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England and Wales High Court (Family Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> S v S  EWHC 2339 (Fam) (22 September 2006)
Cite as:  1 FLR 2120,  Fam Law 482,  2 FCR 762,  EWHC 2339 (Fam)
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Mr Justice Singer
London, WC2A 2LL
B e f o r e :
Mr Nicholas Cusworth and Mr Tom Carter (instructed by Messrs Dawson Cornwell) for the Respondent Wife
Hearing dates: 25 to 28 April and 4 May, 13 July and 20 September 2006
Crown Copyright ©
Mr Justice Singer:
'that [T Ltd's] high levels of borrowings and goodwill render the valuation exercise more than usually open to debate. Accordingly, whilst there are a number of aspects on which we have been unable to narrow out differences, in the circumstances of this case (and in particular having regard to paragraph one above) we have formed the view that a detailed analysis would be unlikely to assist the court and would thus be inconsistent with the principles of proportionality. We therefore confine ourselves to a broad outline of the areas in which we disagree.'
50. Meanwhile in 2002 H was quoted in the specialist press as saying that the long-term strategy was to float T Ltd independently 'which might be next year, the year after, or even the year after that'. By 2003 the market sector was in downturn, and by the end of the year a flotation was said to be no longer on the cards.
 Having read the skeleton arguments and the judgment we were at once struck by the security of the result that the wife had achieved in contrast to the risks confronting the husband's economy. The family's standard of living has throughout been dependent upon the fortunes of the husband's business. Had the marriage survived the family would undoubtedly have shared adversity as it had shared prosperity. The years of marriage comprise the years of the husband's commercial vitality between his late 30s and his mid-50s. The harvest of those years is represented by the concrete assets totalling £1,823,000. But the future years look hazardous. It seems unlikely that the husband will restore the pattern of prosperity and savings from income in the years ahead. After all, if it is reasonable for him also to seek to retire at 60, he has only 5 years in which to recover the profitability without which Soundtracs will not be easily realisable for significant value. In principle it seems to us that the separation of the family does not terminate the sharing of the results of the company's performance. That is easily achieved in any case in which the wife's dependency is met by continuing periodical payments. It is less easy to achieve in a clean-break case. In that situation, however, sharing is achieved by a fair division of both the copper-bottomed assets and the illiquid and risk-laden assets. After all, the wife was already a shareholder in Soundtracs and a substantial increase in her shareholding would at least have enabled her to participate in future prosperity by dividend receipts or capital receipts on sale or a cessation of trade. An increase in her share of the illiquid and risk-laden asset would have allowed a reduction in the Duxbury fund, if not in the housing fund. If profitability were not recovered then both parties would share the experience of a marked reduction in standards of living.
"I am quite sure that even now in most cases that [the date when the hearing takes place] is the correct date when valuation should be applied. But I think the court must have an eye to the valuation at the date of separation where there has been a
very significant change accounted for by more than just inflation or deflation; natural inflationary pressures on particular assets, for instance, the value of a house moving up or down in the housing market.
In this case the increase in value is attributable to extra investment of time, effort and money by the husband since separation and I do take into account the exceptionally steep increase in the turnover figures since the date of the separation. However, having done so it must be put in the context of the wife's continuing contribution too which similarly did not cease at the date of separation. She too has continued to play the valuable part that she had done throughout the marriage, in looking after the home and the children.
[Counsel for the Wife] asked the hypothetical question: what would the position be if the value had similarly declined significantly since the date of the separation? In my judgment that too, in an appropriate case, could be a factor to be taken into account, particularly perhaps where the decline was as a result of action or inaction by the
paying party. But that is not the situation in this case and I am not making a
statement of general application or anything of that kind.
 That this was the only viable route became plain during the evidence. Both
W's accountant and H agreed that it was impossible to attribute anything other than a wild guess to the value of H's options. H would extend this uncertainty to the rest of his deferred assets. It therefore follows that a Wells sharing is the only way of
achieving fairness. Indeed, it would seem to me that this should become standard
fare where a case has a significant element of deferred or risk-laden assets. For why should one party receive most of the plums leaving the other with most of the duff?
 In this case, the post-separation accrual does not arise from the trading of capital which existed at separation, rather it has accrued from the husband's own
hard work post-separation, albeit that part of his bonus is referable to a scheme that was 'invented' during the marriage.
 Moreover, the bonus is also due to the husband's personal work in fulfilling
ABC Co's current policy of developing its overall business. This takes up about 50% of his time albeit that it is not currently profitable. Such undefined part of his bonus as is referable to this aspect cannot be seen as relating to his earlier 'invention'.
 These factors are relevant and I take them fully into account.
 The assets that have been built up since the parties have separated fall to be considered in this case because the litigation has not been unduly delayed and the parties have been financially linked throughout. In addition, the husband failed to make adequate interim provision.
 The husband may receive substantial bonuses in the future but to do so he will have to work a very punishing schedule. I do not consider his future earnings to be a marital asset which falls for division in this case. There may be cases when needs will dictate that future income must be shared because the parties' capital is insufficient. This wife's claim for 'inchoate lump sums' is effectively a claim for maintenance by another name. It is not justified.
25.... 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 ~ 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 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. [My emphasis]
8. It is clear that a number of issues arising from the opinions of the Law Lords in Miller and McFarlane  UKHL 24,  2 WLR 1283 ("Miller") will have to be worked out in future cases. For example, the question of whether compensation will be widely awarded (and if so for what compensable losses) or whether it will be confined to the exceptional case (as a number of comments appear to indicate) will, no doubt, be an early candidate for judicial interpretation. Equally demanding of early guidance will be the question of the application of the yardstick of equality to what Baroness Hale of Richmond and Lord Mance have characterised as "nonbusiness partnership, non-family assets", and whether or not departure therefrom in relation to such assets is confined to short marriage cases,
9. In this case there has been a very substantial passage of time between the separation of the parties and the hearing of H's claim for ancillary relief. Quite apart from the independent question of whether delay per se is a relevant factor in the exercise of the statutory discretion there is the critical question of whether money or property that has been acquired after separation forms part of the matrimonial property (or marital acquest).
10. In all cases now a primary function of the court is to identify the matrimonial and non-matrimonial property. In relation to property owned before the marriage, or acquired during the marriage by inheritance or gift, there is little difficulty in characterising such property as non-matrimonial (provided it is not the former matrimonial home). The non-matrimonial property represents an unmatched contribution made by the party who brings it to the marriage justifying, particularly where the marriage is short, a denial of an entitlement to share equally in it by the other party: see White v White  1 AC 596, GWv RW  2 FLR 108, P v P (Inherited Property)  1 FLR 576, Miller (Paragraphs 2 1-25, 148).
11. But what of money or property acquired by one party after the separation? This gives rise to a number of conceptual problems which I have to say have not been altogether resolved by the opinions in Miller. Before I turn to those opinions I propose to examine the law, such as it was, before the House of Lords gave its views.
12. A long time ago in Lombardi  3 All ER 325 the Court of Appeal held that it was legitimate for the court to reflect in its award the fact that assets had been accumulated since separation by one party alone. Cairns LJ stated:
Another way in which the judgment is criticised is that it is said that the judge was wrong to take into account that the husband's fortune had accrued to him since the parting. Again, I think that that is a proper circumstance to pay regard to. It was never suggested in this case, as it was in Jones v Jones, that the position ciystallised at the time of the parting and that thereafter any change in the husband's means was irrelevant. The increase in the husband's means is plainly relevant; but it is also, in my view, relevant to remember that it is something which has happened since the parting. And what is of much more importance here is that it is not merely something which has happened since the parting: it is something which has been brought about by the husband in co-operation and partnership with Miss Capozzi, who has indeed played a direct part in the business in which he has been engaged and which in the past has been the main source of his income which has provided the capital which has enabled substantial assets to accrue to the husband and Miss Capozzi in the shape of premises which they are now able to let at a quite comfortable rent.
13. Thus it has always been the case that, where a party has by virtue of his own industry created further assets after separation, such sole unmatched contribution should be recognised and reflected by the court in its award. On the other hand, if a matrimonial asset has simply increased in value during the period of separation as a result of passive inflationary economic growth (such as the increase in the value of a house) then it would seem obvious that such growth is an accrual to the original matrimonial property.
But what of the position where a party has taken matrimonial property that existed at separation and traded with it and achieved a significant profit? Two points of view arise here. On the one hand it can legitimately be argued that the party in question has traded with the other party's undivided share and so should share with that party the profit that has been generated. On the other hand it can equally convincingly be said that the second party has not contributed to the industry or endeavour that gave rise to the profit or growth and so it is unfair that the second party should share to the same extent in that profit as the first who made all the effort. Similar controversy arises in relation to bonuses earned in the period of separation. The earner of such bonuses can validly argue that he did his work outside married life and without the support of his spouse. But the other party can equally validly argue that the ability to earn was generated during the marriage; that she was maintaining the family infrastructure pending dissolution of the marital partnership and division of the assets; and that during the period of separation the parties were financially linked.
174 Sixthly, if account is taken of the increase in the value of the parties' assets during the marriage (the matrimonial acquest), a question may arise about the date up to which one should measure it. Should this be up to date when the parties ceased effectively to live as married partners (here April 2003), as Mr Mostyn considered in his judicial capacity n GW v. RW (Financial Provision.' Departure from Equality) at paragraph 34? Or should it be up to a later date such as the date of trial, or even, in a case where an appellate court thinks it right to re-exercise the discretion, up to the date of the appellate decision? Reference was made by Mr Mostyn to my remarks in Cowan v. Cowan  Fam 97, paragraphs 130-135. The matters to which the court must have regard under section 25 include several which exist or appear likely as at the date the court has regard to them (c.f. section 25(2)(a), (b), (f) and (h)). Others of the listed matters require the court to look back at the past (e.g. section 25(2)(c), (f) and (g)). To the extent that the focus is on the matrimonial acquest, the period during which the parties were making their different mutual contributions to the marriage has obvious relevance. The present may be viewed as a case (paralleling the then unreported decision of Coleridge J in N v. N (Financial Provision.' Sale of Company)  2 FLR 69 to which I referred in Cowan v. Cowan) where the increase in value of the New Star shares between separation in April 2003 and trial in October 2004 or judgment in April 2005 was contributed to by the husband's further investment of time and effort, independently on its face of any contribution by the wife. Further, Mrs Miller had here no right to, and could not have been given, any part of Mr Miller's New Star shareholding in relation to which Mr Miller carried the risk. Mrs Miller has at all times been living in the house, which has now been formally transferred to her. Her only further claim was to a sum of money, assessed by the judge at £2.7 million (which Mr Miller paid in two instalments in May and June 2005). Mr Miller cannot easily be said in this case to have been holding on to any asset which should have been Mrs Miller's, or to owe anything other than money. Assuming that the focus is on assets acquired during the marriage, rather than on the husband's overall means, it seems to me therefore natural in this case to look at the period until separation. [My emphasis]
24.1 The statute requires all the assets to be valued at the date of trial.
24.2 For the purposes of establishing the matrimonial property in respect of which the yardstick of equality will "forcefully" apply the value of assets brought into the marriage by gift and inheritance (other than the former matrimonial home), together with passive economic growth on those assets, should be excluded as non-matrimonial property.
24.3 Assets acquired or created by one party after (or during a period of) separation may qualify as non-matrimonial property if it can be said that the property in question was acquired or created by a party by virtue of his personal industry and not by use (other than incidental use) of an asset which has been created during the marriage and in respect of which the other party can validly assert an unascertained share. Obviously, passive economic growth on matrimonial property that arises after separation will not qualify as non-matrimonial property.
24.4 If the post-separation asset is a bonus or other earned income then it is obvious that if the payment relates to a period when the parties were cohabiting then the earner cannot claim it to be non-matrimonial. Even if the payment relates to a period inunediately following separation I would myself say that it is too close to the marriage to justify categorisation as non-matrimonial. Moreover, I entirely agree with Coleridge J when he points out that during the period of separation the domestic party carries on making her non-financial contribution but cannot attribute a value thereto which justifies adjustment in her favour. Although there is an element of arbitrariness here I myself would not allow a post-separation bonus to be classed as non-matrimonial unless it related to a period which commenced at least 12 months after the separation.
24.5 By this process the court should, without great difficulty, be able to separate the matrimonial and non-matrimonial property. The matrimonial property will in all likelihood be divided equally although there may be deviation from equal division (a) if the marriage is short and (b) part of the matrimonial property is "non-business partnership, non-family assets" (or if the matrimonial property is represented by
autonomous funds accumulated by dual earners).
24.6 The non-matrimonial property is not quarantined and excluded from the
court's dispositive powers. It represents an unmatched contribution by the party who brings it to the marriage. The court will decide whether it should be shared and if so in what proportions. In so deciding it will have regard to the reality that the longer the marriage the more likely non-matrimonial property will become merged or entangled with matrimonial property. By contrast, in a short marriage case non-matrimonial assets are not likely to be shared unless needs require this,
24.7 In deciding whether a non-matrimonial post-separation accrual should be shared and, if so in what proportions, the court will consider, among other things, whether the applicant has proceeded diligently with her claim; whether the party who has the benefit of the accrual has treated the other party fairly during the period of separation; and whether the money-making party has the prospect of making further gains or earnings after the division of the assets and, if so, whether the other party will be sharing in such future income or gains and if so in what proportions, for what period, and by what means.
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.