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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Goddard-Watts v Goddard-Watts [2023] EWCA Civ 115 (15 February 2023) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2023/115.html Cite as: [2023] WLR(D) 80, [2023] 2 FLR 735, [2023] EWCA Civ 115, [2023] 4 WLR 20 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
FAMILY DIVISION (SIR JONATHAN COHEN)
FD09D05089
Strand, London, WC2A 2LL |
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B e f o r e :
LADY JUSTICE NICOLA DAVIES
and
LADY JUSTICE CARR
____________________
GODDARD-WATTS |
Appellant |
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- and - |
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GODDARD-WATTS |
Respondent |
____________________
Timothy Bishop KC and Richard Sear (instructed by Pinsent Masons Solicitors) for the Respondent
Hearing date: Thursday 20 October 2022
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Crown Copyright ©
Macur LJ:
Introduction
Background
The financial remedy proceedings
"62. Mr Greene noted in his report that this was a very high offer as it represented more than 26 times the company's EBITDA for the year ended 31st July 2015. The offer was subject to the achievement of a number of key assumptions. One of these was that the forecast EBITDA and maintainable profit adjustments for 2016 were "realistic and achievable". The updated 2016 EBITDA forecast, based on actual figures for 7 months, is approximately half the forecast figure in the IM.
63. The husband commented in his oral evidence that the offer was so heavily caveated that it was never a realistic offer in the sense of being achievable.
64. I agree with Mr Greene that this offer is of no relevance to the exercise he undertook because it does not reflect the likely value of the business.
…
69. During his oral evidence, the husband was asked about the contents of the IM where it was stated that he "has no day-today involvement" and that he "does not have an operational role" in the business. Mr Greene also refers in his report to the husband having no "operational role" in the business since he moved to Switzerland in 2010. The husband dealt with this at some length and I am persuaded that he does, indeed, remain the "driving force"' behind the business and remains actively engaged in it."
"…agreed the inevitable in his closing submissions, namely that the shares contributed by the husband's parents are not a marital asset…and in my view, there is no justification in this case for any part of the value derived from them being shared between the parties... There are no circumstances present in this case which diminish the importance of the source of the shares. The fact that the husband has benefited from them, largely since the parties' separated, does not justify them being shared between the parties."
"96. Further, if I was to undertake the discretionary exercise by reference to the current value of the resources, I would have to make considerable allowance for the fact that the current values of [CBA] reflect the husband's work over the course of the last 6 years. Indeed, it would be easy to conclude that the difference between the values given for 2010 and the current values are not the product of marital endeavour. The husband has not been trading (per Cowan) or gambling (per H v H) with the wife's share because the resources as disclosed, including the husband's interests in these companies, were shared in 2010.
97. For the avoidance of doubt, I also do not accept that the fact that part of the Trusts' resources have been lent to [CBA] and/or might otherwise have been said indirectly to have helped this business, creates any entitlement for the wife to a share of the business post 2010. This is too remote. As referred to above, the current value of the business is the product of post-separation endeavour, as between the husband and the wife, and gives her no entitlement to a further share in addition to that which she received in 2010."
"51. …The truth can only be that he deliberately withheld disclosure, not only from the wife and the court, but even from his own legal team. He withheld it because he knew perfectly well that it would open up again the whole issue of a possible sale to FED and the achievable price for his shares, if only from a special purchaser such as FED. He withheld the information and hoped that he would get away with it. By September 2017, when he was forced to reveal the state of negotiations to the wife, as trustee, he probably thought that he had got away with it.
52. I regret to have to say that if an intelligent adult of full capacity, which the husband is, deliberately fails to disclose, and withholds, information and documents which he knows he should disclose, his decision not to do so is dishonest and, for the purposes of the law in relation to non-disclosure, amounts to fraud."
"78. My starting point is that I am adjudicating upon W's claim de novo albeit against the background of the orders made in the past which have provided her with funds. I am acutely aware of the criticisms made by the courts in the past of H's disclosure which has deprived W of the opportunity of being able to consider the resolution of her claims with full knowledge of what the asset base was.
79. I bear these points strongly in mind, but I am convinced that the approach I should adopt is the Kingdon approach. I reach that conclusion for the following reasons:
i) The whole of this case before me has been about the value and realisation of H's shares in CBA. It has been a single issue case.
ii) This was inevitable. W received her fair share of the non-disclosed trusts in 2016 and her share of the other assets in 2010.
iii) Moylan J adopted the Kingdon approach in 2016 and the fact that one further aspect of non-disclosure has come to light does not lead to a conclusion that I should adopt a different course. There is a merit in consistency, but it is not just consistency that drives me to this approach.
iv) There has never been any attack in this hearing against H's disclosure of the value of CBA in 2010. Indeed, Moylan J had the benefit of a retrospective valuation prepared by Mr Greene which showed that H's disclosed value of the company was in the right region. Ms Stone says that the value in 2010 is of no or little relevance in the light of the non-disclosure generally, and in particular of H's undisclosed trust interests. I do not agree. It was part of the basis of the parties' agreement.
v) It follows inevitably, as Moylan J set out, that W received her share of the company upon separation. Since then, she has made no contribution to the marital partnership and the parties have lived in different countries, for most of the time with different partners. W has made, of course, a significant contribution to the children of the family, to which I shall return.
vi) To look at the case the other way round, if CBA had gone bust, as it was very close to doing at times, particularly in late 2019-2020, H would not have been able to resuscitate a claim against W. He took the shares in the company as part of the settlement and whether the company succeeded or failed would have made no difference to the outcome of the case. This illustrates that the sharing of the company took place in 2010 and there is no cause to revisit. H was not trading with W's funds and she was not bearing any of the risk.
vii) It is well established law that changes in the value of an asset after an order effecting sharing has been made would not justify reopening the capital claims. Each party bears the consequences of the change in the value of their portfolios. See for example Cornick [1994] 2 FLR 530 and Myerson (No. 2) [2009] 2 FLR 147."
"82. All cases are fact-specific. In this case the parties had divorced in 2010 and in 2010 and again in 2016 separated their affairs in a proper and fair way. It would not in general terms be appropriate or fair for W to share in the current renaissance of the business after its near recent collapse.
83. There is however one aspect which I can properly consider. It cannot have been in the contemplation of either party that the whole of the burden of the children's care and upbringing should have fallen on W from 2010. As a result of the disagreement between the parents all the emotional and physical parenting has fallen on W. I take that into account in my approach to needs.
…
88. I have to consider all the s.25 factors and that is the approach that I have adopted. These include needs assessed as at the time of trial. In doing that assessment I shall take into account W's contributions over the years including those over and above what was anticipated in 2010."
The Kingdon approach
"…I can well imagine cases of non-disclosure – for example where an applicant has secured a needs-based award without disclosure of a substantial asset or of an engagement to marry- in which the proper course is indeed to conduct the exercise under s 25 all over again on updated material. The same might apply to non-disclosure by a respondent which was so far reaching as to have led the court to survey the entire financial landscape on a false basis. What I cannot accept is that the exercise will always have to be conducted again. The exercise certainly has had to be conducted. But it has been conducted; and the nature of the defect generated by the non-disclosure may-or may not- require the whole order to be set aside and the whole exercise to be conducted again."
The issues in the appeal
Discussion.
Does Kingdon survive Takhar?
"The cause of action to set aside a judgment in earlier proceedings for fraud is independent of the cause of action asserted in the earlier proceedings. It relates to the conduct of the earlier proceedings, and not to the underlying dispute. There can therefore be no question of cause of action estoppel. Nor can there be any question of issue estoppel, because the basis of the action is that the decision of the issue in the earlier proceedings is vitiated by the fraud and cannot bind the parties: R v Humphrys [1977] AC 1, 21 (Viscount Dilhorne). If the claimant establishes his right to have the earlier judgment set aside, it will be of no further legal relevance qua judgment. It follows that res judicata cannot therefore arise in either of its classic forms."
Was it appropriate for the Judge to adopt a Kingdon approach in this case?
Was this a 'single issue' case? Did the wife receive her fair share of "the other assets in 2010?"
"Moylan J himself recognised that (as, indeed, section 25 of the 1973 Act requires) he must take into account all the circumstances of the case, including the current resources available to the parties. There is a huge difference between a case in which the total assets of the husband are of the order of £30 million, on the basis of the Greene valuation of his shares in CBA, or almost £100 million, on the basis of the price proposed in the email of 22 November 2016."
Did the judge conduct his own assessment of fair division independent of Moylan J's approach?
Conclusions
Nicola Davies LJ:
Carr LJ:
I also agree. Much emphasis was placed for the wife on judicial statements at the highest level to the effect that fraud unravels all: "A judgment that is tainted and affected by fraudulent conduct is tainted throughout…" (per Lord Brunswick in Hip Foong Hong v H Neroira & Co [1918] AC 888 at 894, cited with approval recently by Lord Kerr in Takhar v Gracefield Developments Ltd [2019] UKSC 13; [2020] AC 450 at [45]). However, this broad mantra needs to be treated with caution in the present context. As the judgments in Kingdon and Sharland themselves demonstrate, fraud does not necessarily unravel all. Nevertheless, as Macur LJ clearly reasons, on the particular facts of this case the husband's fraudulent conduct, with its impact on the procedural timeline, was such as to entitle the wife to a wholesale re-assessment of her claim for financial relief, in particular by reference to what she contends to be the correct approach to the valuation of CBA.