Family Law Hub

AF v MF & Ors [2016] EWFC 65

A complicated financial remedy judgment involving trusts, inherited assets, businesses and non-matrimonial property.

  • Neutral Citation Number: [2016] EWFC 65

    Case No: NP 15 D 01050

    IN THE HIGH COURT OF JUSTICE

    FAMILY DIVISION

    Royal Courts of Justice

    Strand, London, WC2A 2LL

    Date: 20/10/2016

    IMPORTANT NOTICE

    This judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment no person other than the advocates or the solicitors instructing them and other persons named in this version of the judgment may be identified by name or location and that in particular the anonymity of the parties and their children must be strictly preserved. All persons, including representatives of the media, must ensure that this condition is strictly complied with. Failure to do so will be a contempt of court and may be punished by a fine or imprisonment of up to two years.

    Neutral Citation Number: 2016 EWFC 65

    Case No: NP15D01050

    IN THE FAMILY COURT

    Cardiff Civil Justice Centre

    Date: 20th October 2016

    Before :

    Mr Justice Moor

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    Between :

    AF (Applicant)

    - and –

    MF (First Respondent)

    - and –

    OF (Second Respondent)

    - and –

    AB (Third Respondent)

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    Mr Justin Warshaw QC and Ms Natalie Sandercock for the Applicant

    Miss Deborah Bangay QC and Ms Emma Hargreaves for the First Respondent

    Mr Jonathan McDonagh for the Second Respondent

    The Third Respondent did not appear and was not represented

    Hearing dates: 10th to 20th October 2016

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    JUDGMENT

    Mr Justice Moor :

    1. I have been hearing cross financial remedy applications although the lead claim is made by the Applicant, AF following the breakdown of her marriage to the First Respondent, MF. I propose to refer to them respectively as the Wife and the Husband for reasons of convenience. I mean no disrespect to either by so doing.

    2. There are two other Respondents to the application. The Second Respondent is OF, the Husband's Father. The Third Respondent, AB is the trustee of a Liechtenstein Stiftung known as X or "the X Foundation". He has not submitted to the jurisdiction and has not, therefore, been present or represented in court.

    3. I heard oral evidence from the Wife, the Husband, the Husband's Father and the Husband's brother, QF.

    The Parties

    4. The Husband's Father was born on 23rd September 1926. He is therefore 90 years of age. He is from Country E and continues to reside in Country E with his wife, the Husband's mother. He travelled to Cardiff to give evidence in person. Although he is hard of hearing, he seemed in remarkably good health for someone of his age. He gave a spirited display and, although I will make my findings of fact in due course, he certainly gave the clear impression that he remained the patriarch of the family, with his fingers well and truly on the financial pulse.

    5. The Husband was born in April 1957 in Country E. He is therefore aged 59. He is now the deputy Chairman of Company Y Plc, a publicly quoted company on AIM. He now only holds 448 shares in the company in his name. There is, however, a significant issue as to a large number of shares held by X.

    6. The Wife was born in September 1957. She is therefore also aged 59. She is now a housewife. Prior to the birth of the children, she worked in a bank.

    7. The parties began to cohabit in 1980. They married in May 1987. On any view, this qualifies as a long marriage.

    The matrimonial home

    8. The former matrimonial home is a substantial property, known as SM in Cardiff. The house and land immediately surrounding it is held in the joint names of the Husband and Wife but there are two further parcels of land that are owned by X adjacent to the property and a third slightly further away. The previous house on the site was demolished and the current house built from scratch to the parties' specifications.

    9. The house is spread over some 7,000 square feet. It includes an indoor swimming pool and a gym as well as a self-contained two-bedroom flat. There is a stable block nearby as well as a "Show Home" that was built to demonstrate various energy saving techniques.

    10. The entire property was valued by Savills on 13th April 2016 at £1.75 million if it was in good order but at £1.6 million to reflect its current condition. Without the surrounding land, the value of the home itself would fall to £1.4 million given the disadvantage of not being able to engage in equestrian activities. The value falls to £1.25 million if the Show Home is also excluded. The market value of the two adjacent plots is £50,000 each. The third plot of land at P Farm, however, is worth £400,000.

    The children of the family

    11. There are two children of the family. T was born in 1988 and is therefore aged 27. I am told he has Aspergers and is dyslexic. He appears to have had a difficult progression from adolescence to adulthood. I heard a number of allegations during the case that did not go to his credit but I have not heard from him and therefore intend to be careful as to my findings. He has, though, not been successful in business to date. Most recently, he has been financed to a very significant extent in relation to a property development business. I will return to this in due course. I am told that he recently returned to live in the Show Home after a tenancy at a hotel in Cardiff came to an end. It had been paid for by the Husband's Father to the tune of around £1,800 per month.

    12. U was born in 1990. She is therefore aged 26. She is employed by one of the family businesses and lives in a property with her boyfriend that was financed for her by the Husband/his Father. Again, I will return to this in due course.

    The development of the businesses

    13. In considering the relevant chronology, it is necessary to go back as far as 20th September 1967 when the Husband's Father incorporated two entities, X AG and Z AG. The point has repeatedly been made that the Husband was only ten years of age at that time.

    14. In 1975, the Husband left Country E. Initially, he studied in Switzerland and then in Boston, USA. Thereafter, however, he decided to stay abroad to make his fortune. It is clear that the crippling taxation regime in Country E played a large part in the decision. Indeed, I was told that his older brother, QF had moved separately to Switzerland. The Husband came to Wales. Whilst I am satisfied it was his decision, it is clear that his Father was heavily involved in the matter.

    15. The Husband's Father ran a business known as F Co in Country E. It is involved in a very similar business to Y Plc. It is clear that the availability of substantial grants in Wales to those wishing to set up manufacturing businesses formed an important part in the thinking of commencing Y Plc here. Machinery was shipped from Country E and an off-the-shelf company, G Ltd was purchased in 1978 by X AG.

    16. The Husband was appointed Chairman of the new company, which changed its name in April 1979 to H Ltd. The Husband held one share out of 5,000. X AG held the other 4,999 shares. He was then employed as Managing Director. There has been much debate as to whether the Husband or his Father was the "founder" of H Ltd. It is certainly true that the UK publicity for the business has repeatedly referred to the Husband as the founder.

    17. Another executive, LM worked with the Husband in H Ltd and in two other ventures. The first was a company eventually called I Ltd which appears to have been owned as to 25% each by the Husband and LM with the other 50% held offshore. The third business, J Ltd was owned 50% each by the Husband and LM. Finally, K Ltd was also trading in Wales. It now appears that this was operated by the Husband's brother, QF with a family called R.

    18. In April 1989, H Ltd changed its name to Y Ltd. The X Foundation was set up by the Husband's Father in Liechtenstein in December 1989. All the shares in X AG were subsequently transferred to the Foundation. AB and a CD, who has since retired, were appointed as members of the Board of the Foundation. At the same time, a second Foundation known as V AG was also founded. It subsequently changed its name to the Z Foundation.

    19. By 1993, it is clear that all those involved were beginning to make the arrangements to enable Y Ltd to be floated as a public company. Other than K Ltd, the various companies were consolidated into one. Indeed, in March 1993, Y Ltd purchased the 50% of I Ltd owned by the X Foundation for £412,500. Y Plc achieved its AIM listing in 1995.

    20. The Annual Return of Y Plc for the year 2000 showed the Husband as owning 1,286,790 shares. X AG had 21,814,200 shares. Z AG had 3,975,000 and LM Holdings Ltd (LM) had 3,300,000.

    21. It certainly appears that, in the early years, the X Foundation operated without by-laws. I was told that CD and AB requested that this be corrected. On 27th November 2003, the Husband's Father sent a letter of wishes in relation to the X Foundation. In essence, this letter was converted into the by-laws of the Foundation which are dated 3rd December 2003. The primary beneficiaries were stated to be the Husband and the children of the family. The Wife was not a beneficiary. The secondary beneficiaries were QF and his children. Up to 90% of the Foundation's funds were to be used to support the progress and development of F Family Companies. 10% was to be available for investment in private residential properties, boats etc and in other types of private facilities customarily used and enjoyed by the members of the F Family (by-law 1). The assets must, however, be wholly owned by the Foundation and, if sold, all the income of the sale must go back into the Foundation. By-law 2 provides that 80% of the income was to be retained by the Foundation. There was a discretion to benefit the primary beneficiaries with up to 20% of the income by loan or outright appointment to assist them in the purchase in the name of the Foundation of residential property for their occupation or in the purchase of other private items which may assist them in maintaining their established standard of living. The Husband was able to receive £25,000 pa and £50,000 pa whilst he remained working full-time for Y Plc. The children were able to be supported up to £50,000 pa from the age of 30. Prior to that, there was to be a maintenance fund for their exclusive benefit but there could be no capital distribution prior to the age of 30.

    Property purchases

    22. The first matrimonial home, MH1, was purchased in the Husband's name for £132,500 in 1986. In 1992, a Summer House was purchased in the parties' joint names in Country E.

    23. In June 1993, land to the North and West of P Farm was acquired in the name of the X Foundation. In around 1995, land at SM was purchased by an entity called the H Settlement for £150,000. The Wife claims the Husband presented her with the property, wrapped in a red ribbon on her birthday in 1996. In December 1996, an application was made for planning permission for a new property on the land. In December 1997, the land on which the matrimonial home itself sits was transferred into the joint names of the Husband and Wife for £125,000. The property on the land was then demolished before a new property was built at a cost of approximately £2 million. The Husband sold shares in Y Plc to fund the works.

    24. In January 2003, an apartment was purchased in Country E. The money to fund the purchase came from the Husband's Father. The register shows that the Husband owns 10% whereas his Father has 90%. There is little doubt that the property was purchased primarily for the use of the Husband and Wife. Indeed, the Husband's father has never slept there. At some point in 2003, the former matrimonial home, MH1, was sold. Thereafter, between £300,000 and £350,000 of the sale proceeds was used to renovate the Country E flat. The Wife makes the point that this was an unusual use of the proceeds if the flat was truly owned as to 90% by the Husband's Father.

    25. In December 2003, some further land at B Farm, which is adjacent to SM was purchased by X. Subsequently, in early 2005, X was registered as the proprietors of the other parcels of land surrounding the matrimonial home. The matrimonial home itself remained in the joint names of the parties. In August 2004, the parties decided they would like to acquire a number of timeshares in the Bahamas. These were also purchased in the name of X, which provided the purchase money.

    Difficulties in the marriage

    26. In November 2000, the Wife says she discovered that the Husband was having an affair with his personal assistant. The parties undertook marriage guidance counselling and the marriage continued but, on 20th March 2002, the Husband had a consultation with Mr Nicholas Mostyn QC, as he then was. During the course of the oral evidence, the Husband offered to waive privilege as to the reason for the consultation with leading counsel. Mr Warshaw QC, acting with Ms Sandercock for the Wife, argued that, if he waived privilege in relation to that, he would have waived privilege in relation to all advice that he has received. I declined to rule on that at the time, saying I would return to it later once research had been carried out on the law. In fact, I was never asked to return to the issue. Miss Bangay QC, acting with Ms Hargreaves for the Husband, relies on the Husband's willingness to waive privilege as an indication as to his bona fides. In any event, I remind myself that legal professional privilege is an absolute right and it is quite impermissible for me to draw any inference or conclusion from the fact that I have not seen an attendance note of the consultation.

    The transfer of shares in Y Plc

    27. In May 2005, the Husband transferred 900,790 shares in Y Plc to a trust for the children of the family. This left him with only 448 shares in his sole name. At the time, Y Plc was making good profits and paying significant dividends. For a couple of years, the dividends were used to pay U's school fees as a boarder, although the Husband was taxed on the income as he was the settlor of the trust. The Wife has been very exercised as to this transfer, believing it was done to defeat her claim for financial provision. She has not, in fact, applied pursuant to section 37 of the Matrimonial Causes Act 1973 to set aside the disposition and she clearly feels reluctant to do so, given that the children are the beneficiaries of the Trust. The children have not therefore been joined as parties although I did read a statement from U that was produced by her grandfather's legal team. I will have to return to this issue in due course but a secondary argument advanced on behalf of the Wife is that the Husband would only transfer such a high proportion of his shares if he knew that the shares in X were his resource. His response is that he did this solely for reasons of Inheritance Tax planning and that it was something that the Wife's parents had done for her. The CW Trust was subsequently "exported" to Liechtenstein in April 2008 and CD and AB became the new trustees, replacing the Husband.

    The economic crash

    28. In 2007/2008, the economy went into a deep recession. The share price of Y Plc crashed from several pounds to a few pence. The Board took action. LM left the company. The Husband was dismissed as Chief Executive Officer and appointed non-executive Deputy Chairman on a much reduced financial package. His remuneration package reduced to approximately £90,000 pa gross. It may well be that the fact that the F Family still controlled over 40% of the shares in the business saved the Husband from complete dismissal.

    29. Prior to his dismissal, the Husband had been earning around £350,000 pa gross as Chief Executive. He was also receiving £75,000 pa from X paid offshore via credit cards, giving him a net income of around £300,000 pa after tax. Notwithstanding this, the family had incurred a very significant unsecured overdraft with HSBC. In early 2009, it was about £450,000. The Bank got nervous and required a charge against the matrimonial home. It is clear that the Wife refused. The Husband therefore made other arrangements. In June 2009, X bought art in the matrimonial home for £263,690 but the art remained in place. It was originally thought that this was the original cost of the art but it now appears that the art cost £148,675. It is unclear how the figure of £263,690 was agreed.

    30. Even so, this left a significant overdraft. On 9th September 2009, the Husband drew down £80,000 from his SIPP to reduce the overdraft further followed by an additional £50,000 on 5th October 2009. On 26th January 2010, he drew a further £31,396 from his pension and placed it in the joint account.

    31. At around the same time, the Show Home was built in the garden of the matrimonial home by a firm known as L Ltd. It appears that a grant was obtained from Welsh Ministers. They were originally given a charge over the jointly owned matrimonial home but I am satisfied that the charge is no longer operative. The Show Home was initially used as a school for dyslexic children. The Husband is also dyslexic and runs a charity to assist children with dyslexia.

    32. In December 2009, X AG transferred 20,310,400 shares in Y Plc to X Ltd (British Virgin Islands). The Wife contends this was done as there are virtually no reporting obligations in the BVI. The sister company, Z AG transferred 2,819,800 Y Plc shares at the same time to Z Ltd (BVI).

    33. I have already noted that the economic crash had serious consequences for Y Plc. A serious fraud had even worse consequences for K Ltd. It seems that the R family had managed to steal many millions of pounds from K Ltd without the F family or the auditors realising. Litigation ensued but it was only possible to recover £1.5 million and, even then, costs were incurred of approximately £1 million in doing so. For some reason, those responsible in the R family were not prosecuted which, on the evidence before me, is regrettable.

    34. The decision was taken that K Ltd could not be allowed to fail. It employed a significant number of people in Wales and traded with other F Group companies. The Husband says that X was approached but refused to assist. The Husband's father therefore provided, on 9th February 2011, loans of CHF 3.2 million and £7.4 million to the Husband and QF to save K Ltd. Until the oral evidence, I had not appreciated that QF had been running K Ltd. It appears that, initially, it was intended that the Husband would henceforth own the shares in K Ltd but in due course it was decided that the Husband and QF would have 50% each. The mechanism for doing so was by incorporating on 3rd March 2011 a company known as Z Holdings AG. The loan can truly be said to be "soft" in that it is interest free and is not repayable until 9th February 2021 and then only if K Ltd is in a position to do so. As K Ltd has now been valued at only £800,000 without taking any account of the loan, it is clear that the money really was lost.

    35. During 2012, the Husband continued to draw down from his savings/pensions. On 2nd May 2012, he drew £12,500 from his pension which was paid to the joint account. On 16th July 2012, he drew £46,806 from his ISA followed by a further £25,193 from the ISA on 18th July 2012. It appears this latter money was used to fund solar panels that were installed on the roof of K Ltd's premises.

    Financing the children

    36. In 2014, the decision was taken to assist both children in different ways. T was set up in a property development business and a property was purchased for U. It now appears that the Country E apartment was already subject to a mortgage in the sum of SEK 5.5 million, which had been taken out to invest in a business with a Mr B. In April 2014, SEK 8.7 million was borrowed on the property. After paying off the existing loan, SEK 3.159 million was transferred to the Husband's account with Handelsbanken. On 4th June 2014, the Husband's Father transferred a further SEK 7.5 million to the Husband's Handelsbanken account.

    37. The money was used to purchase U's home in Cardiff for £289,000 mortgage free. It is owned as to 90% by the Husband and 10% by U. It can be seen that this arrangement has a great deal in common with the way in which the Country E apartment was originally purchased. Initially, the Husband paid the outgoings but, more recently, U and her partner have taken them over. On 5th June 2014, the Husband loaned £533,000 to M Ltd for T's property development business. The sum of SEK 1.4 million was retained in the account to service the Handelsbanken loan. Subsequently, the Husband's Father has agreed to provide more funding to enable the purchase of two properties for development in Wales. I am told there is some matched bank funding but the Father has loaned two further sums, totalling over £1 million, namely £347,458 and £675,000.

    The breakdown of the marriage

    38. It appears that the Husband had moved out of the marital bedroom in 2008/2009 although his case is that this was just to ensure both parties got a good night's sleep and did not signal the end of the marriage. The Wife came to the conclusion that the marriage had irretrievably broken down in October 2014. She petitioned for divorce in May 2015. Voluntary Form Es were exchanged in the early part of 2015. The Husband's is dated 2nd February 2015 and was prepared by him as a litigant in person. It is in manuscript and it is accepted that it is a woefully inadequate document.

    The litigation

    39. The Husband issued a Form A on 3rd August 2015 with the Wife following suit on the 13th August 2015. I subsequently decided that the Wife's Form A should be the lead application. The case was listed before me by Crowley DJ on 4th August 2015.

    40. The Husband's Form E is dated 1st October 2015. It includes various debts that the Husband claims are owed to his Father, including (£322,161) which was said to be outgoings his Father had paid on his behalf in relation to the Country E apartment and 50% of the K Ltd loan, said to be (£4,765,404). In consequence, the Form E showed negative assets of (£3,197,449). He had £547,414 remaining in pensions. His income was given as £133,924 net, including the £75,000 pa available offshore on credit cards from X. He said his Father was paying around £30,000 pa for the children, holiday expenses overseas for the Husband and was paying the tax due to protect the Husband's non-domicile status, which was then £50,000 pa.

    41. The Wife's Form E is dated 30th September 2015. At the time, she had significant assets of her own which had come to her predominately by way of inheritance. These included a property known as AYC, owned jointly with her brother, plus 43 acres of land to the north of P Farm. She had £121,966 in bank accounts and funds with Skandia worth £334,642. She deposed to net assets of just over £2 million.

    42. It is a tragedy of this case, as with so many, that the heavily contested litigation has destroyed a high part of the assets set out above. The Wife has incurred costs of £551,596 of which she has paid £510,441, largely by liquidating her inherited assets. The Husband has had costs of £671,114 of which he has paid £566,253 by cashing in the remainder of his pension funds (which comes with a heavy tax burden) and taking a Novitas loan of (£206,000). I regularly warned both parties about the horrific costs of this case as contested application after contested application was heard by me and other judges over the past year.

    43. I first had to deal with the case on 7th October 2015. I allocated the case to myself and made a maintenance pending suit order of £4,300 per month.

    44. In October 2015, the Husband sold his RIB boat and paid SEK 406,998 to his Father as "part repayment of monies owed to him". He says that 50% of the boat was already owned by his Father. It goes without saying that divesting oneself of assets, even relatively modest ones, in this way raises strong suspicions with your former spouse, particularly when the Husband's Father later agreed that he should "waive" the money allegedly owed by the Husband to him in relation to the outgoings on the Country E flat. It was said he did so as a result of the cost of the refurbishment of the property paid for by the Husband.

    45. On 12th October 2015, the Wife applied to prevent any dealings by the Husband with his pensions, referring to the sum of £100,000 that had been cashed in around the time of the maintenance pending suit application. On 24th November 2015, the Husband applied for me to vary the maintenance pending suit order I had made only six weeks earlier, arguing that his Father intended to stop paying his non-dom tax charge and would not pay the tax on any remittance of the £75,000 to the UK to discharge my order. No reason was given for the Father's alleged position. There was a directions hearing before me on 21st December 2015 when I set the matter down for this hearing with a ten-day time estimate. I heard the substantive cross-applications on 27th January 2016. By then, the Wife had found a large number of documents (the Imerman documents) in the matrimonial home over the Christmas period which she gave to her solicitors.

    46. By the time I heard the applications on 27th January 2016, the Husband had, to his credit, arranged a Novitas Loan of (£200,000). As this was a cheaper means of securing funding than taking pension (which immediately incurs a hefty tax liability), I granted an injunction to prevent him drawing down on his pensions until he had exhausted the litigation funding. I dismissed the application to vary the maintenance pending suit order on the basis that there had been no change in circumstances and his Father had been paying his entire non-PAYE tax bill to date. On 10th February 2016, I made initial directions for dealing with the issues as to the Imerman documents and on 16th March 2016 I directed that the matter be heard by another judge.

    47. The Husband's Father served a statement dated 22nd January 2016. He said that he was the founder of X AG. He instructed X to purchase G Ltd and to employ the Husband. All the initial machinery was supplied by his company in Country E, F Co and that he was therefore the founder of Y Plc. On 23rd March 2016, AB wrote a letter saying that the Husband is a discretionary beneficiary of X with no claim on the assets of the Foundation. He said that Liechtenstein law explicitly excludes the right for information to be passed to beneficiaries.

    48. Rather than hear the FDR, Roberts J had to use 13th April 2016 to deal with the Imerman issue. She reached the preliminary view that the "documents are confidential to the Husband alone subject to any findings as to an express or implied agreement to share that confidentiality". All I would say at this point is that the Husband has repeatedly given evidence to me that the Wife was fully aware of everything that was going on financially. Save for two documents, Roberts J considered there was nothing relevant to the core issues in the case although the Husband then waived confidentiality to enable the Wife's counsel to inspect the documents. The judge further directed that the issue of confidentiality be dealt with by me at the final hearing.

    49. She conducted an FDR on 20th May 2016 when, regrettably, the case did not settle. She made a number of directions including for pleadings. On 9th June 2016, the Husband's solicitors notified the Wife's solicitors that the Novitas loan facility had been exhausted. Perhaps inevitably, although very regrettably, the Wife applied on 15th June 2016 for a further section 37 order to prevent further pension draw down. I dealt with the application, and a plethora of other issues, on 24th June 2016. I dismissed the application on the basis that the Husband had to have sufficient funds to enable him to instruct his lawyers.

    50. The parties did, at least, agree that the Artwork in the two Country E properties is worth £1,605,000 without prejudice to the Husband's contention that it is owned by the X Foundation. I have since been told that X bought the artwork for this price.

    The pleadings

    51. The Wife's Points of Claim are dated 17th June 2016. She asserts that the Country E flat is held jointly by the parties. I immediately saw that this meant that I would have to join the Husband's Father as a party. She did not plead that X is a sham but she did claim that its assets are a resource of the Husband. She referred to varying post-nuptial settlements in relation to the land, artwork and timeshares held by X without making an application. She alleged that the transfer of Y Plc shares into the CW Trust was done for the purpose of defeating her financial remedy claims but again without making an application to set it aside.

    52. The Husband's Points of Defence are dated 6th July 2016. He pleads that the Wife is incorrectly conflating ownership with management. He argues that the shares in Y Plc are not under his control. He says that his Father has agreed to write off the bills paid on the Country E apartment in consideration for the money spent on renovation work but argues that the law of Country E applies as to the ownership of the Country E flat. In relation to the land, artwork and timeshares, he pleads that the nuptial element is missing and that the Wife is not a beneficiary of X such that the property remains owned by the Foundation.

    53. On 24th June 2016, Y Plc changed its name. I do not know the reason for the name change but, for convenience, intend to continue to call the company Y Plc.

    54. I heard the case yet again on 21st July 2016. Realistically, it was accepted that X was able to deny the Husband any further information. I joined both the Husband's Father and AB as Respondents to the application. On 18th July 2016, AB had written on behalf of X that he would not be attending the final hearing and would not join the proceedings but I was clear that he should, nevertheless, be joined. I further provided that the documents issue should be determined after delivery of my main judgment.

    55. On 20th July 2016, GH, who is the Husband's Father's right hand man, wrote on behalf of the Husband's Father saying that he had no evidence of the funds in the Stiftung. I will return to this but it was a surprising statement given what the Husband has since said.

    56. The Husband's Father's defence is dated 21st September 2016. It says that X AG was the owner of almost the entire shareholding in H Ltd prior to flotation. He was the owner of these shares until he settled the shares into the Foundation. The entirety of the funds used to purchase the Country E apartment were provided by him and he was content to have assisted with guaranteeing loans for the grandchildren's projects.

    Subsequent statements

    57. A number of statements were filed during September 2016. These included the parties so-called section 25 statements. Fortunately, I had restricted them in length. The Wife's is dated 12th September 2016. She reminds me that there are 27 acres of land at the matrimonial home and that she has 3 elderly horses and 25 cats that she breeds. She seeks a home in London for between £1 and £2 million and claims monthly outgoings of £25,056 (or £300,672 pa) as against £142,680 pa in her Form E. The most recent budget includes £75,000 pa on holidays and £57,600 pa to maintain the matrimonial home.

    58. The Husband's statement is dated 19th September 2016. He argues that the matrimonial home itself should be sold and that both parties can rehouse themselves for around £700,000 in areas such as the Vale of Glamorgan. I had been insistent at earlier hearings that I wished to know details of the assets and value of X. I was criticised forcefully by Miss Bangay QC for doing so at the Pre-Trial Review. It was said that I had prejudged the issue as to the knowledge of her client. I do not accept that criticism. I have done a number of these cases in which it has been said that everyone involved, whether settlor or beneficiaries, has no idea as to what is in such entities and the trustees will not tell them due to Liechtenstein law. I was right to be forceful. The Husband says in his statement that, although his knowledge is a few years out of date, he believes that X has a portfolio of investments worth between £7 and £8 million over and above the land, artwork, timeshares, shares in Y Plc (now 17,142,640) and three companies transferred into X recently, namely N Ltd, M2 Ltd and L Ltd (none of which appear to have significant value).

    59. The Husband also filed statements from PQ, LM and his brother, QF. The first two witnesses were not required by the Wife for cross-examination so their evidence is accepted. PQ is a former Group Finance Director of Y Plc. He said that he believes the company was established by the Husband in Wales but he had no knowledge of the ultimate ownership. QF's statement is dated 12th September 2016. He said X AG was started by his Father and he worked for the company for 8 years in Switzerland dealing with sales. LM's statement is dated 3th September 2016. He says that, as far as he is aware, the Husband's Father founded the company and chose Wales. The Husband relocated to Wales to run it. The Father also set up a business in Switzerland for QF to run. The Father provided money to buy O Ltd of which the Husband and he held 25% each. They also owned 50% each of J Ltd. All three companies went into Y Plc in 1989 in preparation for flotation. After flotation, X held 53% of the shares and the Husband and he would have 15.5% each in their names. He subsequently exercised options to increase his share to 22.5%. He left in 2008 but retains shares.

    60. The Husband's Father filed a second statement dated 20th September 2016. He had originally founded a business, F Co in 1961. The turnover is £6.6 million pa and he owns 75% whilst the Husband owns 25%. He founded X AG in 1967 to create wealth outside Country E. QF had the management role in Switzerland whilst the Husband did so in Wales. Y Plc had a revenue in 2016 of £236 million with a gross profit of £43 million and a net profit of £7.6 million. The X Foundation is discretionary as he wanted to guard against wasting assets on a frivolous lifestyle. He is consulted as to important decisions. When K Ltd was in trouble, the Foundation refused to pay so he had to. He specifically says that the Husband is not a beneficiary of the Z Trust.

    61. He filed a third statement immediately before the hearing commenced. He said that he now knew that his previous understanding and explanations of the Z Stiftung were incorrect. He settled Z Foundation on 20th October 1988. The primary beneficiaries were QF and his three children. Similar documents were created in 2003 as with X so that the Husband and his children were secondary beneficiaries but the Husband had received no benefit. Surprisingly, he said he did not believe the Husband was aware. Moreover, given that he must have provided the letter of wishes that led to the by-laws being created, it is very hard to accept that his previous "understanding" was anything other than misleading.

    62. I read U's statement which is dated 21st September 2016 de bene esse. In fact, very responsibly, Mr Warshaw indicated that he did not wish to cross-examine U. She says that she "now knows" that the funds that assisted her whilst she was at school came from the CW Trust. She adds that she "believes" that her mother was always aware of this as well. She says she has subsequently learnt that, when the Trust was unable to pay, her grandfather generously stepped into assist. Inevitably, she was very concerned as to the position of her home. She said she did not believe it should be considered as a matrimonial asset nor as a resource available to her father.

    63. Finally, on the first day of the hearing, I was shown a report dated 4th October 2016 by Nigel Blagg, a Chartered Psychologist who has been involved with the family for around 14 years. He wrote that the Husband has severe problems with dyslexia which continue to impact on his ability to read and understand letters and documents and communicate ideas. He believes the Husband suffers from Aspergers Syndrome although he has not formally carried out an assessment. The Husband finds it difficult to sustain eye contact, can misread social cues and can be very literal in his interpretation of communications. Further distressing matters about the Husband's past are included in the letter. He is concerned that, if in oral evidence, he avoids eye contact, appears hesitant or confused or does not directly address the intended meaning of questions posed, it may not necessarily imply he is being evasive. I make it clear that it is for me to assess the Husband's evidence and I will do so. I was not asked for an intermediary to be appointed to assist him but I did permit his solicitor to sit next to him throughout his cross-examination to assist him in dealing with the documents.

    The open proposals

    64. The open proposals are as far apart as in any case I can remember dealing with. The Husband's proposals were sent commendably early on 9th June 2016. He contends that there should be a sale of the matrimonial home (including the land held by the Foundation, the value of which should be paid to the Foundation and said to be £50,000) and the show home owned by L Ltd. The parties' debts should be repaid and the equity then divided equally. The Country E summer house should be transferred to him. He should pay maintenance on a joint lives basis of £3,500 pm. The artwork should be returned to the Foundation. The remaining pensions should be equalised. The letter calculates that this results in a division of the assets 68% to the Wife and 32% to him.

    65. The Wife's open proposals are dated 28th September 2016. She seeks financial provision to the value of £20 million. This should include a transfer of the matrimonial home to her, free of charges and the surrounding land as well as the time shares in the Bahamas and the artwork. She calculates that she would then require a lump sum of £18,180,603 to make her award up to £20 million. She will transfer the Country E flat and the Summer House to the Husband. Her further claims should be adjourned pending payment in full and she should receive £4,300 pm also until payment.

    66. The Husband's Father responded on 5th October 2016. He said that the Wife's position was "extraordinary". He said that the land belonging to X cannot be transferred and reiterated that sham had not been pleaded. At best, X is a strictly limited resource. The Husband is not the sole beneficiary and is only a discretionary beneficiary.

    67. In the light of increased costs, the Husband refined his proposal on 7th October 2016. There should be no pension share in the Wife's favour as he only had £16,481 left whilst the Wife has a pension worth £139,000.

    Expert evidence

    68. A number of valuations and expert reports have been obtained. By way of very brief resume:-

    (a) Hilary Evans valued the Wife's property at AYC on 11th May 2016 at £180,000. In fact, it has now emerged that it is on the market for £269,000 which does cast considerable doubt on the valuation. She valued the 47.6 acres of land at £360,000 but reducing to £200,000 if it is subject to an agricultural tenancy in favour of the Wife's brother. No formal tenancy document has been found but it is said that the tenancy is verbal.

    (b) The artwork in the matrimonial home was valued on 18th May 2016 by Anthemion Auctions at £210,810. Of this, the artwork owned by X is valued at £83,050 so that owned by the parties is £127,760.

    (c) The Country E apartment was valued by ERA on 25th August 2016 at SEK 14.5 million.

    (d) Geoff Mesher, a Chartered Accountant, valued K Ltd at £800,000 on 16th September 2016. He valued M2 Ltd at nil to £3,000.

    (e) Finally, there was a report on Country E law by Mr A dated 14th September 2016. Country E law does not recognise a trust or proprietary estoppel. Although there is a concept of "hidden ownership", it relates, almost exclusively, to spouses or cohabitees. In relation to the Country E property, the ownership is quite clear and is 90/10.

    The Law

    69. I have been referred to numerous authorities. I can, however, summarise the position shortly. I have to apply section 25 of the Matrimonial Causes Act 1973. I must have regard to all the circumstances of the case, having particular regard to the matters set out in section 25(2). I have done so with care.

    70. The vital aspect of this case is not the law but my findings of fact as to the assets and income of the parties. Once I have done so, I must consider the sharing principle. There are non-matrimonial assets in this case that have come to the parties by way of inheritance and/or lifetime provision from relatives. In general, they would be excluded from the sharing principle. Matrimonial assets, however, created during the marriage, would undoubtedly be subject to sharing. Nevertheless, the authorities make it clear that I must also consider compensation and needs. Nobody has suggested this is a case for compensation but, depending on my findings of fact as to the assets, it may very well be that it is a case where needs take centre stage. If so, I can invade even non-matrimonial property to provide for those needs but I must consider the needs of both parties not just those of an applicant.

    The approach to trusts

    71. The majority of the authorities to which I was referred dealt with the approach to trust assets. Very briefly, the principles can be summarised as follows:-

    (a) Assets held in a trust or foundation may constitute a "resource" under section 25(2)(a) to the extent to which they are likely to be made available to the relevant spouse either now or within the foreseeable future (RK v RK [2013] 1 FLR 329). The court will have regard to the circumstances of the trust or foundation, how it came into being, who the beneficiaries are, what duties the trustees have, the relevant terms and how it has been administered in practice (Whaley v Whaley [2011 EWCA Civ 617).

    (b) A distinction must be drawn between a relative providing bounty on the one hand and a fiduciary or trustee relationship on the other. In the former case, the payee has no more than a mere hope of bounty which may, at the election of the relative, reasonably or unreasonably be withheld (TM v ML [2006] 1 FLR 1263).

    (c) The court will not put improper pressure on a third party but may frame its order in a manner which affords judicious encouragement to provide the relevant spouse with the means to comply with the court's order (Thomas v Thomas [1995] 2 FLR 668 (CA)). The general practice is that, even if the court is prepared to proceed on the basis that a relative or trust is likely to "backfill", it is very unusual to make an order that the outside person or entity produce fresh money directly to meet an award, ie an award in excess of the total value of the visible matrimonial resources (AM v SS [2014] EWHC 865 (Fam).

    (d) When considering the issue of whether the assets held by a trust constitute post-nuptial settlements, it is necessary to consider whether the arrangements have an element or character of nuptiality. In other words, are they arrangements making continuing provision for the parties to the marriage in their capacity as such? If so, what is the property or right that forms the settlement? I was referred to the judgment of Coleridge J in N v N and F Trust [2005] EWHC 2908 (Fam); [2006] 1 FLR 856 where he found that a matrimonial home was subject to an ante-nuptial settlement capable of variation by the court. I was told, however, that the judge varied the settlement to enable the wife to reside in the property indefinitely rather than to transfer the property to her outright. I was also referred to the decision of Roberts J in NR v AB [2016] EWHC 277 at Paragraph [120] where she found the nuptial settlement to be a revocable licence to occupy the properties terminable on reasonable notice. In Ben Hashim v Ali Shayif [2008] EWHC 2380; [2009] 1 FLR 115, Munby J found that one property was not subject to a settlement and that there was merely a revocable licence to occupy it. A second property was subject to a nuptial settlement but, again, it was a licence determinable on reasonable notice which he assessed as being six months.

    (e) I was referred to the law on sham but I do not need to consider it as sham has not been pleaded and I am quite satisfied that it is not open to Mr Warshaw to do so in any event on the facts of this case.

    Lies

    72. There are issues in the case as to the extent to which all those who gave oral evidence have lied. First, I must decide whether or not any of them did deliberately tell lies. If I find that they did, I have to ask myself why they lied. The mere fact that a witness tells a lie is not in itself evidence that the person concerned has undisclosed assets or controls assets. A witness may lie for many reasons. They may possibly be "innocent" ones. For example, they may be lies to bolster a true case; or to protect someone else; or to conceal some other disreputable conduct; or out of panic, distress or confusion. It follows that, if I find that a witness has lied, I must assess whether or not there is an "innocent" explanation for those lies. However, if I am satisfied that there is no such explanation, I can take the lies into account in my assessment of the assets available and the relative strength of the respective cases.

    Language issues

    73. The Husband, his Father and brother are all from Country E. English is not therefore their first language, although the Husband has been living in this country for many years. Moreover, I formed the clear view that all three spoke English remarkably well and had a good grasp of the intricacies of the language. Nevertheless, I have to remind myself that I must take care in assessing their evidence, given that processing information provided in a foreign language may put the participant at a disadvantage. I must guard against the very real possibility that questions or answers or both are misunderstood or at the least nuances and shades of different meaning are lost in the process. So far as the Husband is concerned, I have also taken into account the evidence I had from Nigel Blagg.

    The Wife's evidence

    74. Before I turn to my findings of fact, it is necessary for me to consider the veracity of the witnesses. Very regrettably, I am unable to accept the evidence of all three of the main witnesses in a number of important and significant areas.

    75. I will deal with the evidence of the Wife first. The basic premise of her evidence was that she "knew nothing." I cannot accept this total denial. She is an intelligent and articulate woman. She worked in a bank. She has been forceful in her approach to this litigation and I am quite sure that she would not have accepted a position where she was kept completely in the dark by the Husband and his Father during the marriage. I cannot accept that she signed documents without reading them or understanding at least the thrust of what they were about.

    76. Her evidence was palpably wrong in one important aspect. She was asked about HSBC's request to have a charge on the matrimonial home. She denied that she knew anything about it until she got a letter from HSBC on 4th March 1989. It was clear at the time that this could not be correct as the letter says that the Manager, Mike Kear was "extremely disappointed at AF's refusal to sign the Legal Charge over the property" so she must have known about it before and refused. Eventually, she was recalled and shown a letter to her dated 12th February 2009 telling her that she needed to see a solicitor before signing the charge. I accept entirely that she did not want her property charged. Indeed, as things have turned out, it was very sensible of her not to agree to it being charged but I cannot accept she was kept in the dark. It follows that I also accept that she did not offer any of her inheritance as a means of discharging the overdraft. On the balance of probabilities, I find the Husband did not know exactly how much she had.

    77. Her evidence was equally unsatisfactory when it came to her knowledge of the ownership of the matrimonial home. I find that she must have known that the parties only owned the main house under title WA****** whilst the rest of the land, as well as the land at P Farm, was owned by X. After all, she told me that X had not been properly maintaining its land such that it was unsafe for her horses. Equally, she said she always believed the Country E flat was owned equally by the parties but it was noticeable that she did not include it in either of her Forms E as an asset of hers. Having said all that, I am not entirely sure where this takes me in relation to the main evidence in the case. At the end of the day, it is not my findings as to the Wife's evidence that is important. It is the evidence of the Husband and his Father that really matters.

    The evidence of the Husband

    78. I found the Husband to be an unattractive witness. At times, he appeared to me to be attempting to bully the court by his aggressive approach. At others, when the going got tough, he tried to fall back on his dyslexia and Aspergers. At others, he seized on points made by either Miss Bangay or myself as though they were a total answer to the questions being put by Mr Warshaw. One particular exchange was memorable. He gave Mr Warshaw the proverbial "two barrels" for several minutes. In consequence, Mr Warshaw slightly lost his cool and made one aggressive repost. The Husband immediately turned to me and complained bitterly that he thought the case was supposed to be being dealt with in a constructive and friendly manner.

    79. It was quite clear to me that he is a very intelligent and clever man. I, of course, accept his dyslexia but Albert Einstein was dyslexic. He is an excellent businessman and is completely in command of the facts when it comes to his financial affairs. He understood perfectly the questions that were being put to him and why they were being put to him. Indeed, at times, he tried to answer the next question rather than the one he had been asked.

    80. I accept that his Father had the idea for what became Y Plc and that his Father provided the seed corn capital and the original machinery but there is absolutely no doubt in my mind at all that the Husband was the driving force behind the business. He made it into the great success that it has become and he can and should be described as the founder. In this regard, the publicity material is absolutely correct and it did him no favours to deny it. I accept that he will have continued to seek the advice of his Father over the years as an "elder statesman" but that does not make it the Father's business. The Father told me that he was proud of his son's achievements with Y Plc. He was right to do so.

    81. The Husband was all over the place as to what he knew about the Wife's inheritances and I could not rely on what he said in that regard. In addition, there were parts of his evidence throughout the case that were simply untrue. He initially was adamant he had no knowledge of the assets of the X Foundation when he knew very well. He even instructed his leading counsel to complain that I had been wrong to say that he must tell me what they were at an earlier stage of the proceedings. I reject entirely his case that he did not know that he was a beneficiary, albeit a secondary beneficiary, of the Z Foundation. He knew very well the arrangements. I am equally clear that he has attempted to mislead me as to the relationship between him, his Father and X. I reject the suggestion that CD and AB take the decisions as to what X will invest in. They are professional trustees who know little of the business world occupied by the Husband and his Father or the merits of acquiring land in Wales. That is not to say that X is a sham. It is not. CD and AB operate in accordance with the by-laws but, if they are asked to buy some land around the matrimonial home or some timeshares in the Bahamas, they do so without question, provided it comes within the by-laws.

    82. The Husband actively misled me as to the Bahamas timeshares. He told me he had to ask his Father before he went. That was nonsense as the Father confirmed. It was equally nonsense to suggest that he required the permission of the trustees before he used it. I accept that his first manuscript Form E was woeful but I do not consider that helps me as to his veracity thereafter. He was, after all, acting in person and his dyslexia cannot have made it easy for him to complete the document. Nevertheless, his second Form E claimed that he owed (£322,161) to his Father for the bills on the Country E flat, whilst totally ignoring the money invested in the refurbishment of that property. I find he knew he would never have to repay that money. It also includes as his personal debt the loan secured on the Country E flat. His Father confirmed in his evidence that this was a loan that he had made to his grandchildren after carefully considering the position. The Form E also included the loan to his Father in relation to K Ltd. Whilst I accept the loan agreement was disclosed, the net effect of all of this in the Form E is to show every liability as a hard debt at the same time as distancing himself as far as possible away from X. This led to the Form E showing a total value of his assets as being negative (£3,197,449).

    The Father's evidence

    83. The Father was, in many respects, an impressive witness. Indeed, I have referred already to a number of occasions when his frank answers contradicted the position of his son. Having said that, he did not tell me the true position as to Z Foundation until very late in the day. Moreover, there were aspects of his evidence that I cannot accept. He too peddled the myth that he was the founder of Y Plc. He denied the company had been built up by the Husband when it clearly was. He said he did not know what the assets of X were when I am clear that his finger is still very much on the pulse. He did say that he had an idea that there was some money there but his grasp of financial matters remains amazing for someone of his age. He knew that over £12 million had been paid in dividends from Y Plc into X. I find he knows exactly what is there. Indeed, at one point he referred in passing to some assets in China that had not done well. If X has invested in China, it is clear to me that it is not because AB thought it was a good idea. Indeed, I cannot see that the Husband would have done so either. I find that it would have been at the suggestion of the Father. Finally, he denied that X was for the Husband and Z Foundation for QF. I have already found that X is a genuine foundation and not a sham but within the context of a Stiftung and the by-laws of that foundation, it is clear that X is for the Husband and his children in so far as it is for anyone. It is certainly not for the Husband's Father. He settled the shares into the Foundation and approved by-laws that do not provide him with any benefit whatsoever. He does, however, still clearly have influence, as one would expect from the Settlor of such an entity.

    84. But I accept other parts of his evidence. One vital part of his evidence that I do accept related to the future of X. He told me that he would definitely not be prepared to change the by-laws to pay millions to the Husband. I will make my findings as to this in due course but I am satisfied that this structure has been set up for many years. Whilst I cannot say exactly what will happen after his death, I cannot find that he would permit the Husband to withdraw all the assets of X, even if the shares in Y Plc were all sold, for example if there was a takeover. He would certainly not do so to enable his son to pay off an ex-wife. After all, avoiding such liabilities was an important reason for setting this structure up in the first place.

    85. It is not, of course, for me to investigate the assets of the Father. It is, however, relevant to look at his enormous generosity. He provided in excess of £9 million to rescue K Ltd. In effect, he paid for U's property and the £533,000 invested in T's business. He has provided two further sums in excess of £1 million to fund the business. He has been paying £30,000 pa for his grandchildren and his son's tax bills. He has funded overseas holidays for the family. He has provided a flat for the Husband and Wife in Country E, albeit that they funded the refurbishment. This aspect of the case cannot be ignored.

    My findings of fact

    86. There are numerous factual and computational disputes between these parties that I must resolve. At the end of the day, is this a case where the assets are, as suggested to me in opening, £98.3 million (per the Wife) or negative (£2 million) as postulated by the Husband, which increases to £2.7 million if the soft loan from the Father is ignored? I will deal with each dispute in turn before ending with my approach to X.

    The former matrimonial home

    87. It is clear to me that the Trustees will cooperate in the sale of the land at the matrimonial home, which will be sold together as one unit. This is what happened when the land was purchased and it would be completely unrealistic for me to find that they will, in some way, play hardball now. It follows that the matrimonial home is worth £1.4 million. However, a sum of £50,000 will have to be paid to the Trustees for Property 2. I am equally clear that nothing needs to be paid to L Ltd as the valuer says that there is no material value attributable to the Show Home, principally as a result of the restrictive planning conditions attached to the building. This gives net equity of £1,356,500 after allowance for the costs of sale.

    Country E apartment

    88. I accept that the Country E flat is owned as to 90% to the Husband's Father and only 10% to the Husband. I recognise that the flat was bought for the parties rather than for the Husband's Father and/or Mother. I am sure the Wife and the Husband thought of it as theirs. For this reason, the proceeds of sale of MH1 were used on its refurbishment. As a matter of Country E law, however, it remained owned as to 90% by the Husband's Father. This is not unfair to the Wife for three reasons. First, the Husband's Father provided the purchase price. Second, the 90% to 10% arrangement is exactly the same as the way in which U's flat was purchased. It would be illogical to treat the two assets differently. Finally, the flat has been used to fund the financial assistance to the children.

    The children's loans

    89. It is extremely difficult for a court to grapple with complicated family financial arrangements involving different generations of a particular family who are helping each other. I have to consider three particular matters. First, there is the loan secured on the Country E apartment that was used in part to fund U and T. It is, however, equally clear that it was also used in part for an investment with a Mr B which has not been investigated fully. The loan is shown as being (£792,350) and the Husband's schedule attributes it entirely as his debt. In one sense, this seems unfair given that his Father told me that he had decided to help his grandchildren. I accept that, at one point, he said that the Husband took out a loan, but he later told me that the money came from him from the apartment in Country E. Whilst I consider it is unrealistic to think that the Husband will ever have to repay this money to his Father, I cannot ignore the loan whilst including the loan due to the Husband by M2 Ltd of £533,000 and his 90% share in the value of U's property. The latter is put in the schedule at £291,000 net but I think it should be £261,900 to account for U's 10% share. The two assets and the liability therefore almost exactly cancel each other out.

    90. The court has to be realistic. Whilst I cannot see that the Husband is ever likely to have to repay his Father, it is equally unlikely that he will ever be paid the equity in U's flat. It is possible that he may get some benefit from the M2 Ltd loan but, on balance, I take the view that these are all family arrangements that will, in due course, sort themselves out. It follows that the Husband has a 10% share in the Country E flat worth £128,097. The loan on the Country E flat and the children's assets effectively cancel each other out. The equity in the Summer House is £255,742. The boat house on the Husband's Father's land is worth £40,000.

    The Wife's inherited assets

    91. The Wife has a one-half interest in AYC. It is on the market for sale at £279,000 whereas the Single Joint Expert valued it at £180,000. I have no evidence as to whether or not the marketing figure is unrealistic. I do not know what interest there has been in the property. It would, however, be odd if the court was to accept a valuation of £180,000 when the property is on the market for £100,000 more than that figure. In the same way, there is a dispute as to the 47.6 acres of agricultural land which may or may not be subject to a tenancy in favour of the Wife's brother. I am no expert as to agricultural tenancies but I suspect that an oral tenancy may well be sufficient, particularly if it is supported by use over a long period of time. In one sense, I have the same difficulty here as with the family arrangements surrounding the children's loans. The land is not owned jointly so the brother has no incentive to cooperate. Doing the best I can, I will take £250,000 as the value of the property but £200,000 as the value of the land subject to the tenancy. This gives net figures to the Wife of £102,358 for the property and £156,000 for the land. I remind myself that these are non-matrimonial assets but I will undoubtedly need to consider them in the context of need.

    Chattels

    92. There are a large number of chattels that are in issue. Given that there are so many issues in the case, there was virtually no oral evidence about any of them other than some missing diamonds, possibly worth £8,000. The Husband was wrong to pay the proceeds of sale of the RIB boat to his Father when he had not previously been paying the outgoings on the Country E flat. I am prepared to accept that half of it was owned by his Father but I reattribute £18,209 to the Husband on the basis that the Father accepted that the liability for the outgoings on the Country E flat should be written off entirely. The Husband says he has sold his Ferrari to pay his costs and there is no evidence to contradict this. I have heard no evidence about Ebel watches, Mercedes cars, number plates or Nimbus boats, although the Husband says his Father owns the latter and that LM owns a sailing boat. On the Wife's side, there is reference to a Volvo and some jewellery. I propose to ignore all these items on both sides.

    Liabilities

    93. The Husband owes Novitas (£206,000) in relation to the legal costs loan. The schedule shows that he owes (£130,000) in costs although the Form H1 has the liability at (£105,000). The Wife owes (£41,000). It is said that there is a joint debt of (£69,462) in relation to litigation relating to the shop case. I have heard very little about this. I do not even know whether it is owed to a limited liability company or to solicitors. If it is to a company, it is likely to be a family company, probably one of those owned now by X. Although I will include it in the schedule, I will expect an indemnity from the Husband to the Wife in relation to it. There is a very large bill of (£18,193) said to be owed for electricity in the matrimonial home over many years. Again, I heard virtually no evidence on the subject but I accept that both parties must discharge one half of any such liability should it materialise.

    Company interests

    94. The Husband has a 25% interest in F Co. It has not been valued. It is a non-matrimonial asset as it was gifted to the Husband by his Father, who owns the remaining 75%. The Wife says I should take the value of the Husband's share at £647,634 whereas the Husband says it should be £201,782. There appear to be two issues. The first is whether or not there should be a 50% discount for a minority holding. The second is whether there should be a 40% discount for tax. I accept that this is not a liquid asset and any valuation is somewhat arbitrary. Nevertheless, this is a family company that should be treated as a quasi-partnership. It is therefore unrealistic to deduct anything for a minority holding. On the other hand, the tax must be deducted. The value should therefore be taken at £388,588.

    95. There was some suggestion that I should exclude the value of K Ltd/Z Holdings AG as it is also illiquid and any value extracted would go to the Husband's Father. I note, however, that it is included in Miss Bangay's asset schedule. The SJE valued it at £800,000, which would give the Husband's shares a value of £400,000 (£320,000 after tax). I certainly intend to ignore the very large loan to the Father, which is currently (£4,765,404), as being entirely theoretical. It will only be paid if the company can afford it. It does therefore cast doubt on whether I should include any value but I have decided to do so, whilst accepting that it is very illiquid. This exercise does, however, show how difficult the exercise of computing the assets in this particular case has been. I will take the Husband's value for the very small interests he has in FS Co and FF Co, namely £13,185 and £7,229 respectively.

    CW Trust

    96. The Husband transferred 900,790 shares in Y Plc to the CW Trust. The Wife values these shares at £2,839,741 including dividends. I cannot add these shares back into the assets schedule. I cannot find that this transaction was done to defeat the Wife's claim. She undoubtedly knew about the existence of the CW Trust. I find that she knew it was paying, at least in part, U's school fees. It is, of course, possible that she did not know the source of the assets in the Trust but there is no evidence that the Husband did this to defeat her claim. To make such a finding, I would have to rely on the consultation with Mr Mostyn QC and that is an inference that is not permissible. I do, however, consider that the transfer is very important. I will return to this when I consider the question of my approach to the Trust but the Wife has satisfied me that this transfer would only have taken place if the Husband was confident he could rely on the X Trust and the very significant block of shares in Y Plc that it contained.

    X

    97. And so I turn to the most important issue in the case, namely X. I will deal first with my computation of the assets in the Foundation. They are very significant. X holds 17,142,640 shares in Y Plc. They are currently valued at £51,427,920. It goes without saying that this figure dwarfs all the other assets in terms of value that I have considered so far in this judgment. There was some debate about the shares transferred relatively recently from X to the Z Foundation for QF and his family. I have been unable to say why that happened but I do not consider it significant, given that shares worth over £50 million remain. It may be that the Husband's Father thought that the Husband's trust held too high a percentage as against QF's trust. I reject, however, that it had anything to do with this divorce.

    98. I heard a lot of evidence about the recent transfer of N Ltd, M2 Ltd and 150,001 shares in L Ltd into X. Mr Warshaw was following the line that these three transactions would only have happened if X had been truly the Husband's entity. I cannot make that finding. In one sense, the transfers were curious. It was difficult to see why they took place. N Ltd is worth only £5,284 and M2 Ltd is worth £1,500. It may be that there are future plans for using these entities but that would be speculation. The shares in L Ltd have more value at £60,359 but again, I fail to see where this takes me.

    99. It is known that the following assets are owned by X and have, at the very least, provided benefit to the Husband and Wife:-

    (a) The Bahamas timeshares £ 133,587

    (b) The artwork in the matrimonial home £ 83,050

    (c) The artwork in Country E £1,605,000

    (d) The land surrounding SM £ 500,000

    £2,321,637

    100. Until very late in the day, the court had no idea what else might be in X. The Wife's team say that dividends from Y Plc in excess of £14 million have been paid to X. The Husband's team believes it was around £12 million. Either way, these are substantial sums. The Husband now says that he believes X has a portfolio of between £7 and £8 million, although this information is around four years old. It is a great shame that AB refused to cooperate. It makes it very difficult for a judge. I cannot, of course, double count the dividends and the investment portfolio as Mr Warshaw originally suggested as the portfolio can only realistically have come from the dividends. I would, however, be entitled to draw an adverse inference by the failure to give me chapter and verse given that the Settlor and the Primary Beneficiary (ignoring the children) are both parties to this case. I cannot, however, ignore two aspects. First, over £2 million has been spent on the items set out above. Second, there has been a very bad recession within the last ten years. The Husband's Father suggested that part of the fund was invested in China and that the investment had not done well. This is possible although I find without hesitation that the Husband and his Father could have provided me with chapter and verse had they wished to do so. It is nonsense to suggest that AB will not tell them. If that was genuinely the case, nobody would ever be so foolish as to place their assets in a Liechtenstein Stiftung. Having said that, I am going to be generous to them and take the figure at £7.5 million if only because I do not believe it matters very much in the context of what I have to decide.

    101. It follows that I find the assets of X to be:-

    (a) Shares in Y Plc £51,427,920

    (b) Assists used by the parties £ 2,321,637

    (c) Other shareholdings £ 67,143

    (d) Portfolio £ 7,500,000

    £61,316,700

    102. On any view, this is a very substantial sum. I have, however, already made it clear that I accept that X is not a sham. I have decided that I should proceed in accordance with the by-laws but X is clearly a resource available to the Husband which is not available to the Wife. The by-laws are clear and provide him with substantial benefit. The Husband cannot simply pretend that X does not exist or that the by-laws may not be followed. This is reinforced when this finding is put alongside my finding that the Husband has, in effect, created the value in X as founder and driving force behind Y Plc, even if his Father provided the seed-corn to enable him to do so.

    103. X has already provided assets worth £2.3 million to the parties. This was clearly permissible in accordance with either by-law 1 or by-law 2. I am quite satisfied that these assets were provided for the enjoyment and use of the parties and their children. I simply could not understand why it was even suggested that the Husband would have to ask his Father before he used the timeshares. There is absolutely nothing in the by-laws about doing so. The Husband's Father is not a beneficiary under the by-laws. The timeshares were bought because the Husband requested it. He did not have to ask anybody first. Whilst the Trustees had to agree, the by-laws made it clear that this was a legitimate request and, unsurprisingly, they agreed without demure. The same applies in relation to all these assets. The only people who really benefited from the artwork were those living in the matrimonial home, namely the Husband, the Wife and the children.

    104. I do accept that it is relevant that, when the Husband had to discharge his overdraft, X did not provide the money outright. The by-laws were applied but the money was provided to buy the artwork. This is important for two reasons. First, it makes it clear that, if I was to order a lump sum of £18 million to the Wife, X would not come to the rescue. Second, however, it is equally clear that the Husband will, in the future, be able to rely on X to provide assets to him to fund his lifestyle. I am quite clear that this includes the provision of accommodation. It is right that the matrimonial home was not owned by the Trust. This was probably to take advantage of Principle Private Residence relief and, possibly, to avoid tax difficulties but the Trust could have done so to the tune of 10% of the value of the Trust. At present that would be £6.1 million.

    105. In fact, only some £2.3 million has been provided but I am clear that I should proceed on the basis that up to a further £3.8 million can be made available to him. This is not fanciful. It is what the by-laws, on which he relies, say. Indeed, following the sale of the matrimonial home, assets to the tune of £583,000 will immediately become available, even if the artwork and the timeshares are ignored. The value of the artwork bought in Country E shows itself how significant the benefit is to him. In one sense, this all makes the provision of a schedule of assets somewhat otiose as it is never going to exceed the figure of up to £6.1 million that is available in X. I find that X is in a position to fund a suitable home in Wales for the Husband and that, in accordance with the by-laws, it will do so.

    106. I accept that there is a nuptial element in the various transactions that provided land, artwork and timeshares to the parties. These were undoubtedly arrangements that made continuing provision for the parties to the marriage in their capacity as such. The timeshares were for them. The artwork was in their matrimonial home. The land was part of the matrimonial home. It increased the amenity value of the property and allowed the Wife to engage in her equestrian activities. This does not, however, take me far because I do take the view that the parties were given no more than a licence to occupy, determinable on reasonable notice. The assets were made "available". They were to be wholly owned by the Foundation and, if sold, the proceeds were to go back to the Foundation. I have therefore formed the clear view that I could not give the Wife a lifetime interest in the land even if I wished to do so.

    Overall computation of the assets

    107. I have therefore made the adjustments to the short form asset schedule provided by Miss Bangay and Ms Hargreaves. It forms Annex A attached to this judgment. It shows assets in the name of the Husband of £1,481,741 and assets of £1,290,065 in the name of the Wife, making a total of £2,771,806. The elephant in the room, however, is that it shows nothing for X. I have found that up to £6,131,670 can be made available to the Husband. I accept that it is not the same as liquid capital as it can only ever be held by X. I further accept that it might be said that some of this money should be for the children, although the Husband and his Father have been clear that provision for the children would not be made through X. I reject the suggestion that this would be as a result of the views of AB. It would have been the decision of the Husband and his Father. I further accept that there may be tax difficulties for the Husband in acquiring a property through X but that is just a problem that will have to be met. If a family arranges its affairs in the expectation of avoiding large amounts of tax, the same family cannot complain if part of those resources then have to be used to fund tax that the structure has created.

    108. It is impossible to provide a formula for a court to divide liquid resources of just over £1.6 million and illiquid resources of just over £1.1 million when the Husband has available up to £6.1 million from a trust. I cannot simply add the £6.1 million onto the schedule and divide by two. But, I must take regard of the fact that £2.3 million has already been made available to the Husband. Moreover, I am simply not prepared to find that there is no further liquidity in a situation where the books of X have simply not been opened for me to see. In any event, a modest number of shares in Y Plc could be sold. The Husband can hardly say that this would be deleterious to the company when he has sold so many in the past.

    109. In coming to my overall determination, I have to be realistic. Fine distinctions between matrimonial and non-matrimonial assets become irrelevant. I am entirely clear that the matrimonial home will have to be sold. I cannot transfer the land surrounding it to the Wife. The Novitas loan must be dealt with. Indeed, the property is well in excess of the Wife's needs. There will therefore be an order for sale.

    110. I have already indicated that the Novitas loan on the matrimonial home will have to be discharged. I also accept that the Husband must have a further fixed sum of £105,000 to discharge his outstanding costs but the remainder of the net proceeds of sale of the matrimonial home will be paid to the Wife. I calculate that this will give her around £1,046,500. It will be up to her if she invests this in one property in Wales or in a smaller property here (such as the properties suggested by the Husband at around £700,000) and a holiday home overseas. She will then have her remaining inherited resources available to supplement her position. She must be indemnified against the costs debt but will have to pay her share of the joint overdraft and electricity bill. The jointly owned chattels will be transferred to the Wife. After all, the Husband will have the use of those owned by X.

    111. The Country E Summer House will be transferred to the Husband. He will therefore have available to him the two Country E properties. I am satisfied that X can provide somewhere suitable for him to reside in, in this jurisdiction.

    Income

    112. I entirely accept that, on the basis that the Wife receives just over £1 million from the matrimonial home, this is not a clean break case. The Husband has offered £3,500 per month. I ordered £4,300 per month on the maintenance pending suit hearing but that was on the basis that he would also pay the outgoings on the matrimonial home.

    113. I am clear that the Wife has a very limited income from breeding her cats and from her inherited assets. She is now nearly aged 60. She has not worked for many years. I find that her earning capacity is £5,000 pa and she should be able to generate £5,000 per annum from her remaining inherited assets. This means that I will assess her overall income at £10,000 pa from all sources.

    114. The Husband's income is £52,480 pa net from IA Co and £5,500 from F Co. He also receives £75,000 from X, which nets down to approximately £45,000 pa on the basis that it is remitted to this country. In evidence, he said that a further £30,000 pa had been paid by one of the Country E companies into N Ltd as he did not feel his work in Country E had been properly remunerated. He said it was paid into N Ltd due to losses in that company that could be used to defray tax. This family cannot afford such manoeuvres any longer. I attribute this income to him as well. I will deduct tax at 45%, giving a net income of £16,500. This makes total net income of £119,480 pa, which I will round up to £120,000.

    115. He also receives help from his Father. There was virtually no evidence given as to this at the hearing. His Father pays some of his holiday costs. He pays the outgoings on the Country E Flat. He has been paying his tax bills in this jurisdiction. By the narrowest of margins, I do not propose to include any of this in my calculations but it is further benefit that will increase his standard of living.

    116. I take the clear view that the net income in this case should be divided equally after such a long marriage. The Husband's income is £120,000 pa and the Wife's is £10,000 making a total of £130,000. Equal division is £65,000 pa from which I must deduct my assessment of the Wife's income. This leaves £55,000 pa or £4,583 pm which he must pay from the date of the sale of the matrimonial home.

    117. It would be far better if a clean break could be achieved. I am not in a position to order one but the Duxbury calculation on £55,000 pa is approximately £925,000. No pressure can be put on X or the Husband's Father but, if this sum could be found from one source or another, I am convinced it would be in the interests of both parties to do so given the huge level of acrimony and costs that have been incurred in this case to date. Further applications and litigation are in the interests of nobody. I would terminate the maintenance on payment of such a sum. If not, the periodical payments will be on the standard joint lives basis.

    Costs

    118. I do not believe that this judgment has really got close to describing accurately the truly terrible level of acrimony in this case. Huge amounts of costs have been wasted. It seems to me, having heard the evidence that I have, that both parties are equally to blame. I have taken the costs into account in coming to my decision. In particular, I have permitted the Husband to discharge his outstanding costs from the proceeds of sale of the matrimonial home as well as his Novitas loan. As to the main applications for financial remedies, there will be no order as to costs.

    119. At various times throughout the case, reference has been made to the determination of "the documents issue" after the conclusion of this judgment. I am going to give the parties some time now to consider whether this is really necessary or sensible in the light of this judgment.

    APPENDIX
       
    SUMMARY OF ASSETS 
       
    Liquid 
    H
    W
    Total 
    SM 
    678,250
    678,250
    1,356,500
    Summerhouse 
    127,871
    127,871
    255,742
    Boathouse
    40,000
     40,000
    AYC (3 bed, 0.1 acres)
     102,358
    102,358
    47.6 acres at AYC
     156,000
    156,000
    Boat
    18,209 
     18,209
    Joint debts
    (51,796)
    (51,796)
    (103,593)
    H's funds (excluding M2 Ltd debt) 
    (247,956)
     (247,956)
    H's Y Plc shares
    1,344
     1,344
    W's funds
     73,939
    73,939
        
     565,922
    1,086,622
    1,652,544

    Illiquid
       
    Art in matrimonial home 
    63,880
    63,880
    127,760
    Country E Flat 10% & loan 
    (671,963)
     (671,963)
    M2 Ltd debt (illiquid per SJE) 
    533,000
     533,000
    U's home 
    261,900
     261,900
    H's interest in Country E cos 
    409,002
     409,002
    50% K Ltd 
    320,000
     320,000
    Pension W
     139,563
    139,563
    Pension H
    16,841
     16,841
     915,819
    203,443
    1,119,262
        
     1,481,741
    1,290,065
    2,771,806


Judgment, published: 21/02/2017

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  • In a tweet: Heavily contested proceedings where treatment of Liechtenstein Stiftung was a key issue Case note, 22/03/2017, members only

Published: 21/02/2017

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