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You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> JB v MB [2015] EWHC 1846 (Fam) (10 June 2015) URL: https://www.bailii.org/ew/cases/EWHC/Fam/2015/1846.html Cite as: [2015] EWHC 1846 (Fam) |
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FAMILY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
(SITTING AS A DEPUTY HIGH COURT JUDGE)
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JB |
Applicant |
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- and - |
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MB |
Respondent |
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Hearing dates: 12th – 15th May, 10th June 2015
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Crown Copyright ©
This judgment was handed down in private on 10 JUNE 2015. It consists of 54 paragraphs and has been signed and dated by the judge.
The judge hereby gives leave for it to be reported.
Mr CUSWORTH QC:
7. The first point to be derived is that the treatment of pre-marital property is highly fact specific and very discretionary…
8. That said, the discretion must be exercised consistently and predictably. As Deane J stated in the High Court of Australia in Mallett v Mallet :
'It is plainly important that… there be general consistency from one case to another... Otherwise, the law would, in truth, be but the "lawless science" of "a codeless myriad of precedent" and "a wilderness of single instances" of which Lord Tennyson wrote in his poem "Aylmers Field"'
The late Lord Bingham of Cornhill put it this way in his book "The Rule of Law" …:
'The job of the judges is to apply the law, not to indulge their personal preferences. There are areas in which they are required to exercise a discretion, but such discretions are much more closely constrained than is always acknowledged.'
"We believe the formulation of policy in this and indeed other areas of the law involves the resolution of two objectives, each intrinsically desirable, but perhaps mutually inconsistent. The first is that the law should be certain and predictable in its results. This objective is not only consistent with the popular concept of justice; it also means that it is easier for lawyers to advise their clients on the likely outcome of a dispute, so promoting the conclusion of reasonable settlements and minimising recourse to contested trials. The second objective is that the law should achieve justice and fairness between the parties; and it is said that this necessarily involves considerable flexibility of approach by reason of the widely varying facts of each case."
'To what property does the sharing principle apply? The answer might well have been that it applies only to matrimonial property, namely the property of the parties generated during the marriage otherwise than by external donation; and the consequence would have been that non-matrimonial property would have fallen for redistribution by reference only to one of the two other principles of need and compensation... Such an answer might better have reflected the origins of the principle in the parties' contributions to the welfare of the family; and it would have been more consonant with the references of Baroness Hale of Richmond in Miller to 'sharing … the fruits of the matrimonial partnership' and to 'the approach of roughly equal sharing of partnership assets'. We consider, however, the answer to be that, subject to the exceptions identified in Miller... the principle applies to all the parties' property but, to the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality. It is clear that both in White… and in Miller… Lord Nicholls of Birkenhead approached the matter in that way; and there was no express suggestion in Miller, even on the part of Baroness Hale of Richmond, that in White the House had set too widely the general application of what was then a yardstick.'
'It is therefore no accident that this court's reference [in Charman], at [90], to the unlikelihood of departure from equality further than to 66.6% - 33.3% was of "division of matrimonial property". By contrast, although non-matrimonial property also falls within the sharing principle, equal division is not the ordinary consequence of its application. The consequences of the application to non-matrimonial property of the two other principles of need and of compensation are likely to be very different; but the ordinary consequence of the application to it of the sharing principle is extensive departure from equal division, often (so it would appear) to 100% - 0%.'
'Accordingly, where it becomes necessary to distinguish matrimonial property from non-matrimonial property the court may do so with the degree of particularity or generality appropriate in the case. The judge will then give to the contribution made by one party's non-matrimonial property the weight he considers just. He will do so with such generality or particularity as he considers appropriate in the circumstances of the case.'
It is also the case that the propriety of the course to be adopted in each case must be considered against the backdrop of the arguments made by the competing factions for or against greater precision in the quantification of parties' respective entitlements.
24.1. The statute requires all the assets to be valued at the date of trial.
...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 immediately 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...
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."
'36. Perhaps unsurprisingly, I remain satisfied that my summary of the relevant principles is correct, although my references to sharing non-matrimonial property in paras 24.6 and 24.7 must now be read in the light of K v L and S v AG. Only very exceptionally will such sharing be found to be fair.
37. Recently in her monumental judgment of Cooper-Hohn v Hohn [2014] EWHC 4122 (Fam) Roberts J meticulously analysed the entire jurisprudence between paras 147 and 197. At para 183 she stated:
"Thus what I have to decide is whether and to what extent the new work and new investments created by the husband in the period after the parties separated falls to be considered in the character of matrimonial property in which the wife should be entitled to a share or whether some or all of it falls at a point too distant from the essential character of the matrimonial partnership to qualify."
And her next section was pithily headed "Continuum versus new ventures" which to my mind rightly captures the essence of the debate...
39. Roberts J in para 195 reached this conclusion:
"Whilst I shall come on to the precise figures once I have considered the issue of overall computation and special contribution, it is not my intention that this wife should receive no share of the assets which fall outside the marital acquest in this case. She will receive a share and that share will form part and parcel of the overall award which I will make on the basis of fairness to both parties. There is no question of her entitlement to any element of post-separation accrual being triggered by a 'needs' argument but I take the view that, notwithstanding the exponential increase in the growth of the Fund post-separation, its genesis as a matrimonial asset is a factor of considerable significance. That factor must, in my view, find its reflection in the overall quantum of the financial award she will receive at the conclusion of these proceedings. It goes to the heart of what I consider to be fair in the overall context of the case."
40. When I first read this I wondered if I had sighted awhite leopard, as Roberts J appears to be suggesting that the wife would receive a share (not on a needs basis) in property that was "outside the marital acquest" and which was therefore non-matrimonial property. But on reflection I think I was wrong. I think the proper analysis is that Roberts J was saying that the fund retained its matrimonial character but the wife would share unequally in the increase in the value achieved by the husband alone in the period of separation.
41. This approach is to my mind undoubtedly correct for those assets which were in place at the point of separation. They remain matrimonial property but the increase in value achieved in the period of separation may be unequally divided. I emphasise may. Obviously passive growth will not be shared other than equally, and there will be cases where on the facts even active growth will be equally shared...
42. On the other hand there will be cases where the post-separation accrual relates to a truly new venture which has no connection to the marital partnership or to the assets of the partnership. In such a case the post-separation accrual should be designated as non-matrimonial property and save in a very rare case should not be shared.'
'45. It will be apparent from what I have written above that I do not agree with this approach as it risks the criticisms of being a lawless science and an unreasoned expression of instinct and intuition. To my mind the preferable approach where there is a significant amount of active post-separation growth of a matrimonial asset is first to determine the share of the pool in the absence of that growth (usually an equal share) and then to determine the share of the growth (usually an unequal share).
46. It is of course correct that in Jones that Wilson LJ stated at paras 34, 35 and 52 that the fairness result achieved by this approach should be checked by the overall percentage technique, although it is hard to imagine a case where the datum of the overall percentage of a mixture of matrimonial and non-matrimonial property could alter the primary result (although an alternative view of the decision of Roberts J in Cooper-Hohn v Hohn is that she did just that).'
'Application of the sharing principle is inherently arbitrary; such is, I suggest, a fact which we should accept and by which we should cease to be disconcerted.'
a. At the outset of the case W was seeking, in addition to her retaining the property in which she currently lives with the children, and other non-contentious provision for the children:
i. A series of lump sums totalling £2.35m, payable in 4 tranches between June 2015 and December 2017, to be raised by H through dividend payments to him out of Z Ltd.
ii. £60,000pa periodical payments for her until payment in full of those sums, plus 100% of the parties' respective pension provision (£461,091).
iii. This equated to about 33% (£3.16m) of the total assets base of £9.443m
By her closing position, and in the light of the evidence given, this had been modified to:
i. A lump sum of £300,000, with further sums equivalent to the value of 25% of the value of H's shareholding in Z Ltd to be paid upon the company's eventual sale.
ii. Periodical payments and pension provision as above
iii. This equated to £3.2m, or 34% of the total, albeit that the bulk of this will now be deferred until sale of the company.
b. By contrast, H's position at the outset of the case was that:
i. W should have no interest at all in H's Z Ltd shareholding, and that her entitlement had already been met in full by the discharge by H of the mortgage on the property at 21 C Road (£402,000), in September 2014, leaving her with an asset worth £509,250 net.
ii. Even if the value of the shares did not represent post-separation accrual as he was contending, they should any event be disregarded as a species of special contribution by him
iii. There should be no pension adjustment, and spousal maintenance for the duration of the children's minority paid at the rate of £18,000pa.
iv. W's (accurate) calculation was that this equated to 6% of the total available asset base.
By the conclusion of the case, his position had modified as follows:
i. W should receive on eventual sale of the company 10% of the net value of H's shareholding, in addition to 21 C Road.
ii. Special contribution was not (or not forcefully) pursued.
iii. The position in relation to pension and periodical payments was unchanged.
iv. The overall value of this position was that W would receive 14.43% of the total asset base, using W's figures as a base for computation.
'41. …for those assets which were in place at the point of separation. They remain matrimonial property but the increase in value achieved in the period of separation may be unequally divided. I emphasise may. Obviously passive growth will not be shared other than equally, and there will be cases where on the facts even active growth will be equally shared...
42. On the other hand there will be cases where the post-separation accrual relates to a truly new venture which has no connection to the marital partnership or to the assets of the partnership. In such a case the post-separation accrual should be designated as non-matrimonial property and save in a very rare case should not be shared.'
a. Whilst the Rating Solution was a post separation creation of H's in 2010, which has driven the later progress of the company, H's offer to W made in 2011 nevertheless comprised about 27% of the value of his shareholding.
b. Subsequent re-investment of the profits back into the company must be taken to have included W's share in those profits, as well as those of H and his colleagues.
c. I find that there is a greater degree of 'continuum' that H has admitted, both in his own attitude as displayed in 2011, but also in the company being throughout the vehicle by which his ideas are taken on and developed for the market place – as much earlier happened in 1995.
d. Whilst I accept the accuracy of Mr Dodge's valuation, I am not utilising his 2007 figure, which may have been appropriate had one of the parties taken financial proceedings at that time. This is a case where H has taken W's undivided share for onward investment, and she is therefore entitled to some of the resulting uplift, albeit greatly discounted to reflect H's subsequent efforts.
e. Whilst there has been a significant time delay in this case, some 7 years, I find that this was one which was orchestrated and sanctioned by H, to enable him to trade with the full value of the shareholding, which he knew to be matrimonial and hence ultimately to be shared in some degree.
f. H's later decision to issue Form A, at a time when the company's strategy for inward investment to maximise value had negatively affected liquidity, may well have been designed to assist him in resolving this application without significant immediate expense. Whilst H may have thought that questions of liquidity may be created by the timing of this hearing, that factor should not apply to W's prejudice in relation to entitlement.
g. Notwithstanding all of the above, it is clear that significant value in the shareholding is attributable to H's post-separation endeavour, and that the award to W must in fairness reflect that. It is clear that this is not a situation where there has been only or even largely passive growth, which should be shared equally, but rather growth as the result of active and unmatched economic endeavour over a significant period of years.
Note 1 After the initial completion of this judgment, Mr Lyon produced some amended asset values for H which, save for a credit card balance, I have allowed, and adjusted the resultant figures accordingly. [Back]