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||Neutral Citation Number:  EWHC 502 (Fam)
||Case No: FD13D01416
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Strand, London, WC2A 2LL
||28 February 2014
B e f o r e :
MR JUSTICE HOLMAN
(Sitting throughout in public)
Charles Howard QC (instructed by Hughes Fowler Carruthers Ltd) for the wife
Lewis Marks QC and Miss Marina Faggionato (instructed by Charles Russell LLP) for the husband
Hearing dates: 10, 11, 12, 13, 14, 18, 19 February 2014
HTML VERSION OF JUDGMENT
Crown Copyright ©
See also:  EWHC 536 (Fam) and  EWHC 1035 (Fam)
Mr Justice Holman:
The core issue
- This is a claim by a husband for financial provision upon divorce. Shortly before the marriage, the parties entered into a "Pre-marital agreement". The husband agreed that he would not make any claim either during or after the marriage in relation to the wife's separate property or to gifts made or to be made to her by her "wealthy family". That agreement was effectively repeated and reinforced by two "Supplemental agreements" made during the course of the marriage on the occasions of the wife's parents or father making substantial further gifts to her. If the pre-marital agreement had not been made, the marriage would not have taken place. If the supplemental agreements had not been made, the parents/father would not have made the further gifts to the wife. There is no doubt that by making his present claim the husband is acting in breach of what he had earlier agreed to, upon which not only the wife but each of her parents had relied. The core issue in this case is how much weight should now be accorded to those agreements, and whether they should have the effect that the husband's claims should be dismissed. The law on this topic is not difficult to state. But it requires a discretionary decision by the court which is, in my view, and on the facts on this case, an exceptionally difficult one.
The public hearing
- Rule 27.10 of the Family Procedure Rules 2010 provides as follows:
"(1) Proceedings to which these rules apply will be held in private, except
(a) where these rules or any other enactment provide otherwise;
(b) subject to any enactment, where the court directs otherwise
- Subparagraph (a) of that rule does not apply. In my view the effect of rule 27.10(1), read with subparagraph with (b), is as follows. It provides a starting point, or default position, that in the absence of the court directing otherwise, proceedings for a financial remedy after divorce will be held in private, with "duly accredited representatives of news gathering and reporting organisations" normally being permitted to be present pursuant to rule 27.11, but not ordinary members of the public. In my view rule 27.10 does not contain any presumption that financial remedy proceedings should be heard in private it is no more than a starting point and the question whether a given case should or should not be is entirely in the discretion of the court.
- This case began in court at 2.00 pm. At 10.49 am that day my clerk had sent to all counsels' clerks an email message which said "Mr Justice Holman may order that all or part of the hearing in this case will be heard in public pursuant to FPR rule 27.10(1)(b) and all counsel are accordingly requested to attend in robes." The effect of that message was to give to all counsel over three hours' notice that I may make such a direction. They clearly had ample opportunity to consider the position and take instructions from their respective clients and instructing solicitors, and to prepare any submissions to the effect that I should or should not give a direction under subparagraph (b). At the outset of the hearing itself I indicated that it was my provisional position that I should give such a direction. I enquired whether either party opposed that course and invited the two leading counsel to make any submissions they wished. Neither of them stated that there was any resistance to a hearing in public or that they wished to make any submissions. Further, at no stage at the outset of, nor during the course of, the hearing has there been any application for a reporting restriction order, subject only to not naming the three children as I have directed. As a result, the entire hearing has indeed taken place in public (as is the handing down of this judgment). Some journalists have been present intermittently during the hearing and a very small number of people have sat at the back of the court room from time to time, whom I believe to have been members of the public. I am aware that the case has received publicity in the national press in print and on line.
- The reasons why I formed that provisional view, and later (without opposition) directed that I would sit in public were, briefly, as follows. The principle that courts normally sit in public underpins the rule of law in a free and democratic society. Historically, courts sitting at first instance to hear financial cases after divorce have almost always sat in private. But there has recently been a strong shift towards greater transparency. That is evidenced by, amongst other sources, FPR rule 27.11 to which I have referred, and by the very recent Practice Guidance on Transparency in the family courts; Publication of Judgments, issued by the President of the Family Division on 16 January 2014 and coming into effect on 3 February 2014 (before the start of the hearing in this case). At paragraph 2 of his Practice Guidance the President states "
there is a need for greater transparency in order to improve public understanding of the court process and confidence in the court system
" Whilst greater publication of judgments will make for greater transparency, publication of the judgment alone suffers from the limitation, or even defect, that the public can only read what the judge chooses to say. It is only if the public are able to see and hear for themselves how the proceedings unfold in the court room, what the oral evidence and arguments actually are, and indeed how the judge comports himself, that there is true transparency, open justice and public accountability. Jeremy Bentham famously said "Publicity is the very soul of justice. It is the keenest spur to exertion and the surest of all guards against improbity. It keeps the judge himself, while trying, under trial." Mere publication of a judgment does not achieve that. It is curious, to say the least, that precisely the same financial case may be conducted under full public gaze on appeal and yet in private at first instance. It is true that it is normally only at first instance that witnesses have to give oral evidence, but as witnesses have to give evidence publicly in most other situations, including often in intimate detail as to their sexual lives or their financial affairs, it is not obvious why they should be treated with greater protection in a financial remedy case. Those are general considerations. (Protection of commercially sensitive or other confidential information of third parties is another consideration which, however, does not arise in this case.) In the present case there was the particular consideration that the core issue which I have already identified is one of considerable and legitimate current public interest. The Law Commission was, as I understood, about to publish its report on the topic of prenuptial agreements, and in order that the public can have an informed debate on a topic of considerable public interest they need to be able to see how, under the present law, courts resolve these cases on a case specific basis. [I here interpose that the Law Commission did in fact publish their report on 27 February 2014, the day before this judgment is handed down. I had already fully prepared this judgment by then. I have not seen the report, and its contents do not impact in any way whatsoever upon the judgment or my decisions, which are based upon the law as it currently is.] For those reasons, and taking into account the lack of any opposition by either party or their advocates, I directed the public hearing. I am glad that I did so, and there was not one moment during the hearing when I regretted having done so, despite what I am about to say in paragraph 6 below. The outcome of this case is likely to be controversial with some polarised public reactions to it. Everything has been done openly. Nothing has been done secretly.
The course of the proceedings and the lost opportunities to settle
- The evidence and argument in this case lasted 6½ long days in the court room. Although there were some flashes of humour it has been an exceptionally bitter hearing which was very painful to behold. The two sides are now very entrenched indeed. Many hurtful things have been said. Caught in the cross fire are three adored, innocent but vulnerable children. Further, the financial remedy proceedings have already cost some £550,000 and rising, and other aspects of the overall litigation have cost a further £107,000 with more to come. It did not have to be like this. The husband now has no assets at all, and net debts, including all he owes in costs, of about £226,000. The wife is property rich. She owns unencumbered the house where she lives which is worth, net of costs of sale, about £6,740,000. But she now has no free assets, and her debts, inclusive of costs, will now also begin to exceed her only other assets apart from her home. Neither spouse has any significant income. But the wife has, as described in the pre-marital agreement, "wealthy" parents. Although certain figures were bandied about as to the wealth of the wife's father in particular, I have no idea at all of the scale of the wealth of either of them and it is none of my business. But between them her parents currently voluntarily fund allowances for the wife and children totalling about £80,000 per annum and all the school fees. There is not the slightest suggestion that they, and in particular her father, cannot afford to do so. By an open letter dated 29 May 2013 the wife's solicitors made an open offer that included raising a mortgage of £850,000 upon her current home, to be guaranteed and funded by her father. With this she offered to purchase a home for the husband until the children had all left school or, if earlier, attained the age of 18. That proposal was rejected, apparently out of hand, when the husband, by his solicitors' open letter of 21 June 2013, asked for almost double that amount and for a significant part of it to be paid outright. Now the primary open position of the wife is not to offer a penny. There is not the slightest suggestion that her father could not easily have afforded the proposal that was made on 29 May 2013 or, indeed, more. I wish to stress with the utmost clarity that neither the wife's father nor her mother are under the slightest legal obligation whatsoever to pay a single penny to, or for, their daughter, nor their grandchildren, nor, still less, their son-in-law. It was, in my view, very unwise and misjudged that the husband's solicitors wrote on 21 June 2013, presumably on their client's instructions, that "
. her parents will, inevitably, be prepared to assist her to meet her obligations to my client" and then asked for considerably more than her father had already, voluntarily and with some generosity, effectively offered to fund. (It was, of course, irrelevant to the husband whether the offered £850,000 was funded by a mortgage paid by the father or a cheque written by the father.) But the tragic fact is that there was scope for a negotiated settlement last summer, assisted by the generosity of the father, and that has now all been lost. At the outset of, and repeatedly during, the hearing I urged settlement and provided a number of breaks and adjournments for the purpose. I do not know what may have been discussed outside the court room. But alas there has been no settlement and the wife's primary open position remains that there is not a penny on the table.
- The Family Procedure Rules 2010 provide for a family dispute resolution hearing or FDR. During April 2013 the solicitors agreed that a one hour hearing that had been fixed before a district judge on 1 May 2013 for another purpose should be rescheduled and utilised as that FDR. That seems to me to have been a tragic mistake. In my experience an FDR can be highly effective at promoting settlement and avoiding much costs and bitterness. But a case like this, which was obviously going to be heard at the level of the High Court, requires much longer than one hour and, with no disrespect to the district judge, requires to be listed before a High Court judge. No one can ever know, but I venture to speculate that if there had been an FDR with a full clear day allowed, before one of the High Court judges experienced in financial cases, and with the wife's father present and made welcome, the framework for a settlement which was later suggested in the letter of 29 May 2013 could have been discussed and refined, the figures and terms adjusted, and a settlement could have resulted. This is a case which never needed to come to court and which was eminently capable of settlement. I stress that apart from the two open letters I have no idea what the respective negotiating positions may have been or may indeed still be. But, objectively, this terrible conflict was as avoidable as it has been destructive.
- This account of the facts (many of which are not disputed) will incorporate also my findings on disputed issues. The wife is Miss Victoria Lee Luckwell. The husband is Mr Francesco Alessandro Limata (Frankie). The wife's parents are Mr Michael Luckwell (Mike) and Mrs Mary Luckwell. For convenience and clarity, and intending no disrespect to any of them, I will call them Victoria, Frankie, Mike and Mary, being the names by which they know each other and are generally known.
- The story begins with the wife's parents. Mike is now aged 71. Mary is now aged 67. They have two children. Their son, Adam Luckwell, is now aged nearly 40. He is not married and has no children although he is currently engaged. Victoria was born in July 1976 and is now aged 37. Sadly, the marriage between Mike and Mary had ended in divorce in 1997 when Victoria was about 20. Although they sat next to each other throughout the hearing, I understand that Mike and Mary normally rarely meet or communicate and that when they do have to communicate their relationship is more one of civility than of friendship. I understand that the wealth of Mary, who now has property developments, derived originally from Mike. It is clear that Mike, whom Victoria described as a self-made man, has been, and remains, a successful business man in the film, advertising or media and now other fields. As already stated, I have no idea as to the scale of his wealth, but there has been no attempt to disguise that he is a wealthy man.
- In 1997, when Victoria was 20, her parents purchased and gave her, her first home, at Greencroft Gardens, London NW6. In 2002 her mother purchased and gave her another home at Elm Row, London NW3. Greencroft Gardens was later sold and Mary received the net proceeds.
- Frankie was born in February 1969 and is now aged 45. He was long ago briefly married and divorced, with no children from that union. In 2004 Frankie was working in the post production and visual effects industry. Coincidentally, he was employed by a company, MPC, which had originally been established by Mike although, as I understand, Mike had sold it before Frankie began working for it. Frankie owned a flat in Eastlake House, London NW8. It had a mortgage and the equity was later stated in the pre-marital agreement to be about £50,000, before costs of sale, although in the event it later only yielded £30,000 net on sale. In summer 2004 Victoria and Frankie began to live together. Over the next few months they actually lived or stayed at Eastlake House, then in the basement flat of Mike's then home, then at a flat owned by Mary in Abercorn Place. Elm Row and Eastlake House were both rented out. In February 2005 Victoria and Frankie became engaged, and in March 2005 Victoria became pregnant. In April 2005 Victoria ceased work and she has never since been in paid employment. The wedding date was advanced due to the pregnancy and set for 23 July 2005.
- On 11 July 2005 both parties signed the "Pre-Marital Agreement", which I will call the PMA (the parties having selected the adjective "marital" in preference to "nuptial"). Recital L to the PMA states as follows: "Victoria and Francesco each specifically acknowledges and agrees that the marriage would not be taking place without this Agreement having been negotiated and signed by each of them." Each of Victoria and Frankie expressly agreed during their evidence that that was a true and accurate proposition. In relation to the PMA I am sure that:
i) Victoria herself was insistent upon it;
ii) Mike was also very determined that there should be one;
iii) But for the agreement, the marriage would never have taken place, even although Victoria was already pregnant. They might of course have continued to live together;
iv) When Frankie agreed its terms and signed it, he was a mature man (then aged 36). He was of normal intelligence (although he has few educational qualifications just two "O" levels). He was mentally stable. He knew exactly what he was signing and he meant what he was agreeing to. He was keen to demonstrate to Victoria and her family that he was marrying her for love and not for her money. At the time he had every intention of abiding by the agreement, although he did not imagine that they would ever actually separate or divorce. During the course of his oral evidence Mike said that even when Frankie signed the PMA (and the later Supplemental Agreements) he was "lying" because he did not intend, even at the time, to be bound by them. That is unfair to Frankie. He did intend at the time to be bound by them. He has more recently broken his promises.
v) Frankie had independent legal advice of the highest calibre. He saw and was advised by the late John Cornwell of the solicitors Dawson Cornwell. Frankie was very complimentary about John Cornwell during his oral evidence. I personally knew (professionally) John Cornwell (as I have also known the wife's solicitor, Ms Frances Hughes) for many years. Each of these parties was advised by family lawyers of the highest repute and great experience.
vi) Full and accurate financial disclosure was made and summarised in the agreement itself.
The terms and content of the PMA
- The whole agreement is of course available and I can only summarise or highlight the more important terms. It recited at the outset (recital A) that Victoria was pregnant and their child was expected to be born, as she later was, in December 2005. The agreement accordingly expressly contemplated that there would be at least one child. The agreement clearly referred to, and identified, "Victoria's separate property" and "Francesco's separate property" and recorded, correctly, that each had acquired all his/her separate property independently of, and without contribution from, the other (recital C). Victoria's separate property included Elm Row, stated to be worth about £750,000 and mortgage free. Frankie's separate property was the equity in Eastlake House, stated to be £50,000 before costs of sale. He had "no significant cash or other assets or debts." It was stated that Victoria has "substantial inheritance prospects from parents" and that Francesco has "some inheritance prospects on the death of his parents." Francesco had "just joined the pension of MPC but only two months ago."
- The PMA then recited at recital D the proposed purchase of Flat 7, 22 Westbourne Terrace, to which I will refer later. It recorded that Victoria (assisted by a gift from her father) would provide one half the costs of purchase. A mortgage in joint names would fund the other half. Francesco would fund the interest only on the mortgage. Upon sale, Victoria would receive one half ("equivalent to her contribution to the purchase costs") and the balance would be divided equally between them.
- Recital C expressly stated that "Victoria comes from a wealthy family" and contemplated (in wide terms) that Victoria may later acquire other assets from her parents or family, to be referred to as "Victoria's family gifts".
- Recital F recorded that each wished to retain as their own separate property their "separate property" as defined and identified, and that Victoria wished to retain as her own separate property "Victoria's family gifts" viz later gifts from her family.
- Recitals G K recorded, in summary, that each "expected and intended" the agreement to be binding on them throughout the world, and binding upon their heirs and personal representatives. Each had received separate and independent legal advice. Each were entering into the agreement "freely and voluntarily, without coercion, influence or pressure of any kind from the other or from any third party or from the circumstances or otherwise" (my emphasis). Each fully understood the nature and effect of this agreement and "the rights they are surrendering or limiting as a result of this agreement
- Recital K continued: "
whilst acknowledging that in certain jurisdictions it may not be possible to oust the court's power to override the terms of this agreement they respectively acknowledge, intend and agree that in the event of a decree of separation, annulment or divorce
in any jurisdiction this agreement shall be treated by them as binding and of full force and effect."
- Pausing there, recital K is the first of many provisions which make very clear and express reference to separation or divorce. Although Frankie did not believe that would occur, he can have been under no doubt or illusion that in the event of separation and divorce the agreement was still intended to govern. The agreement was patently targeted at least as much upon possible separation or divorce as upon regulating affairs during the subsistence of cohabitation and the marriage. Victoria knew from recital K that the agreement could be "overridden" by the court in certain jurisdictions and will unquestionably have been advised that England and Wales is one of them.
- The operative part of the agreement contains several belts and braces and repeats, as matters of agreement, many parts of the recitals. The essence is in Article 3:
"Victoria's separate property and Victoria's family gifts shall remain Victoria's. Francesco shall not either during or after the marriage make any claim in relation to Victoria's separate property or Victoria's family gifts and he hereby releases any and all rights or potential rights whether arising pursuant to the marriage or otherwise to Victoria's separate property or Victoria's family gifts, or any portion thereof."
- The second limb of Article 3 was to the reciprocal effect that Victoria would make no claim against Francesco's separate property. However it lacked mutuality for, as Mr Lewis Marks QC and Miss Marina Faggionato strongly emphasise on behalf of Frankie, it concluded with additional words in brackets "(save for claims relating to maintenance for Victoria and/or the child(ren) of the family)". This difference appeared again in Article 8 which provides that:
"8. In the event of the dissolution
of the marriage (or [permanent] separation
) Francesco will make reasonable maintenance provision for Victoria and the child(ren)
in the context of all the circumstances prevailing at the time
and on the specific understanding that Victoria will fully utilise her capital to house and support herself and the child(ren) and, in particular, will purchase housing appropriate to the marriage and the prevailing circumstances."
- Mr Marks submits that that one-way article shows how unfair and one-sided the agreement was. It makes no provision for Victoria to maintain Frankie, but does require that Frankie "will make" reasonable maintenance provision for Victoria, albeit subject to the other qualifications in the article. It does, however, contain protection for Frankie, too, in that it makes clear that Victoria will "fully utilise" her capital not only to house but also to "support herself and the child(ren)."
- Article 10 provided that "The terms of this agreement shall be reviewed with the benefit of legal advice after 5 years have elapsed from the date of this agreement and every 3 years thereafter." Mr Charles Howard QC, on behalf of the wife, makes some play of the fact that Frankie has never apparently sought a formal "review" pursuant to that article. This carries no weight with me. First, there is no indication in the agreement as to how a "review" would be conducted or by what principles it would be guided. Second, by July 2010 (when 5 years had elapsed) there had been many stresses in the marriage and it is fanciful to suppose that around that time Victoria would have countenanced any relaxing of the terms. Third, the fact of the first and second Supplemental Agreements in 2006 and 2008, to which I refer below, effectively superseded some separate "review", at any rate for five years from the date of the second Supplemental Agreement. The claims which Frankie now makes effectively subsume any "review" by the parties now.
- The PMA concluded with two "Certificates of Independent Legal Advice received by" the respective parties. John Cornwell signed and certified that he had experience of, and expertise in, advising clients in relation to pre-marital contracts and that he had advised Francesco with regard to the agreement, on the terms included in the agreement, their meaning and effect. He continued:
"Francesco expressed himself to me as understanding, and appeared to me as fully understanding, the said Agreement and the nature and effect of the said Agreement on and in the light of present and future circumstances, and as understanding my advice to him. He stated to me, and it appeared to me, that he entered into the said Agreement willingly and without any pressure, duress, stress, undue influence or deception on the part of any other person, including Victoria or otherwise.
I believe that upon entering into this Agreement Francesco was fully advised and informed with regard to all the foregoing matters and may fairly be said to have acted independently herein."
The marriage, Westbourne Terrace, the first Supplemental Agreement and Avonmore Road
- The PMA having been signed, the marriage duly took place on 23 July 2005. At that time Frankie was working for MPC and earning just under £50,000 gross per annum. The day before the marriage the purchase of the flat at Westbourne Terrace was completed. Victoria, assisted by her father, provided all the down payment. During August 2005 Mike made a further payment to Frankie of £18,624. The circumstances in which that payment was requested (or Mike would say, demanded) and precisely what it was intended for, and how it was spent, are much disputed, although the email from Mike to Frankie dated 22 August 2005, now at bundle B/F3, seems to give a very clear contemporary account of how it was calculated. (It was a balancing figure so that the amounts paid by Victoria or her family and the final amount of the mortgage (£190,000) upon which Frankie was to pay the interest were equal). I do not intend to go further into this issue. Over eight years later it is, frankly, a footnote to the case, and the sum in question is now insignificant in the context of this case. In any event, the agreed revised asset schedule dated "18.02.14" clearly credits that sum back to Victoria out of the net proceeds of sale of Westbourne Terrace which is currently on the market. Whether she accounts for it to her father is between the two of them.
- They moved to live in Westbourne Terrace as their first matrimonial home. Their first child and only daughter was born in December 2005. She is now aged 8.
- Victoria and Frankie soon felt that the flat in Westbourne Terrace was too small, and at too high a level (the fourth floor) for a family with a small child. By June 2006 Mike and Mary generously agreed to provide more money for the purchase of a house at Avonmore Road, London W14. The entire purchase cost of about £1 million (with associated legal costs) was paid as to £750,000 by Mike and £250,000 by Mary. I am sure that Mike, if not Mary, would not have agreed to fund the purchase unless the parties had already agreed to sign the first of two "Supplemental Agreements" (the FSA). This actually bears the date 18 June 2006 (shortly after completion of the purchase) but was patently drafted earlier.
The first Supplemental Agreement
- Again this was based upon, and recorded, full and frank financial disclosure, and was signed after independent legal advice. In the case of Frankie the Certificate of Independent Legal Advice (in identical terms to that attached to the PMA) was signed, and the advice given, by Rhiannon Lewis, a partner of John Cornwell. Recital B refers to the PMA and continues "
this agreement is intended to be read in conjunction with and be supplemental to that agreement." Clause 1 makes reference to the expressions "Victoria's separate property" and "Victoria's family gifts" which had been defined in the PMA. That is why, in paragraph 1 above, I have described the FSA as effectively repeating and reinforcing the PMA. Recital D refers to the intended purchase of Avonmore Road and that "the entire purchase price and related costs have been met by Victoria using monies gifted to her by her parents." There are similar recitals with regard to legal advice, capacity and understanding as in the PMA, and a repetition at recital J of recital K to the PMA. Clause 1 of the agreement states that "Avonmore Road shall be treated as Victoria's separate property and shall be treated in the same way as Victoria's separate property and Victoria's family gifts as provided for by clauses 3 5 of the pre-marital agreement."
- The parties only actually moved into Avonmore Road during 2007. Also in 2007 Frankie sold his flat at Eastlake House, realising in the event £30,000 net (since spent). Victoria sold the flat at Elm Row, realising £1,117,000 net which, at that stage, she retained. The flat at Westbourne Terrace was let, and from then on the mortgage has been funded out of the rental, so the period during which Frankie actually paid the interest on the mortgage out of his own earnings was not more than two years.
- In July 2007 Frankie changed jobs and began working for a firm (in the same industry) called Glassworks at an increased salary of £65,000 gross per annum.
Connaught Square and the Second Supplemental Agreement
- In December 2007 the parties moved from living in Avonmore Road to living in Mike's own house at that time at 26 Connaught Square, London W2. This is a fine, large, period house in a prestigious square, the value of which has escalated in the last few years. Soon afterwards Mike offered to Victoria (not to Frankie) that he would give the house to Victoria. But unquestionably this was a gift on terms and conditions. I am quite clear that by now Mike had low regard for Frankie and did not trust him an inch. He clearly regarded him as lazy and workshy. Even before the marriage, he had been told (whether or not accurately) that Frankie had had a number of girlfriends who were rich or were the daughters of very rich parents. He had always regarded Frankie as a gold-digger who had married for money and from whom Victoria's money and the assets he now proposed to give Victoria had to be utterly protected. During the course of his evidence Mike referred contemptuously to Frankie as "that man" and as "the predator".
- Mike wished to give Victoria Connaught Square as what he calls her "patrimony" by which he means, as I understand it, her and her children's inheritance given up-front during his lifetime rather than after his death. He was determined that although Frankie could of course live in it, he was not to be able to get his hands on it.
- There were two conditions. First, there must be a "Second Supplemental Agreement" (SSA) making specific reference to Connaught Square. Second, Victoria had to promise Mike, which she did, that she would never sell, mortgage or charge Connaught Square without his prior consent ("the promise").
- In addition to these conditions there was a concurrent process of what was described both then and during the hearing as "levelling up" with Adam i.e. ensuring that, roughly calculated, each of Adam and Victoria had benefited evenly from their father.
- As part of "levelling up" it was calculated that Victoria would still be in surplus compared with Adam by about £2 million. This was later paid by Victoria to her father by a cash payment of £600,000 in October 2008 from her retained proceeds of Elm Row, and by payment to him of the whole of the net proceeds of sale of Avonmore Road, namely about £1,440,000, when it was finally sold in December 2009. ("the £2 million").
The Second Supplemental Agreement
- This was dated 28 February 2008. I am sure that Mike was not willing to authorise the actual transfer of Connaught Square to Victoria until he knew that the SSA had been signed, and he would never have transferred Connaught Square to her if it had not been signed.
- The SSA is in many respects a "carbon copy" of the FSA. It was "intended to be read in conjunction with and to be supplemental to" both the PMA and the FSA. There was again full and frank disclosure. Both parties again received independent legal advice, in Frankie's case again from John Cornwell, who signed a further certificate in the same terms as previously. Recital E referred to the proposed gift by Mike to Victoria of Connaught Square and continued "The gift is intended to be effected as soon as practicable after Victoria and Francesco execute this agreement
. By this agreement Victoria and Francesco wish to enter into an agreement recording their wishes and intentions regarding Connaught Square." Clause 1 provided that "Connaught Square shall be treated as Victoria's separate property and shall be treated in the same way as Victoria's separate property and Victoria's family gifts as provided for by clauses 3 5 of the pre-marital agreement."
- The appendix containing the "Summary of Victoria's assets and income" is significant. It referred, amongst other assets, to the net proceeds of sale of Elm Row and to her intention to sell Avonmore Road as soon as possible. It continued, in words that have been pored over during the hearing:
"Victoria intends to make a gift of approximately £600,000 to her brother Adam and may [my emphasis] make a further gift of £2 million to her father. These gifts will be funded by the cash at bank currently held by Victoria and from the sale proceeds of Avonmore Road."
- Under a heading "Income" the summary recorded that at that time Victoria was receiving "£12,000 per annum by way of an allowance paid by her father. £25,000 per annum by way of an allowance paid by her mother." It continued "Once Connaught Square has been transferred to Victoria her father intends to give her a further allowance of £24,000 per annum to cover the costs of Connaught Square. Victoria's father will also be responsible for the school fees for Victoria and Frankie's children."
- At paragraph 14 of his statement dated 17 December 2013, now at bundle A/E 224, Mike said that a second condition of the transfer was that Victoria would promise him not to sell, mortgage or otherwise charge Connaught Square without his agreement. He said it was not recorded in writing but she made the promise and he trusted her. The reason why he required the promise is clear. He wrote, and his oral evidence was to the same effect: "I knew that the Pre-Marital agreement and the Supplemental Agreements were not absolutely binding but I trusted that Victoria would stick to her promise not to sell or charge the property without my agreement." Mike was afraid that, even without divorce or separation, Frankie might pressurise Victoria into raising a mortgage on Connaught Square, or even into selling it, so as to generate cash which he, or they, might fritter, thereby debasing the patrimony. He considered that a promise given by Victoria to him would ring fence (my phrase, not his) Connaught Square and strengthen and protect her from any pressures from Frankie.
- At paragraph 30 of her statement dated 14 January 2014, now at bundle A/E 242, Victoria similarly described the promise.
- At the outset of the hearing Frankie and his lawyers were equivocal about the existence of this promise. During his oral evidence, however, Frankie himself admitted that Victoria had told him about the promise. Further, it is quite clear from the informal notes that the father's property solicitor, Mr Simon Mapstone of Goodman Derrick, made on a file, and from the oral evidence of Mr Mapstone, that conditions to this effect were under very active consideration before the transfer. His notes record a telephone conversation between himself, Nik Gollings (Mike's accountant) and Mike Luckwell on 25 March 2008. Mike [had] agreed with Victoria no sale, no mortgage, no collateral. However, as the notes evidence, there would be no charge or restriction recorded on the Land Register because this would amount to a "gift with reservation" and make the whole of Connaught Square vulnerable to Inheritance Tax on the death of Mr Luckwell. As a result it was decided that Mike would require and rely upon an oral promise alone from Victoria. Mr Mapstone said in his oral evidence that a week or so before the actual transfer Victoria told him "I assume you know my father has made me promise not to mortgage it, or sell it or use it as collateral for any form of debt."
- I am in no doubt that that promise was given. Mr Marks submits that a gift is a gift and that such a promise is not legally binding. Further, that if it was legally binding it would have just the same effect upon IHT as if it had been a written promise or entered as a charge upon the Land Register. However the legal status of the promise is irrelevant, as is the correct application of tax law to these events. The promise most certainly does not in any way bind this court or fetter my powers. The relevance of the promise is that it is part of the context of Mike's threat to stop all allowances and school fees to which I refer later.
- Understandly, Mike wished to treat his two children broadly equally and insisted on levelling up. Victoria knew that she had to level up. She did not know (and I understand still does not know) the extent of provision that her father had made to Adam, nor the value of any assets he had given to Adam. Mike did his own calculations as to levelling up and made his own decision as to the value of the assets he had transferred, which ranged from cash, forgiveness of a loan to Adam, shares to Adam and the property purchases or transfer made for or to Victoria. It is clear that in financial matters such as this Victoria just did as she was told, and that she accepted, with little or no question, figures proffered by her father. There was much cross examination of both Victoria and Mike about levelling up and the figures, and, most particularly, whether the £2 million had anything to do with levelling up at all. Victoria was very unclear whether the £2 million was anything to do with levelling up. She thought she had just decided to give it to her father. Mike was adamant that it was calculated as part of levelling up.
- The family's accountant is Mr Nicolas Gollings FCA of Gollings & Co. He was away on holiday during the first week of the hearing. On his return he made a statement dated 17 February 2014 and gave oral evidence the next day. As a result of that statement and evidence, and the attached contemporary email dated 21 January 2008 and the spreadsheet that was attached to the email, I am quite satisfied that the figure of £2 million did indeed emerge as part of the calculation of levelling up. The email (to Mike) said "
we factored in Avonmore being worth circa £1.5 net of sale costs. These funds would be paid over to you along with the Elm Row proceeds and after off setting your other gifts would equate to you giving approx £1 million to both AL and VL." The spreadsheet clearly shows those sums being payable by Victoria to Mike to create levelling up between herself and Adam and each having then received about £1 million net from him. It is important to note that that email and the spreadsheet date from 21 January 2008.
- As part of levelling up Mike then calculated that Victoria should pay £600,000 to Adam, as recorded in the summary of her assets and income in the SSA. Mike later did a recalculation of share values and decided that Victoria needed to pay Adam only £500,000 which she duly did by instalments in March and July 2008. Nothing turns in this case on the reduction from £600,000 to £500,000 payable to Adam.
The £2 million
- Of course in relation to the £2 million, levelling up could have been achieved by Victoria paying a further £1 million to Adam rather than £2 million to her father. If, therefore, it was merely levelling up, why was £2 million paid to her father rather than £1 million to Adam? Both Victoria and Mike were pressed very strongly about this. Mr Marks stressed that in the summary of Victoria's assets in the appendix to the SSA the words are that Victoria intends to make a gift of approximately £600,000 to Adam, but only that she may make a further gift of £2 million to her father. Victoria's own evidence under cross examination (in the absence of her father, whom I directed temporarily to leave the court) was that the payment of the £2 million "was completely voluntary". "I decided to make the gifts because why would I not?" "It was not a condition. It was a discussion." Mr Marks submits that in a context in which Mike was attentive to minimising inheritance tax (see Mr Mapstone's notes and the decision for IHT reasons not to enter a charge or restriction on the Land register) it is odd that Mike himself decided to receive back £2 million from Victoria which, unless he later spent it, merely added £2 million back to his wealth and estate.
- In their written closing submissions at point 16.2 Mr Marks and Miss Faggionato say "1) £2 million is held for the wife, 2) [it is] a resource of hers." They say, correctly, that when a child pays money to a parent there is no presumption of advancement, and so they submit that the presumption is that Mike holds £2 million on a resulting trust for Victoria. When I commented that to establish that factual and legal outcome might require litigation between Victoria and her father, Mr Marks hastily said that they and Frankie "are not targeting the £2 million."
- In my view the £2 million simply is not a resource of Victoria's at all. She paid it to her father and cannot now recover it from him. I am quite clear that it was not a mere gift by Victoria and, notwithstanding the use of the word "may" in the asset summary, was a payment which Mike wished her to make, although he did not go so far as to require her to make it. As he put it, they talked about it and she agreed without demur. His reasons were three fold. First, he wished there to be levelling up, but he did not wish to be generous to the point of providing a further £1 million (still less, £2 million) to Adam. He said in oral evidence that if Victoria had not given him that money he might have felt obliged to give a further £2 million to Adam and he did not think that was appropriate. He thought that net gifts to each of them of about £1 million were enough. Second, he did not wish either of his children to have a substantial fund of cash. Third, in the case of Victoria he was undoubtedly keen to avoid money being available "for the predator" (this being the context in which he used that description).
- As well as referring to the £2 million, the summary of Victoria's assets and income in the SSA refers to the intention of Mike to increase her allowance from £12,000 to £36,000 per annum and to be responsible for the school fees. Mike himself said during cross examination about the £2 million that "I was willing to give her the allowance so it was a monthly allowance which could not be got at by Frankie. I thought a monthly allowance was better to avoid more money [being available] for the predator." Mr Marks and Miss Faggionato accordingly submit that, having received the £2 million, Mike is at least morally, if not legally enforceably, now obliged to continue to pay the allowance and the school fees, a point to which I return in paragraphs 90-100 below.
- In spring 2008 Mike moved out from Connaught Square and the parties began to occupy the whole house. The formal transfer was registered at the Land Registry on 2 April 2008.
- In March 2008 the parties' second child, a son, was born. He is now aged almost 6.
- In May 2008 Frankie was unfortunately made redundant by Glassworks. He was quickly offered a job at a slightly higher rate of pay by the then CEO of a company called UNIT in which Mike was the majority shareholder but in the running of which he was not then actively involved. Mike said in evidence, and I accept, that he told the then CEO that he would prefer it that Frankie did not get a job with UNIT. He requested the CEO not to employ him. Mike said he was in the United States (where he has a home) when he discovered that Frankie was working for UNIT and he was displeased. Apart from his low regard for Frankie, whom he considers to be lazy, his main reason was that he knew that it was his intention to make Adam the CEO, as he later did, and he did not think it a good idea to have his son-in-law as an employee of his son. He thought it was an unhealthy scenario.
- Mike's instinct was clearly right and it now seems clear that if Frankie had not worked for UNIT a great deal of anguish might have been avoided.
- At Christmas 2008 there was what was intended to be a happy family holiday in Barbados, in a villa, with Mike, Mary, Victoria, Frankie, Adam and the now two children. It was not a success. Both Adam and, later, Mike, left before the end of it and before they had planned to leave. The only relevance, if any, of the holiday to this case is that it clearly triggered huge upset in this family. It clearly emerged during the holiday that Mike planned to appoint Adam as CEO of UNIT and that if Adam did become the CEO he would, or might, fire Frankie. Quite who said what to whom about this is, frankly, irrelevant. Victoria supported her husband. In the aftermath of the holiday (i) in February 2009 Victoria became for a period seriously psychiatrically unwell; (ii) in March 2009 Frankie was indeed fired or sacked by Adam; (iii) very sadly indeed, Victoria has never since seen or communicated with Adam for, now, over 5 years, with the exception of three hours that he spent with her at Christmas 2009; and (iv) Mary told me that since the holiday she and Mike barely communicate at all.
2009 - 2011
- In mid February 2009 Victoria was admitted as an in-patient to a private psychiatric hospital. She remained there for about three months until May 2009. The immediately precipitating events and medical diagnosis and treatment are irrelevant to this case. It must patently have been a stressful time for her, for Frankie, and, no doubt, for her parents (her father was apparently prevented from visiting her).
- It was in that context that Frankie sent an email to Mike on 2 March 2009, now at bundle B/G1, which Mike produced during the hearing. It was clearly a request to open a dialogue between Mike and Frankie, Frankie saying "
I have lost sight of whether you are friend or foe." It was clearly an implicit request for more financial support, for he continued: "These points are hard for me to express in Victoria's absence without raising suspicions that I am just avaricious." He continued, in a sentence upon which Mike wishes to place weight: "I would be more than happy to sign legal documents forbidding me to personally financially benefit from any generosity passed on to Victoria [and the names of the two children]." It is clear from Mike's later letter dated 4 March (see below) that it was on the next day (3 March) that Frankie told Mike that what would make Victoria feel a lot better was if Mike would give her a substantial cash sum. According to Mike, the figure mentioned was £8 million, later increased to £10 million.
- During his cross examination of Mike, Mr Marks produced, without any prior disclosure, an intensely personal letter dated 4 March 2009 which was actually sent by Mike by email to Frankie and others on 6 March 2009. It was not sent to Mary in 2009 and had never been seen by her. It must have been deeply distressing for Mary when this letter was suddenly produced in a public court room in 2014, and she learned of its existence and read its content for the first time. The letter is long and ranges over many family issues, going back into the childhood of Mary and the marriage and divorce of Mike and Mary. The main focus of the letter is, indeed, to counter a range of things which Mike understood that Mary had been saying about Mike. It harks back to the Barbados holiday and does refer at some length to Frankie's position at UNIT. It does include the following passages upon which, amongst others, Mr Marks placed reliance:
"I did not say, as I gather Mary relayed, that Frankie was a 'profligate fortune hunter' and have never said that nor, more importantly, believed that. I believe he loves Victoria and that the feeling is mutual
- Mike conceded in his oral evidence that he thought that probably Frankie did love Victoria and she loved him. However it is quite clear that the emollient words "
" were not Mike's true state of mind. He had believed for many years that Frankie was both profligate and a fortune hunter.
- The letter continues "I have always treated Victoria and Adam absolutely equally. Victoria and Adam stand to inherit the vast bulk of anything that may be left when I die absolutely equally. This has not changed
- Mike said that since that letter in 2009 he has made a further will, the contents of which (which have not been disclosed) are different from that current in 2009.
- Further on, the letter makes reference to the conversation in which Frankie had asked for a substantial sum of money to be paid to Victoria:
"Frankie mentioned to me, during our 90 minute call yesterday, [viz on 3 March] that one solution might be for me to just write a very large cheque to Victoria, big enough that Victoria and her family could, for the rest their lives, feel totally secure and be able to have a good life
although he said that he was not necessarily pushing for that. I explained that I did not feel comfortable with his proposal. It does not seem sensible to put a virtually unlimited sum into an account to be administered by two people, one of whom is unwell and the other with no basic maths nor do I have the money to do that."
- As Mike pointed out, if he had given £8 10 million to Victoria, as Frankie suggested, levelling up would have required him also to give £8 10 million to Adam.
- Other than evidencing the terrible stresses within this family, I gain little from either of these emails.
- Not long afterwards, still in March 2009 and while Victoria was still an in-patient, Adam did sack or fire Frankie from UNIT. In August 2009, after about four months of being unemployed, Frankie began a job, at a slightly lower salary, at Rushes Post Production. In December 2009 Victoria completed the sale of Avonmore Road and paid the balance of the £2 million to her father. At the same time he increased her allowance to the current rate of £51,000 per annum (plus school fees) and in January 2010 Mary increased her allowance to the current rate of £30,000 per annum.
- The year 2010 was relatively uneventful. In 2011 Frankie changed employment from Rushes Post Production to Prime Focus, at a salary of £62,000 gross per annum.
- In September 2011 Frankie saw a consultant psychiatrist, Dr Michael Craig, whose report dated 3 September 2011 is now at bundle B/B10. That reveals that Frankie himself had been receiving psychiatric help and medication since the time Victoria was an in-patient in 2009. It is not necessary to quote extensively from the intimate report. In its conclusion Dr Craig wrote:
"After a period of having little direction, he gravitated towards the film business where he has been working since the age of 22 years old. Unfortunately, however, this has involved him, in more recent years, becoming enmeshed with businesses that are connected (directly or indirectly) with his father-in-law. My overall understanding of this situation is that this has not being particularly helpful for Frankie and has continued to undermine his self-confidence.
My overall impression of Frankie was that he probably suffers from deep-rooted personality difficulties, which have made it difficult for him to form meaningful relationships. This has been associated with recurrent symptoms of anxiety and depression. It is also probable that these symptoms have had a significant negative effect of his ability to focus and concentrate throughout much of his education and occupational life. On balance, I am of the opinion that a diagnosis at Attention Deficit Hyperactivity Disorder (ADHD) is improbable."
2012 2013, the separation and divorce
- The third child, and second son, was born in January 2012. He is now aged 2. He was born with certain serious medical problems and the period following his birth must have been one of great anxiety and stress for the whole family.
- In April 2012 Frankie was made redundant by Prime Focus and became unemployed for the rest of the marriage.
- On 18 November 2012 there was a sad and unfortunate episode when Victoria and Frankie were together in a pub. In an irrational gesture of self harm Frankie deliberately broke a glass against his head, which required considerable stitches. It was then agreed that he would temporarily leave Connaught Square. The marriage was by now clearly at a nadir and, in the event, he never returned to live at Connaught Square. He did, however, continue to visit frequently to see the children, including bathing them and putting them to bed.
- During February 2013 there was heightened tension between Victoria and Frankie as Victoria believed that Frankie had deliberately removed and secreted her keys to the house. Although there is considerable warmth in some of the texts between Victoria and Frankie during February 2013, it is, to my mind, quite clear that around 27 and 28 February 2013 Victoria was concerned about the keys and was making plain that she would prefer that Frankie kept away from the house for a short period. On 28 February 2013 at 15.24 she texted "Please do not come over today. I can't deal with any more. If you would like to see the children, Grandma Mary is very happy to make arrangements [to take them] wherever suits [you]." He replied at 17.43 that he intended to come round "unless you say otherwise". She did say otherwise, for she replied at once: "why don't you see them tomorrow. Tensions are running high today
" As Frankie knew, Victoria herself was then on her way to the airport to fly, briefly, to Monaco. Despite that clearly expressed wish by Victoria that he did not go to the house that night, Frankie did do so. When he arrived, the front door was open because a locksmith was changing the locks. He walked straight in, and altercations then ensued involving Mary, who was present, Mike, who was summoned, and eventually the police, which Frankie found deeply humiliating and "a horrible experience like having a gun poked at me in my own house." The following day, Friday 1 March 2013, Victoria's solicitors applied without notice to a district judge and obtained non-molestation injunctions and an order prohibiting him from going to the house, or into Connaught Square, save for contact expressly agreed in writing.
- Mr Marks has been highly critical of Victoria and her solicitors for seeking and obtaining that injunction, and of the district judge for making it.
- I have read the statement of Victoria (prepared on her instructions while she herself was in Monaco) which was placed before the district judge. On the basis of that evidence I do not consider that the district judge could fairly be criticised for making some injunction of very short duration on the without notice application. But the non-molestation order, particularly in relation to the children, was very hurtful and was unnecessary if he was not to go at all to the house or even into Connaught Square for a limited period. The order was made on a Friday. It should have provided a return date in the following week. It was wrong that the return date given on a without notice injunction, which included a prohibition on visiting what was still his home, and where he regularly saw his children, was two months later, namely 1 May 2013. I understand that this came about because the district judge left it to a court official to identify and insert a date convenient to the court after the judge had made the order. That should not have happened and should not happen again. It did not, in my view, comply with the requirements of section 45(3) of the Family Law Act 1996. Section 45(3) requires the court to fix a return date which is not only "convenient" but "just". It was the responsibility both of the solicitors who made the application, and of the district judge who made the order, to ensure that on a without notice order of this kind a rapid return date was given.
- If Frankie had already instructed solicitors by then, it would have been very wrong to apply for an injunction at all without notice to them. But he did not at that stage have any solicitors. It was a Friday. His precise whereabouts during that day may not have been known to Victoria's solicitors, and I do not go so far as Mr Marks in criticising Victoria's solicitors for making the application without notice. It did, however, put them, as well as the court, under a high duty to ensure that a rapid return date was set.
- This case got off to a very bad start and it is my clear impression that Frankie has felt that he was on the back foot from the outset.
- Victoria presented a petition for divorce later in March. There has been a decree nisi but no decree absolute.
The parties' circumstances since February 2013
- Victoria continues to live at Connaught Square, with the help of a live-in nanny during the week and a different one at weekends. She continues to receive £81,000 per annum from her parents. She has made six foreign trips in the last year or so, to Austria (skiing), Monaco (twice), Dubai, Cyprus and Majorca. Some have been client trips in connection with Mary's business or that of Victoria's boyfriend.
- By contrast, the circumstances of Frankie have been bleak. For about a year he moved from room to room in his own mother's bed and breakfast hotel, depending on which room (if any) was vacant. When the hotel was full he slept on the sofa or a spare bed at various other addresses. He said he was living like a tramp, with his possessions in bin bags. He often had to eat out at an expense which he could ill afford. He described himself as living in an ad hoc way with feelings of displacement, sadness, confusion, and loss of identity as a small provider [viz for his wife and children].
- In November 2013 Frankie obtained a facility as part of his litigation loan which enabled him to pay six months' rent on a flat in Leinster Square, London W2. This is very close to Connaught Square and the children's schools. The rent is about £11,000 for six months. He did not have this. He has merely borrowed it, adding to his debts. He described the flat as a godsend. It has two bedrooms and, as I understand, two of the three children can stay with him at any given time. Like Connaught Square, Leinster Square has a garden in which he and the children can play. At the moment he has no means of paying the rent or staying there after the six months end in May.
- Frankie is currently working part time in his mother's hotel and is paid £6.50 per hour, at or about the minimum wage. He is undertaking a degree in art with the Open University which he hopes to complete by Spring 2017.
The parties' current income and assets
- Victoria's sole, but generous, source of income is the allowances from her parents. She has not worked in paid employment since the marriage and it is not suggested that she should do so. She does, however, perform work and valuable services for her mother in connection with her mother's property developments. She receives no direct remuneration for this although, as indicated above, it has led to her having several foreign trips or holidays and of course her mother does pay her the regular allowance.
- Frankie has no income apart from the £6.50 per hour from his mother for such hours as she is able to employ him.
- Counsel agreed a "Revised asset schedule" dated "18.02.14" which includes some minute detail (including a bank account of Frankie containing 20 pence and one of Victoria containing £89). I propose to describe and treat the assets much more simply, ignoring the trivial and the detail.
- On Victoria's side, she has the equity in Connaught Square, agreed at £6,740,000. I ignore her jewellery and watches. These are said to be worth £40,000 and £10,000 respectively, and in the context of this case are for her adornment, not capital. In any event no value has been attributed to the contents generally of Connaught Square.
- If Westbourne Terrace sells for £850,000 (it is on the market for £895,000 but has not sold) Victoria's calculated share of the proceeds is, rounded, £400,000. She now has debts or liabilities, principally for costs, and including her estimated liability for CGT on Westbourne Terrace, also of £400,000. Her debts are attracting interest and the CGT will increase if, as seems increasingly likely, the sale of Westbourne Terrace is after April 2014.
- On Frankie's side, I ignore the £20,500 which he has in pension funds. This is not available to him now and is, in the context of this case, both a negligible sum and a pitiful level of pension funding for a man of 45.
- His calculated share of the net proceeds of sale of Westbourne Terrace is, rounded, £228,000. His debts and liabilities, including his estimated liability for CGT on Westbourne Terrace, are now, rounded, £454,000. In his case, too, these are attracting interest and the CGT will increase if the sale is after April. His current net indebtedness is, accordingly, £454,000 - £228,000, or £226,000 and rising.
- Amongst the listed debts of both Victoria and Frankie are loans from their respective mothers. It would not be fair to treat one as "hard" and the other as "soft" and, as the agreed schedule depicts, both loans are treated in the above figures as being due and repayable.
- Neither party currently owns a car, although Victoria has the use of a Range Rover which belongs to her boyfriend but is registered in her name so she can (legitimately) obtain a parking permit for use in Connaught Square.
The threats to cease paying the allowances
- At paragraph 21 of his written statement dated 17 December 2013, now at bundle A/E 226, Mike wrote:
"21. I became frustrated when I was continuing to pay the allowance to Victoria while Francesco was unemployed and did not obtain a new job. I understand that after I transferred Connaught Square to Victoria she and Francesco had several arguments about the promises Victoria had made to me. Francesco had asked Victoria on numerous occasions to sell the property in order to release capital so that they could enjoy a higher standard of living when he was unemployed. Victoria insisted that she could not sell the property because she was under a moral obligation to me not to sell or mortgage the property and that if she did, I would stop paying the children's school fees and her allowance. She knew that I meant it which is why she did not agree to sell, or even charge, the property. It remains in her sole name and unencumbered."
- At paragraphs 23 and 24 Mike wrote:
"23. I was alarmed to discover that Francesco is seeking a share of Victoria's assets. He always knew that in the event of a divorce, Victoria would seek to rely upon the Pre-Marital and Supplemental Agreements and yet he did not take any steps to save money, or secure new employment after he lost his job in April 2012 and he continued to have children with Victoria. I would never have transferred Connaught Square to her if I had known that there was any risk that the property would not be retained by Victoria for her and the children. I have made clear to Victoria, that if Connaught Square is sold or mortgaged in order to raise capital for Francesco as part of the divorce, I will stop paying the allowances to Victoria and I will stop paying the children's school fees. If Victoria is able to retain the property unencumbered, as was always intended by me and Victoria, I will continue to pay the children's school fees and I will continue to support Victoria by way of the allowance.
24. Finally, I understand that Francesco's solicitors have contended in correspondence with Victoria's solicitors that I will ultimately pay any settlement that is ordered to Francesco so that Victoria is not required to sell, mortgage or otherwise charge Connaught Square and can stay there with the children. That is absolutely absurd. I have made my position clear. I have no obligation to Francesco and I have no intention of paying him anything."
- Mike's oral evidence, upon oath and under sustained cross examination by Mr Marks QC, was repeatedly and consistently to the same effect. He said that he will not pay any money for Frankie, under no circumstances whatsoever. He will do nothing to encourage a situation whereby Frankie gets any money. He said with absolute clarity and firmness that if Connaught Square is sold he will not continue to pay either the allowance or the school fees. "That was not the arrangement with my daughter. I made an arrangement that I would give her that house as her patrimony
If she is forced to sell it and break her promise to me I will be shocked. He has frequently said unsolicited that he will never take money from my daughter. I think it is disgusting that he comes to court to try to force my daughter and his children out of their home."
- Mike disagreed that the £2 million and the allowances were "directly linked" such that he was now morally, if not legally, obliged to maintain the allowances. When Mr Marks suggested that he would be exacting "penalties" upon his daughter and grandchildren, he said that he would not call them penalties. He would call them consequences. He said that he had made very clear to both Victoria and Frankie during the marriage that if she sold or mortgaged Connaught Square in breach of her promise he would cut off the allowances and that remained his position.
- At paragraph 17 of their written Closing Submissions, Mr Marks and Miss Faggionato submitted that this evidence should be disbelieved and that Mike was not being truthful with regard to his intentions. He is merely threatening, bluffing, and, as Mr Marks orally put it, holding a pistol to the head of the court. I should call his bluff and conclude that he will not in fact cut off the allowances even if Connaught Square has to be sold. Both in their written submissions and in Mr Marks' closing oral submissions they submit that the threat is inherently implausible, lacks logic, and is irrational, but that Mike is a rational man. Mr Marks pointed out that Mike also pays an allowance to Adam and that if he cuts off the allowance to Victoria he would have, consistent with equal treatment, to cut off that to Adam as well. Mike's answer to that would, I suspect, be that Adam has not broken any promise to him. Mr Marks submitted that the threat is so deeply improbable and so irrational that, even if he means it now, when it came to it, Mike would not do it. It would be so damaging to Victoria, so damaging to Adam (if his allowance was cut too) and so damaging to the grandchildren.
- It could, of course, be tempting simply to call Mike's bluff; and in any event I could not and would not yield to a mere threat or pistol to the head of the court. I must, however, make a finding whether Mike does or does not mean what he says and intend to carry it out.
- Mike has been described variously by people who know him very well as "determined", "hard", and, by Frankie, as "controlling" and having "fixed and determined views". It is Frankie's own evidence that throughout the marriage Victoria was in "terror" that her father would cut off her allowances or her inheritance. He wrote "Victoria was told on many occasions both prior to and during the marriage that, if she did not follow her father's orders, he would withdraw all financial support." (See his statement dated 23 January 2014 at paragraphs 18 and 19, now at bundle A/E 260).
- At paragraph 31 of her written statement dated 14 January 2014, now at bundle A/E 243, Victoria wrote: "
I had promised my father that I would not [sell the house] and I knew that if I broke that promise he would immediately stop paying my allowance and stop paying the children's school fees. I had no doubt that my father would stop the payments in those circumstances." During the course of her oral evidence, whilst her father was absent, Victoria said "I have pleaded with him. I asked him yesterday. He has always been immovable on this point. Flexible is not something I would call my father."
- In my view, Mike is not merely bluffing nor lying with regard to his intentions. He does definitely mean what he says. In their open offer letter of 29 May 2013, Hughes Fowler Carruthers wrote "My client's father is extremely cross about these proceedings." That was nine months ago. Although his behaviour in the courtroom is of course controlled, restrained and very courteous, I am in no doubt that he is now little short of seething with anger about the proceedings. He knows the enormous cost. He regards Frankie's claim as "disgusting". He said that he considered it would be "outrageous" if the court makes any award. He has clearly always attached enormous significance to the promise. So far as he is concerned, Victoria will break it if she sells, although he was earlier willing to permit her to raise a mortgage as in the open offer. Being so determined, hard and inflexible a man (not my words, but those variously of his family) he has the will power to carry his threat out. Since he has repeated it so resolutely for so long, including publicly upon oath in the witness box, I must conclude on a balance of probability that he will do so.
- I must accordingly consider this case and its outcome on the clear basis, as a reality, that if I make any award at all for Frankie, which will necessarily require Victoria to sell Connaught Square, as she has no other assets and (without the cooperation of her father) no borrowing capacity, her allowance of £51,000 per annum from her father and payment of all the school fees by him will immediately cease.
- These are facts. It is not for me to make any comment or moral observation upon the decision and intentions of Mike.
- I now turn to the position of Mary. At paragraph 11 of her written statement dated 17 December 2013, now at bundle A/E 231, Mary wrote:
"The allowances were all part and parcel of the transfer of Connaught Square and would not have been paid, or continued to be paid, by Mike or me unless all the agreements had been entered into by Francesco and Victoria, Francesco had acknowledged them as binding which he did, and Victoria had promised not to sell or charge the property without Mike's agreement."
- At paragraph 15 Mary wrote:
"I was present for a number of arguments between Victoria and Francesco. On several occasions, he wanted Victoria to sell the property and down grade to a less expensive, smaller house in order to release some capital so that they could fund a lifestyle which was above their means. Victoria insisted that she could not do so because she had made a promise to her father, which she felt morally obliged to stick to. Francesco became increasingly resentful and angry about Victoria's promise to Mike and tried to persuade her to beak it. Victoria, of course, was adamant that she could not. This issue caused a great deal of marital conflict between them and, as I say, I witnessed a number of arguments about it."
- At paragraph 18 Mary wrote:
"I know that Victoria wants to keep the promise she has made to her father because she told me. I also have no doubt that Mike will stop paying the allowance and the school fees if she is forced to sell or charge Connaught Square to raise capital for Francesco. I have known Mike for many years. He is a very successful businessman. He would not have transferred Connaught Square to her if he did not trust Victoria to stick to her promise and he will be very cross if she breaches, whether or not out of choice, the promise she made. I have no doubt that in that scenario he will stop the allowance and the payment of school fees. I am obviously worried about the effect that would have on Victoria and the children. I may, or may not, keep paying her an allowance. I am not sure, however, how long I would be able to continue to pay an allowance to Victoria because I do not have the same financial means as Mike."
- At paragraphs 19 and 20 Mary wrote:
"19. Victoria's only source of income is allowances from Mike and me. In return for the allowance that I pay to her, Victoria helps me out with the development at MP. The development is a multi-million project. It involves a property on a large site in MP
The project involves complex planning and legal matters. Victoria has had the benefit of training over many years from her father in these areas particularly in relation to legal matters. She has been a great help to me and carried out a lot of work on my behalf.
20. I do not pay Victoria for the assistance that she gives me
She assists me with my work on the MP project in exchange for the allowance that I pay her of £30,000 per annum and, of course, in exchange for my assistance with the children. I see no reason why I should also pay her for the work she helps me with in relation to MP. Victoria is extremely grateful for my support and has always been keen to do what she can to help me in return."
- It is clear from the above passages that the written position of Mary before the hearing was different from that of Mike in two significant respects. First, she said at paragraph 18 that Mike will definitely stop the allowance, but that she "may, or may not" keep paying it. Second, in the case of Mary, unlike Mike, Victoria provides services to her business "in return" or "in exchange" for an allowance.
- During her oral evidence, towards the end of the hearing, and after having observed the evidence of Mike, Mary said "I decided the day before yesterday I will not go on paying the allowance if there is a sale." She referred to the upheaval for the children in particular of a sale and said "It's not right." Later she said "I want to back my ex-husband because I think he is right. It is a matter of principle."
- However Mary also said that she does not do a levelling up between Victoria and Adam. She pays what she can when they need it. If she were to sell the MP development "I might give Victoria some money if she needs it." She also said that if she terminates the allowance "I might have to pay her a wage. I will have to think about that one."
- Mary also said that, in contrast with Mike, her relationship with Frankie had been very good.
- In the case of Mary, I consider on a balance of probability that, when it came to it, she would in fact continue to pay the allowance she currently pays even if there is a sale of Connaught Square. I do not question the sincerity of her oral evidence at the time she gave it. But there are many points of difference between her and Mike. Her position was very recent, formed only during the hearing and expressed after just listening to the trenchant evidence of Mike. She is a less hard and determined person than Mike. Her attitude is concerned less with patrimony and more with helping her children when they need it. The promise was not given to her but to him, and she was not the donor of Connaught Square. She is much more involved than Mike in the daily life of Victoria and the children. Finally, it is obviously significant that Victoria performs many services for Mary. If Mary stopped the allowance she would inevitably have to pay Victoria for the services.
- I proceed, therefore, on the basis that even if Connaught Square is sold Victoria will continue to receive the current allowance of £30,000 per annum from her mother. Mr Marks made a somewhat curious submission that if I reached that conclusion in relation to Mary, it somehow impacts upon the decision in relation to Mike. I do not think that it does. They are different personalities and, as indicated in paragraph 109 above, there are many points of difference between their respective situations.
Earnings and earning capacity
- Victoria has not been in paid employment since the marriage and, apart from her continuing to perform services for her mother, it is not suggested that she should now do so.
- Frankie was in paid employment before, and throughout most of, the marriage. His final annual salary at MPC was just under £50,000 per annum, at Glassworks £65,000, at UNIT £67,000, at Rushes £64,000 and at Prime Focus £62,000.
- Frankie has not had well paid employment since he was made redundant by Prime Focus in April 2012, now nearly 2 years ago. He says, although it is strongly denied, that Mike or Adam have been spreading bad gossip about him in the media and advertising industry such that he cannot now obtain further employment in that industry. Further, he says that his previous selling point was his contacts and clients and that these have now dwindled. He believes, therefore, that there is no longer a future for him in that industry and that he must branch out into a different field. He believes that he has a flair for art and has embarked on a modular degree course with the Open University. He hopes to complete this in the spring of 2017 at which point (but apparently not before) he would look for employment with an art gallery or auction house, or perhaps "doing fraud work with the police", or marketing art as an offshoot of a luxury brand such as Hermes or Louis Vuitton.
- During the course of Frankie's evidence I made a comment that, in the witness box, Frankie seemed to be something of a "broken reed". Victoria and her father later disagreed with that, saying that to them his demeanour appeared similar to what it has always normally been. Mike, in particular, considers that Frankie is once again being simply lazy and that if he chose to do so he could go out now and obtain employment in the advertising, media or post production field. He says that Frankie's main roles have been in client entertaining and that the idea that his employability depended on a client list is incorrect.
- I have to say that Frankie does not strike me as currently readily employable at any very high level. He is now aged 45. His mental health has been unstable and he has suffered depression. His employment CV is not impressive. The numerous changes of job have not been career progression but redundancies and, in the case of UNIT, dismissal. His qualifications are very few and he is not numerate. I am myself sceptical about the wisdom of spending three years on the art course and in the process accumulating yet further debts with a student loan. But he said in his Form E at paragraph 4.5(a) that if he did so "I anticipate that I will earn similar amounts to that earned in the media (perhaps £40,000 to £60,000 pa. gross) in other fields. It is likely to take me several years to reach this point."
- In my view he ought to be able to go out now and obtain employment grossing at any rate £30,000 per annum. Ignoring inflation, that would equate to £600,000 over his normal remaining period of employment to, say, 65. If, alternatively, he is able to improve his prospects to at least £50,000 per annum starting in 3½ years time, then he would gross over £800,000 by the age of 65. That being so, I will treat him as a man who could earn £30,000 relatively soon; or whose current earning capacity is low (a maximum of £10,000 per annum), whilst he also pursues his course, but who can gross at least £50,000 per annum from September 2017.
Matrimonial Causes Act 1973, section 25
- It is my statutory duty to apply section 25 of the Matrimonial Causes Act 1973. So far as material that provides as follows:-
"(1) 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 eighteen.
(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 the 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 contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
(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. "
- Although there is no claim by Frankie on behalf of the children, it is relevant that in relation to the children section 25(3)(d) requires the court to have regard to "the manner in which he was being and in which the parties expected him to be educated or trained."
- A highly relevant circumstance of the case in this case is, of course, the fact of the agreements and the promise, and the history in relation to them. At this stage, however, it is convenient to address and have regard to the relevant matters listed in section 25(2). After the above detailed narrative, I can now do so quite briefly, in a somewhat shorthand fashion, without in any way diminishing the importance of the statutory matters.
- (a) Resources Victoria has no earned income. She currently receives the allowances totalling £81,000 per annum and payment of all school fees. If an order is made which forces her to sell Connaught Square (as any order inevitably will do) her allowances will reduce at once to £30,000 per annum, and payment of the school fees will cease. Victoria has no earning capacity. Since I have concluded that her mother will continue to pay her allowance, she must, of course, continue to perform unpaid service for her mother and could not work for anyone else. Frankie could earn a maximum of about £30,000 per annum relatively soon; or about £10,000 per annum gross at the moment and £50,000 per annum from September 2017. Once Westbourne Terrace is sold, they will both have no other income. Frankie will have net debts of £226,000. Victoria will have the equity in Connaught Square of £6,740,000 and net debts of currently around zero. In each case their debts are rising fast with high rates of interest. Whilst the summaries of Victoria's assets in each of the agreements all refer to her having "substantial inheritance prospects from parents", I cannot take those into account as resources which she is "likely to have in the foreseeable future." Her father's current actuarial life expectancy is about a further 16 years. Her mother's is over 20. I do not know their current testamentary intentions and they may change. Mike said that his will has been changed since 2009. I leave possible future inheritance entirely out of account, and patently it could do nothing to meet the needs of either Victoria or Frankie now.
- (b) Needs etc They do both need a suitable home in which to live. Victoria has one. Frankie does not. He has only been able to afford to rent Leinster Square because of an increase in his Novitas litigation loan. Patently he cannot raise a mortgage or buy anywhere at all without funds from Victoria. On his current and medium term income he has no capacity to rent anywhere which bears the slightest relationship in location, size or quality with Connaught Square or any alternative home that Victoria conceivably might buy. I will refer to the cost of alternative homes for each of them at paragraphs 156 and 165 below.
- The reality of this case is that the entire financial responsibility for the children will be borne by Victoria, with the allowances from both her parents if she does not sell, and from her mother alone if she does.
- (c) The standard of living This was high. They lived in a large and fine house in Connaught Square. They had good and expensive foreign holidays. They had a nanny for their children. They frequently ate out at expensive restaurants. They had a Porsche Cayenne car.
- (d) Ages and duration Frankie is 45. Victoria is 37. I treat the duration of the marriage as 8 years from the start of cohabitation in summer 2004 until the separation in November 2012. Although not especially long, it cannot be characterised as "a short marriage".
- (e) Disability Neither has any physical disability. Each has experienced mental ill health or frailty. Victoria was an in-patient for three months in early 2009. Frankie has received psychiatric investigation and treatment, and at paragraph 5 of her statement in support of the application for an injunction on 1 March 2013 Victoria wrote "[Frankie] has been emotionally vulnerable and distressed for a number of years."
- (f) Contributions Until the separation, each played their part to the full as involved and committed parents. Since the injunction in March 2013 Frankie has, to his great regret, been restricted in the amount of time he can spend with the children and, because of his lack of accommodation, can only have them to stay for short periods. In their closing documents Mr Marks and Miss Faggionato produced a schedule headed "Limata Revenue Contributions (approx)." This was designed to show that from his earnings when working, and an inheritance from his grandfather (£160,000) and other sources, the total financial contribution of Frankie was similar to the "non-property" contribution of Victoria, crediting to her the value of the allowances paid by her parents, plus the school fees and many of the holidays for which they paid. Mr Marks said in his closing oral submissions "the non-property contributions are pretty well the same." Although it is the view of Victoria and Mike that actually Frankie frittered much of his money on himself or wasteful luxuries such as the Porsche, I am prepared to accept that overall submission of Mr Marks. What it leaves out of account, of course, is the property contribution of Victoria. The lifestyle could never have been funded by Frankie and, viewing the marriage as a whole, the total financial contribution made by Victoria dwarfed that made by Frankie. It has been calculated that the net value of all the capital gifts made by her parents was of the order of £3.7 million, now of course worth almost double that. Further, the entire future financial contribution to the needs and welfare of the children will inevitably be made by Victoria.
- (g) Conduct The signing of the agreements could of course be viewed as "conduct". I will treat them as part of all the other circumstances of the case. There is no other conduct by either party in the sense of paragraph (g) which it would be inequitable to disregard.
- (h) Loss of benefits There is no loss of benefit by either party in the sense of paragraph (h).
MCA section 25(1) and the agreements
- There is no doubt that the decision of the Supreme Court in Granatino v Radmacher  UKSC 42,  1 AC 534 represented, and now requires, a significant shift in the approach to, and weight to be given to, negotiated, drafted and freely signed nuptial agreements of the kinds in the present case when there is no vitiating factor.
- I said at the outset of this judgment that the law is not difficult to state. Such agreements must always be given weight, and often decisive weight as part of the circumstances of the case. They may affect not only whether to make any award at all, but also the size and the structure of any award. I could at this point cite passages from the majority judgment in Granatino v Radmacher but, helpfully, all three counsel have agreed the following propositions of law which are drawn from Granatino v Radmacher and which I gratefully adopt. (They were first drafted by Mr Marks and Miss Faggionato, but I quote them with the additions made by Mr Howard.)
1. It is the court, and not the parties, that decides the ultimate question of what provision is to be made;
2. The over-arching criterion remains the search for 'fairness', in accordance with section 25 as explained by the House of Lords in Miller/McFarlane (i.e. needs, sharing and compensation). But an agreement is capable of altering what is fair, including in relation to 'need';
3. An agreement (assuming it is not 'impugned' for procedural unfairness, such as duress) should be given weight in that process, although that weight may be anything from slight to decisive in an appropriate case;
4. The weight to be given to an agreement may be enhanced or reduced by a variety of factors;
5. Effect should be given to an agreement that is entered into freely with full appreciation of the implications unless in the circumstances prevailing it would not be fair to hold the parties to that agreement. i.e. There is at least a burden on the husband to show that the agreement should not prevail;
6. Whether it will 'not be fair to hold the parties to the agreement' will necessarily depend on the facts, but some guidance can be given:
i) A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children;
ii) Respect for autonomy, including a decision as to the manner in which their financial affairs should be regulated, may be particularly relevant where the agreement addresses the existing circumstances and not merely the contingencies of an uncertain future;
iii) There is nothing inherently unfair in an agreement making provision dealing with existing non-marital property including anticipated future receipts, and there may be good objective justifications for it, such as obligations towards family members;
iv) The longer the marriage has lasted the more likely it is that events have rendered what might have seemed fair at the time of the making of the agreement unfair now, particularly if the position is not as envisaged;
v) It is unlikely to be fair that one party is left in a predicament of real need while the other has 'a sufficiency or more';
vi) Where each party is able to meet his or her needs, fairness may well not require a departure from the agreement.
- In elaboration of proposition 6(i) above, I should stress that part of the express statutory duty of the court under section 25(1) is to give first consideration to the welfare while a minor of any child of the family who has not attained the age of eighteen. As in Granatino v Radmacher, the children in the present case spend time with each of their parents, and the financial circumstances of each of their parents are likely to impact upon their welfare. The facts of the two cases differ markedly Mrs Radmacher was far, far richer than is Victoria but in Granatino v Radmacher quite significant financial provision was made for the husband, in his role as father, until the younger child attained 22. In that case, however, the children were broadly evenly residing with each of the parents.
- To counsel's propositions of law I add one other, which needs no citation of authority. The court must be scrupulous to avoid gender discrimination or gender bias. Of course gender may, and often does, impact heavily on outcome. If in fact a wife, in her role as mother, is the primary carer for the children, then her need for secure and suitable accommodation may outweigh that of the husband. If a wife, due to her commitments to caring for the children, is less able to work than is the husband, than that is likely to impact upon maintenance needs. So, too, if it is a fact of a case that a wife has lower earning capacity because of gender discrimination in the relevant employment markets. But there must be no discrimination or bias based on gender alone, nor on any stereotypical view that a wife may be dependent upon her husband but not vice versa.
Performing the balance
- There is no doubt that very great weight indeed should be given to the agreements in this case. There are no vitiating factors such as duress or non-disclosure. They were entered into freely by a mature man after expert legal advice. The agreements each contemplated that there would be one or more children (Victoria was pregnant with their first child at the time of the PMA, and with their second at the time of the SSA). By the time of the gift of Connaught Square, the valuable asset now in point, there had been not just one but three agreements, each reinforcing the first. Mike would never have given Connaught Square to Victoria but for the agreements, and Frankie knew it. In this regard I reject Mr Marks' closing submission that three signatures and three agreements "are only the same as one". That might be true about three documents all signed at the same time. But it is, in my view, highly significant that Frankie repeatedly signed three agreements spaced out over 2½ years, and well aware how much fresh reliance was being placed upon each. Frankie was not "lying" (as Mike would have it) when he signed each of the agreements. He absolutely intended to be bound by them. If I make any award at all, that will inevitably trigger a sale of Connaught Square, for Victoria now has no means at all except for Connaught Square (unless Mike and/or Mary very fundamentally change their present positions, which I do not expect, and make more capital available). A sale and trade down to a smaller home, in a less expensive and less central area of London, and probably at a much further distance from the children's schools, would inevitably be de-stabilising for the children (whose welfare is the first consideration) and mean an overall reduction in the living standards to which they are accustomed, living with their mother. There is the additional and very cogent fact in this case that if I make any award at all, thereby triggering sale, there will be an immediate and dramatic reduction in Victoria's income stream of £51,000 per annum plus all the school fees.
- Frankie has no claim at all based on contributions, compensation or sharing. Victoria has already made by far the greater contribution, when the gifted properties are taken into account (exceeding that of Frankie by about £3.7 million). At the time of the marriage Frankie's only asset was the equity in Eastlake House, believed in the PMA to be £50,000 less costs of sale, and in the event £30,000 when it was sold. On the date of final breakdown, in early March 2013, he had a share in Westbourne Terrace, then estimated by him in his Form E to be worth about £277,000 less CGT. His debts then, other than costs, were about £50,000. So he was in surplus by at least £200,000. That he now has a net debt of £226,000 is almost entirely attributable to the costs of these proceedings. There is nothing to compensate. There is nothing to share, for there is now no remaining matrimonial acquest apart from Westbourne Terrace. So Mr Howard asks rhetorically, and with considerable force, if the agreements do not prevail in this case, when could agreements of this kind ever prevail, notwithstanding all that was said in Granatino v Radmacher with regard, in particular, to autonomy and reliance?
- In Granatino v Radmacher at paragraph 72 the Supreme Court commented "Another important factor may be whether the marriage would have gone ahead without an agreement, or without the terms which had been agreed. This may cut either way." But Mr Howard submits with force that if Victoria cannot rely on the agreements even on the facts of this case, then the richer party may in future be strongly deterred from marrying at all.
- And if benevolent parents wish to provide gifts to their child, but not to his or her spouse, how (in the absence of any legislative change) can they ever safely do so in reliance upon agreements of this kind if they do not prevail in this case?
- These are all very powerful arguments and submissions, and I perfectly understood the position of Mike when he said during his evidence that it would be outrageous if the court made an order at all.
- On the facts of this case there is only one consideration which is capable of outweighing the above considerations and capable of having the effect that the agreements should not be applied rigorously and to the letter. That consideration is current and likely future need. During the course of his oral argument Mr Marks submitted that "needs trump the agreement(s)". I profoundly disagree with that submission. There is no question of needs being a "trump card". They may, however, outweigh the fact of an agreement in the overall circumstances of a particular case.
- At paragraph 73 of their judgment in Granatino v Radmacher, the Supreme Court said: "If the terms of the agreement are unfair from the start, this will reduce its weight, although this question will be subsumed in practice in the question of whether the agreement operates unfairly having regard to the circumstances prevailing at the time of the breakdown of the marriage." The weakness, or even unfairness, of the agreements from the start in the present case was that they provided nothing at all for Frankie in any circumstances, no matter how long the marriage may have lasted nor how great his need upon breakdown. They made no attempt, for instance by a formula or by some reference to house price indices, to pre-assess any provision for his own accommodation or needs in the event of breakdown, perhaps after many years of dependence by him upon Victoria for his accommodation. As indicated in paragraph 73 of Granatino v Radmacher, however, it is upon the present circumstances that I now focus.
- At paragraph 75 of their judgment in Granatino v Radmacher the Supreme Court said:
"The problem arises where the agreement makes provisions that conflict with what the court would otherwise consider to be the requirements of fairness. The fact of the agreement is capable of altering what is fair. It is an important factor to be weighed in the balance
The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing [which clearly include the fact and content of the agreement] it would not be fair to hold the parties to their agreement. That leaves outstanding the difficult questions of the circumstance in which it will not be fair to hold the parties to their agreement."
- After then referring to the impact of children (paragraph 77), autonomy (paragraph 78), non-matrimonial property (paragraph 79), and unforeseen future circumstances (paragraph 80), the court said at paragraphs 81 and 82:
which can most readily render it unfair to hold the parties to an ante-nuptial agreement. The parties are unlikely to have intended that their ante-nuptial agreement should result, in the event of the marriage breaking up, in one party being left in a predicament of real need, while the other enjoys a sufficiency or more, and such a result is likely to render it unfair to hold the parties to their agreement
Where, however, these considerations do not apply and each party is in a position to meet his or her needs, fairness may well not require a departure from their agreement
- In that passage I emphasise the phrases and the contrast between "one party being left in a predicament of real need", while the other "enjoys a sufficiency or more." That does seem to me to encapsulate the respective present positions of the parties in this case.
- The plain fact is that over the period since 2006, when the parties moved from the jointly owned Westbourne Terrace to Avonmore Road, solely owned by Victoria, a situation developed in which Frankie became completely dependent upon Victoria for provision of his home. He is now, on any view, and in the context of this case, in a "predicament of real need". He has no home, no current income, no capital, considerable debts, and absolutely no further borrowing capacity. Although he is temporarily housed in Leinster Square, he currently has no prospect of paying the rent again when his up-front payment (all borrowed) for six months ends in May. Victoria, by contrast, does have "a sufficiency", if not more. All her capital is, of course, currently tied up in her home, but the contrast between a wife on the one hand with net worth of £6.7 million, and a husband on the other with net debts of £226,000 is striking and bleak. This is a situation in which, in the words of the Supreme Court at paragraph 75: "
the agreement makes provisions that conflict with what the court would otherwise consider to be the requirements of fairness." In the absence of the agreements it is inconceivable that any court would not make a substantial award to the husband. Further, if all the facts were the same but the genders reversed, it is, in my view, inconceivable that the agreements would outweigh making a substantial award to the wife, even if the children were primarily living with the husband and only intermittently staying with her.
- By section 25(1) I must give first consideration to the welfare, while minors, of the children. At paragraph 77 of Granatino v Radmacher the Supreme Court said: "A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children of the family." The position and welfare of the children undoubtedly cuts both ways in this case. Mary expressed her shock and disgust at Frankie seeking "to evict" his children from their home. Any order at all will undoubtedly require the damaging upheavals of sale, moving to a smaller house in a less fashionable and less central location, and either a change of schools or much longer journey times to and from schools. But if there is no provision for Frankie at all, then the damaging situation will persist, almost certainly throughout their childhoods, that they live with their mother in relative luxury and see and stay (if at all) with their father in relative penury. Even if not in his capacity as a former husband, then certainly in his role as a loving and committed father, Frankie has a very pressing need for secure accommodation in which he can accommodate all three children together and which does not demean him too much relative to their mother.
- It is scarcely necessary to cite any authority for the importance, when achievable, of each of the two parents having at least adequate homes in which their children can visit them and stay. That has been clearly recognised in the approach to matrimonial financial cases throughout my time as a family lawyer, now over forty years. But, if any citation be necessary, I quote the words of a wise judge, Sheldon J., in Cartwright v Cartwright (1983) 4 FLR 463 at 471 where he said:
when considering the financial background of the parties, the standard of life that they and the children have been accustomed to, and that the children will undoubtedly continue to enjoy while living with [their mother], I am of the opinion that it is of importance to the children, to their enjoyment of their father's company and of their visits to him, as well as to the maintenance of good relations between them, that he too should have a settled and secure home to which they can come
- In M v B (Ancillary proceedings: lump sum)  1 FLR 53, the facts were very different and there were no nuptial agreements. But in a now famous passage Thorpe LJ said at page 60 E G:
it is of importance, albeit of lesser importance, that the other parent should have a home of his own where the children can enjoy their contact time with him
in any case where there is
the possibility of a division to enable both to rehouse themselves, that is an exceptionally important consideration
- I highlight, too, the passage in the judgment of Baroness Hale of Richmond in Granatino v Radmacher at paragraph 190, where she said "
since there are ample means available to enable them to do so, the children should be able to enjoy the same standard of living while they are with their father as they have when they are with their mother
- The present case is markedly different from Granatino v Radmacher. There, the means of the wife were so great that suitable provision could be made for the father to accommodate the children without impacting in the slightest on the life style and accommodation provided by the mother. Here, as I have said, there would be upheaval. Nevertheless I have concluded that the need to provide an adequate home in which the children can visit and stay with their father is very important and, insofar as the balance of welfare considerations is concerned, does outweigh the upheaval. As I will later describe, adequate accommodation can be provided for the children when with their father whilst still preserving their security, their private schooling and comfortable, albeit reduced, accommodation with their mother.
- The welfare of the children is not the paramount consideration, but only the first consideration. But their overall welfare is better safeguarded and promoted by making some award to their father.
- For these reasons I have concluded that notwithstanding the fact and terms of the three agreements I must make some capital provision for Frankie. If any provision is made at all, then, if the purpose of adequate housing is to be achieved, that provision will necessarily have to be measured in many hundreds of thousand pounds. There is no room and no purpose in this case for an award merely of a low number of hundreds of thousands. That much is clearly recognised by and on behalf of Victoria. In her open proposal dated 4 February 2014, immediately before the hearing, now at bundle A/C 36, her primary position was, as it remains, to offer nothing. But her fall-back position, in the "scenario" that the court does make any capital provision, is to propose up to £850,000 being used to purchase a property for the use of Frankie until the later of the youngest child attaining 18 or completing a university first degree.
Duration and terms
- Before discussing figures, I now consider the duration and broad terms of any provision. This was the issue upon which Baroness Hale of Richmond disagreed with all the other Justices of the Supreme Court and, indeed, the Court of Appeal in Granatino v Radmacher. The majority upheld the decision of the Court of Appeal that the housing element of the award should end and revert to the wife when the younger child (they had two) attained the age of 22. Baroness Hale of Richmond said at paragraph 191:
"The issue is whether this should all come to an abrupt end when the youngest child grows up
Married parents are different, in that the court has power to make provision, not only for the child, but also for the parent. There is no reason in principle why the court should limit its support in the same way that it has to limit its support for the unmarried parent. Quite the reverse: this is what distinguishes marriage from cohabitation in our law. Where parents are married, the court can look beyond the needs of the child while growing up and look independently at the needs of the parent, and in particular those generated as a result of parenthood. Not only this, these days parents often expect to be a resource for their grown-up children, a base to which they can return and a source of the unconditional love and support which is what parenthood is all about."
- Baroness Hale would accordingly have enabled the husband to use his English home for life (paragraph 194). Upon the facts of that case, the rest of the court disagreed.
- There are two important differences in the facts between those in Granatino v Radmacher and those in this case. In that case, when the younger child attains 22 the husband will be aged about 54 or 55. In the present case, the husband will be a decade older. When their younger son attains 22 Frankie will be one month short of 65. In that case, the husband is "extremely able and has added to his qualifications by pursuing a D Phil in biotechnology" (paragraph 119). In the present case, Frankie is much less able and his capacity to make any provision at all for his older age and retirement is highly speculative and, frankly, very doubtful.
- For these reasons, but still affording as much weight as possible to the fact and contents of the agreements, I have concluded that there must be a stepped approach to provision of a housing fund. A larger fund is required until the youngest surviving child attains the age of 22, during a period when the children may be expected to stay frequently, and together, with their father. At that point capital must be released back to Victoria (or her nominee). But it could not be right or fair on the facts of this case to leave Frankie homeless and possibly a burden on the state at the age of 65. Further, although the rest of the Supreme Court did not agree with Baroness Hale on the facts of Granatino v Radmacher, her words in paragraph 191, quoted above, still resonate with force. Parenthood does not end when a child attains 18 or even 22. Frankie will still need some home at which the children can visit him and which they can view as a base with their father. But it can be a smaller and perhaps less well located one. It could indeed be highly damaging to the children, on the threshold of adult independence, to see their father effectively "evicted" (to borrow Mary's phrase) and homeless just as he himself reaches retirement and older age. Further, section 25(2)(f) expressly refers to "the contributions which each of the parents
is likely in the foreseeable future to make to the welfare of the family
" It is likely that Frankie, as father, no less than Victoria, as mother, will make a very significant contribution to the welfare, though not the finances, of the children for many years to come.
- I intend by this judgment to express the outcome only broadly. I will leave it to the parties in the first instance to decide how to give effect to it, especially as there may be more or less tax efficient ways of lawfully doing so.
- Frankie's most pressing need is for an adequate home where, during their education, including likely university education, the children can regularly stay with him. Each side has produced ranges of property particulars designed respectively to augment their own need and to depress that of the other. I have given careful consideration to all these particulars but, in the end, outcome is driven by available resources more than by either side's wish list. I am satisfied that an adequate 3 bedroomed house can be bought for a gross price of £900,000, and, as will be seen, that no more than that can fairly and sensibly be made available. Compromises will have to be made between size and location, and the essential choice will be with Frankie. But for the agreements, I would have awarded that sum (and more) outright as a housing sum. But in order to give as much weight as possible to the agreements Frankie can only have the use and not the ownership of the property.
- Victoria must therefore produce funds for (i) the purchase of a house (or flat, if he prefers) for the use of Frankie at a gross price (subject to paragraph 167 below) not exceeding £900,000, and (ii) non-returnably, the necessary legal costs of purchase, including stamp duty.
- When the youngest surviving child attains the age of 22 (or on earlier further order, on application by Victoria, if there should be some significant and unforeseen change in Frankie's circumstances), that property must be sold. Forty-five per cent of the net proceeds must at that point revert to Victoria or her nominee. The balance must be reinvested in a smaller home (probably a flat) for the use of Frankie for the rest of his life (or earlier further order as above). The purchase costs of the new home, including stamp duty, must be met out of the net proceeds of the previous one, which is why I am providing for 45 per cent to revert and 55 per cent to be retained. Ignoring property inflation, it should be possible to purchase at around £450,000. Frankie may have to move to a less prosperous or less central area, but, at present property values, he can unquestionably find a small flat for himself at that sum.
- Victoria must in addition make outright capital provision for Frankie in the aggregate of the following components (i) the amount actually required to discharge his actual liability to CGT upon the sale of Westbourne Terrace; and (ii) £435,000, being his current debts per the revised asset schedule dated 18.02.14, but less the figure of £19,819 included in that schedule for estimated CGT (now provided for by (i) above); and (iii) £40,000, for the purchase of furniture, furnishings and a second hand car, and for general moving-in expenses; and (iv) £25,000 which I allow towards rent and living expenses while he resettles; and (v) the interest actually incurred on his Novitas loan between now and the date of payment; but (vi) less the amount actually receivable by Frankie as his share of the net proceeds of sale of Westbourne Terrace.
- On present figures that will require Victoria to produce £20,000 (CGT), plus £435,000 (to clear debts), plus £40,000 (for furniture and car), plus £25,000 (for interim support), minus £228,000, or a net £292,000.
- The justification and necessity for each of the above components is as follows. There is simply no point in providing a home for Frankie but leaving him with enormous debts which he has no prospect at all of servicing or repaying. If his debts are not paid there is a real risk of bankruptcy, and he has to be enabled to start with a clean sheet. I appreciate, of course, that the bulk of his debts are costs. His most pressing need at the moment, apart from a home, is to have those debts paid. In a needs based exercise such as this, costs are a debt which simply have to be paid. The CGT must be paid, but instead of making some estimated provision for it, it is more sensible and fair that Victoria should simply pay the assessed amount whatever that may be. Frankie has no furniture and will inevitably need to furnish a new home adequately to accommodate the children. He does not have a car but reasonably needs one for contact. The decision whether to continue in very low paid, part-time employment while he completes his course at the Open University, or to seek better employment now, is one for Frankie to make. The fact is that at the moment he has no real job. He will now be busy for a period finding and moving into a new home. He pressingly needs to be able to fund rent from May until a new home has been purchased. He needs the sum of £25,000 to tide him over. The escalating interest on the Novitas loan will have to be paid. He must of course credit the whole of the amount actually receivable by him when Westbourne Terrace is sold.
- The effect of the above is to require Victoria to produce in the near future £900,000 for housing (subject to paragraph 167 below), plus purchase costs, plus about £300,000, a total of about £1,240,000. That will leave to her £6,740,000 less £1,240,000, or about £5,500,000.
- The two elder children are at private schools and clearly both parents expected that all three would attend private schools throughout. Indeed Frankie hoped that his sons would go to Eton. It has been established that funding for the future education of all three children at good London private day schools will require a capital sum to be reserved now (and suitably invested) of about £1,100,000. Victoria will need to set that aside, thereby reducing her capital for other purposes to £4,400,000.
- Various calculations have been produced as to the capital that Victoria will need to set aside in order to provide for the needs of all the children during their childhoods and of herself for the remainder of her life expectancy of a little over 50 years. Mr Howard produced some calculations based on £50,000 a year for herself (indexed) for the rest of her life and £10,000 a year for each of the children (indexed) to the age of 23. The starting annual figures total £80,000 and obviously reflect the current level of the allowances. Mr Howard's figures were £1,250,000 for Victoria, £118,000 for the eldest child, £133,000 for the second, and £147,000 for the third, or £1,648,000 in total. Mr Marks and Miss Faggionato produced some calculations which assume that the needs of the children end at the age of 18 (after which student loans would be available to them) and that Mary will in fact, as I have held, continue to contribute £30,000 per annum for at least the next 10 years. On those assumptions Mr Marks' and Miss Faggionato's figure is £1,300,000.
- All these figures of course include huge elements of speculation. Further, the current allowances of £81,000 are being paid to meet the high costs of Connaught Square. It will be recalled that in the SSA there is express reference to Mike increasing his allowance "to cover the costs of Connaught Square." If Victoria has to trade down to a smaller house in a less expensive area her outgoings should reduce. Her reserves will in fact augment when she receives back 45 per cent of the net proceeds of sale when Frankie has to trade down. But on any view she would need to set aside at least £1,400,000 for future expenditure. That further reduces her capital to £3,000,000. Whilst it will obviously involve a considerable fall in her living standards, property particulars produced by Victoria herself, now at bundle G, do indicate that comfortable family houses in West London or South Hampstead can be bought for around that sum. I am therefore satisfied that if provision is made for Frankie as indicated above, sufficient will be left to Victoria to enable her to house and support herself and the children, and to educate the children, all still to a high and comfortable standard. It will be noted that the value of the housing contemplated for Frankie is about one third of that contemplated for Victoria.
- This is a decision and judgment based entirely upon the needs of Frankie, considered in conjunction with his role as father. Whilst not implementing the agreements, it still affords great weight to them. But for the agreements, I would have awarded a larger housing fund and the whole of it outright. As it is, all of it is provided only for a term, and much of it only during the dependency of the children. He only ever gets the use of it in the form of housing. He can never touch the capital.
- There is one qualification upon the figure of £900,000 for the purchase cost of a house. That is based upon current estimated net proceeds of Connaught Square. We are, however, in a period of apparently rapidly increasing house prices. If the £900,000 is provided before 30 June 2014, then it will remain as that fixed figure. If it is provided after that date, then the sum to be provided must be £900,000 plus X % x £900,000, where X % is the percentage increase between £6,950,000 (being the current estimated gross selling price of Connaught Square) and the actual gross selling price of Connaught Square. If Connaught Square sells for less than £6,950,000 there will be no reduction in the £900,000.
- There are many details now to be worked out as to implementation of the above. In view of the distinguished legal representation, and with the assistance of Mr Gollings, I am expecting that this will be done cooperatively and by agreement. If not, I will rule at a later hearing.
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