,541.08 shall be paid to the wife on the basis that it will be her responsibility to pay the outstanding school fees for the children for the balance of the current academic year. Thirdly, the sum of £16,000 shall be paid to the husband to cover six months of living expenses. (He has already received from the escrow account part of his expenses to 31st December, 2014, under the Act of Court of 8th August, 2014). Fourthly, the husband shall be entitled to draw from the escrow account up to £5,000 in respect of redecoration costs and carpets for Unit 18 Gloster Court, providing copies to the wife of the receipts showing the application of these funds. Finally, the balance of the escrow account shall be paid to the wife on account of the sums due to be paid to her by the husband. The figures will not be precise because we are not sure we have a completely up to date figure as to the balance on the escrow account or the amount of the Acorn loan, but that should provide something in the order of £84,617 at this stage for the wife. Dealing with the escrow account in this way seems to us to be fair. It removes one of the high interest bearing debts of the husband, which will ease his cash flow position, secures payment of school fees which shall be the wife's responsibility until the end of the present academic year, secures living expenses for the husband for the next six months, and thereby operates as an incentive to him to get on with the realisation of the other assets, and provides a substantial cash sum to the wife. The release of funds in respect of Unit 18 should assist in an early realisation of that property. These arrangements in relation to the escrow account become operative forthwith and the interim orders in relation to the escrow account are varied accordingly. The Court considers that the husband and the wife should have responsibility for their own financial arrangements as soon as possible and is therefore not attracted by the suggestion that the escrow account should remain in place any longer than is necessary.
(ii) The wife is due a balance of approximately £645,313. The husband should make this payment as soon as possible, but in any event no later than by 31st March, 2015. The judgment is expressed that way so as not to leave the husband making a forced sale of the Gloster units, and so as to enable him to maximise the value which might be obtained from those properties, whilst at the same time indicating that there is an end stop date by which payment should be made. Marketing arrangements for the sale of the Gloster units are for the husband, subject to the provision of information he must provide to the wife in accordance with paragraphs 63 and 64(a) above. It is the husband's obligation to make the balancing payment to the wife by 31st March, 2015, at the latest and thus in his interest to ensure that he makes appropriate arrangements for the sale of the Gloster units. He will recognise that it may be necessary at some point to instruct other agents to handle the sales if progress is not made on a timely basis. It would be desirable if he kept the wife informed in writing of any developments in that respect as they occur. If there should be a material change of circumstance, of course either party has liberty to apply in the usual way. Inevitably, given that there is a charge secured against the Gloster units, that will have to be repaid out of the proceeds of sale. We understand that D is making a payment of £50,000 towards repayment of the debt secured against the Gloster units. No order is made against D, but we order the husband to make that payment of £50,000 as soon as possible but in any event no later than 10th February, 2015. We think that provides to D an adequate time to ensure proper arrangements for payment of these monies.
65. Accordingly, the proceeds of sale of the Gloster units will be applied firstly pay the costs of sale, secondly to repay the charge secured against those units, thirdly to pay the balance of monies due to the wife under this judgment and fourthly to pay the remaining sums to the husband. We note the charge should be repaid out of the proceeds of sale of the first unit sold.
66. Until the sale of the Gloster units, some rental will be receivable by Gloster Hotel Limited. The company has to date permitted the husband to withdraw the rental and the tenants' deposits from its account, charging his loan account with the company accordingly. It appears the husband has spent the money so withdrawn and an issue has arisen as to how the deposits will be repaid and the incoming rents allocated.
67. The Court directs that the husband shall be entitled to receive the rents received by Gloster Hotel Limited up until 28th February, 2015. To the extent that any rents are received thereafter they should be divided equally between the husband and the wife, charging the husband's loan account with the company as hitherto. The obligation to repay the tenants' deposits is a company obligation and as between the husband and the wife, we direct that it is the husband's responsibility to ensure the company is put in funds to enable it to do so.
68. As indicated above, the husband's outstanding legal fees are in the sum of £375,704. The wife is represented on legal aid and her outstanding legal fees were originally assessed at a much higher level but have now been capped at £250,000 plus disbursements giving a total of £280,500. The husband and D have already paid some substantial sums of money in legal fees on top of these figures. Furthermore, those figures reflect the position up to a point in September 2014. Further costs have obviously been incurred in particular during the week of 28th - 31st October, 2014.
69. In both their open positions as at 27th October, 2014, the husband and the wife accepted that each would have to pay their own fees out of whatever allowance was made to them from the matrimonial pot. At that stage, the position of D in relation to the costs which he had incurred remained unclear. Towards the conclusion of the hearing, we asked the parties to set down their open position in relation to costs which we now record as follows.
70. The wife asserted that she would be entitled to seek her costs against either the husband or D. She asserted that her costs had been increased substantially through no fault of her own as a result of her husband's change in legal representation. She also asserted that the husband's previous lawyers had failed to transfer their files to Messrs Benest & Syvret on a timely basis, which had caused delay, and that the husband had failed to provide full and timely financial disclosure when requested. She asserted that it was only as late as December 2013 that complete disclosure started to be made. The wife contended that the final hearing in relation to ancillary relief had become more complicated and extended as a result of the husband's financial misconduct both in relation to expenditure and in relation to Chateau Valeuse. She asserted she would be entitled to her costs in relation to the injunctive proceedings, and in particular that she would be entitled to seek costs against both her husband and D in relation to the Chateau Valeuse proceedings, relying upon paragraph 83 of the Court's judgment in that case where the Court said:-
"The First and Fourth Respondents and their advisers have brought this position entirely upon themselves. That is an important finding for the purposes of any hearing as to costs at a later stage."
Notwithstanding these assertions, the wife submitted that there should be no order as to costs because this provided the Court with the best opportunity to divide up the financial assets without subsequent compromise to those assets from a costs order.
71. The husband's position in relation to costs was that he would be justified in seeking an order for costs thrown away in relation to numbers of issues which had arisen during the course of the argument over ancillary matters. We were referred to his first schedule of assets and liabilities filed on 8th April, 2014, and it was asserted on his behalf that the asset position at the time of the hearing in October 2014 was not sufficiently different given the increase in legal fees incurred in dealing with Chateau Valeuse in August 2014.
Nonetheless, the husband did not propose to make any costs application against the wife except that the husband contended that if the Court found substantially for him in the ancillary relief hearing, the wife should be ordered to pay his costs for the week commencing 27th October, 2014.
72. D contended that he would have every right to seek its costs from the wife because he had been entirely successful as against her on the preliminary issue for the purposes of which he had been joined. D submitted that the wife and/or Advocate Haines had consistently failed to identify correctly the issues which arose for consideration and that between them they had pursued a course which had been immensely expensive and stressful, but was ultimately unsuccessful. He however accepted the message that the wife should come out of the proceedings debt free, and in those circumstances would not expect to press for his costs - except that he contended that the wife should have accepted the amended open position at the beginning of the week of 28th October, 2014, and had she done so, he would not have had to face costs himself for that week. Accordingly an order for costs in relation to that week should be borne by the wife.
73. An exercise into where responsibility ought to lie for payment of the costs up to the 28th October, 2014, would be very time consuming and we suspect would end up with a conclusion that both sides had been responsible for incurring some costs unnecessarily. The passage in the judgment in relation to the preliminary argument over Chateau Valeuse, which we have set out above, was included deliberately as an indicator to D that although he had been discharged from the wife's claims in those proceedings, a good deal of the problem had been caused by the structures which he and the husband had put in place in relation to their joint dealings.
74. Had the matter finished with acceptance of the husband's open position, as amended, on 28th October described in paragraph 12 above, we think that each party would have been left to bear their own costs. However, on the morning of 28th October the wife was asked to reconsider the amended offer from the husband before the Court then continued. That must have been the clearest message to the wife that there had to be a really careful analysis of the merits of the claims which she proposed to put before the Court for the rest of that week and as is indicated in this judgment, we have found in particular that the legal point of principle which underpinned the application before us, namely that the financial misconduct spending had to be taken into account before the rest of the matrimonial pot was considered, has not been accepted. In the circumstances, we think that the wife must bear the taxed costs of the husband and D for the days 28th, 29th, 30th and 31st October, 2014. Where that responsibility lies between the wife and her legal advisers is a matter for discussion between them and no doubt will be included in the overall assessment of what would be a proper fee for her to pay. Such costs are not to be enforced by the Respondents against the wife until the final balancing payment is made to her from the sale of the last Gloster unit.
75. That leaves us only to say this about costs generally.
76. The extent of the legal fees incurred or estimated on each side may or may not be due as a matter of contract. We express no view on that. Nor do we express any view on whether the lawyers are likely to volunteer any concessions on the fees which they may or may not be able to justify as due. We do say two things however. The first is that more and more cases come before this Court which demonstrate that it is not entirely uncommon that fees are incurred at these levels and that suggests that there is an urgent need to review the procedures of this Court and before the Family Registrar in the hope of achieving a more cost efficient way of dealing with these issues. The second is that fees presumably have reached these levels by being based on hourly charges for work done by lawyers or their staff. As a consequence of Part 4 of the Supply of Goods and Services (Jersey) Law 2009, it may be necessary to determine what the contract between the lawyer and client is. One assumes that no client would agree to pay a lawyer just to work on an hourly basis. The objet of the contract is tied to the purpose for which the lawyer is engaged. Article 30 of that legislation requires that the client pay a reasonable price and it seems to us that there is at least a case to be made for the proposition that the reasonableness of the price must be related to the value of the service performed. Not that many years ago, there was a scale fee for acting in a purchase or sale of land of about one per cent of the price. For some there was a rough and ready rule that the cost of litigation should bear a reasonable relationship to what was in dispute.
77. The reality is that fees of the extent incurred in this case, if actually charged which we are sure will not be the position, put legal representation in court beyond the reach of the ordinary person and raise serious issues about access to justice. It seems to us to be necessary that the courts and the profession work together to avoid what is becoming a serious problem.
Authorities
Z-v-Y (Matrimonial) [2014] JRC 170.
Matrimonial Causes (Jersey) Law 1949.
Matrimonial Causes Act 1973.
Children Act 1989.
Children (Jersey) Law 2002.
Norris v Norris [2002] EWHC 2996.
Evans v Evans [2013] 2 FLR 999.
Vaughan v Vaughan [2008] 1 FLR 1108.
White v White [2000] 2 FLR 981.
TL v ML and others [2006] 1 FLR 1263.
Supply of Goods and Services (Jersey) Law 2009.