Family Law Hub

Evans v Evans [2013] EWHC 506 (Fam)

  • In brief: A 210 paragraph judgment that I will attempt to summarise in less then ten. The Evans divorce saga is well known to us; this is perhaps something akin to the end as it was the rehearing of the wife's ("W") financial application – a rehearing "for reasons that are not relevant to this judgment but for which the parties are not responsible." 

    Let's kick off with the most startling figure. Despite Mr Justice Moylan kindly observing that the parties had not been responsible for the costs incurred in the rehearing, he did note that they had nonetheless managed to spend £2.7million in legal costs between them. This was, he said, a stark reflection of the extent to which the case had been litigated i.e. not a way that was compliant with the overriding objective.  

    So, with costs like that, it is no surprise to learn that this was considered to be a "big money case" with assets in the region of £40million. The issues in dispute were:

    • the appropriate percentage of company shares to be received by each party; 
    • how the available capital resources should be divided; 
    • whether or not there should be a clean break; and 
    • whether or not the asset split should be adjusted in the wife's ("W") favour to reflect what she contended was "a wanton campaign of extravagance" by her former husband ("H").  

    Now, as I alluded to, this wasn't the first time W's financial claims had been determined. Initially, back in 2010, the court had awarded W £26million from a pot of assets then worth £52million. Two years later though, she had gone back to the courts, seeking a higher payout out of a diminished pot. 

    W's position was that she wanted a greater share of the capital resources in order to meet her housing needs pending realisation of company shares at which point, she argued, the division would be equalised. H meanwhile sought a 66:33 division of the company shares (in H's favour) (which would give W 38% of the total assets) and a clean break (on the basis of his "special contribution").  

    Moylan J first spent some time considering the allegations of financial and litigation conduct that had been raised; he observed that it was not appropriate to consider H's expenditure in isolation; W's expenditure also had to be considered. W was seeking to argue that H's excessive spending on certain items should be deemed to be part of his resources because H was not spending from his income but from the parties' capital resources and because H had incurred the expenditure on the "understanding that any excess expenditure would have to be added back". Moylan J firmly stated that it was not sufficient to merely point to certain aspects of H's expenditure; the overall picture had to be analysed. On such an analysis, it was clear that both parties' spending had to a large extent been funded from capital.  

    Further, he highlighted, there had to be clear evidence of "wanton dissipation" to the extent that it would be inequitable to disregard it but that an "add back" always had to be justified within the facts of the case. Here he found W had only partly made out her case – both had been spending at a prodigious rate and on the evidence it was not possible to carry out a proper comparison to determine whether or not H's expenditure was wanton. Also, given the size of the asset pot (£40million), an add back of between $425,000 - $700,000 was not justifiable; at most, an add back of this size would give W an extra 0.5 – 1% - that degree of adjustment was not necessary in this case to achieve a fair result.  

    Turning them to whether or not H had made a special contribution, Moylan J took into account that it had been H who had created the company from which the family's wealth had flowed; H had done so from practically nothing but was this sufficient to meet the "of a wholly exceptional nature" test? After considering Charman v Charman (No 4) [2007] 1 FLR 1246 and K v L [2012] 1 WLR 306, Moylan J noted that the answer to the question "has there been in the present case such a disparity in the parties' respective contributions during the marriage, in that the husband has made a contribution of a wholly exceptional nature, such that fairness requires that his contribution should result in his receiving a greater share of the marital wealth?" should not depend upon any detailed analysis of contribution; rather, the answer depended upon a "striking evidential foundation" which clearly stood out. Indeed, Moylan J said: 

    "The extent to which the case, at times, seemed in the eyes of the parties to require what Coleridge J has aptly described as "a general rummage through the attic" was unedifying. This is not required, even when a case of special contribution is being advanced." 

    He concluded that H had not satisfied the special contribution test; in particular, he observed that H's own evidence was that he had considered an equal division of the company shares would have been fair up until the end of the marriage. If the parties themselves considered that an equal division was fair, it was difficult for the court to conclude that there had been such a disparity in their respective contributions that it would be inequitable to disregard it. 

    However the court did take into account H's endeavours post-separation and reasoned that it was justifiable that equality be departed from as a result. In particular, it was acknowledged that the company shares would not be sold until some years after the end of the marriage – years during which H would continue to work in the business and years during which W would be making no marital contributions beyond caring for one of the children of the family. H had strongly contended that his post-separation endeavours should justify a departure from equality in his favour. Moylan J observed that the value of the company shares would, in part, not be marital property because part of their value would be generated post-separation; however, he said, that fact alone did not lead to the conclusion that wealth should not be divided equally. Neither, did the fact that he could not identify specifically what part of the wealth was not marital mean that the court had to divide the wealth equally. The question was what weight should be given to H's sole endeavours after the end of the marriage. Distinguishing the present case from a case such as Jones v Jones [2011] EWCA Civ 41, Moylan J said: 

    "In my judgment, the present case is different and some departure from an equal division is justified because of this factor as part of the discretionary exercise. The company is not static. As referred to above, I am satisfied that maintaining and developing the company and procuring its sale will continue to require a great deal of important work. I am, accordingly, satisfied that the value in due course realised on the sale of [the company] will reflect, in part, the husband's post-separation endeavours." 

    So what was the eventual award? Looking at capital first, Moylan J said that a fair division (and taking into account H's post-separation endeavours as an unmatchable contribution), following the realisation of the company shares, would be to give H 55% of the capital wealth and W 45%. This meant that W received approximately £18million and H received £22million. Stating that "the parties' needs are the critical factor which determines the manner in which I should divide these resources", Moylan J went on to specially direct that W should receive £2.4million from the liquid resources to purchase a new property (she was looking for £3.95million). This left just enough sufficient liquid assets for H to pay his debts.  

    In terms of maintenance, Moylan J explained that an immediate clean break was not possible; W's share of the available (i.e. liquid) resources met her housing needs and it was wrong for her to have to use capital to meet her income needs pending the sale of the company shares. Given that there was uncertainty as to when that sale would occur and what the parties would receive when it was sold, it was reasonable and fair for W's position to be preserved. W's only income was from a company loan which gave her a maximum net income of £105,000; however, this was on a reducing basis. H, meanwhile, was able to pay maintenance as a result of his earned income of £280,000; on this basis Moylan J said, H should pay £100,000 a year to W. Satisfied that any maintenance award was likely to be tax deductible by H but not taxable when received by W, for so long as she resided in England, Moylan J proposed that the effect of this benefit should be divided so that W maintenance was increased to £140,000 per year (although Moylan J added the caveat – "if I am wrong about this, then the payment will remain £100,000"). 

    One of the final issues was the level of child maintenance to be paid. Taking into account that there was a separate trust fund for each child, Moylan J directed that it was reasonable for the trust funds to be used for the payment of both school fees and maintenance.

Case note, published: 12/04/2013

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Published: 12/04/2013

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