Family Law Hub

M v M [2004] EWHC 688 (Fam)

  • Restriction: The judgment is being distributed on the strict understanding that in any report no person other than the advocates or the solicitors instructing them (and other persons identified by name in the judgment itself) may be identified by name or location and that in particular the anonymity of the children and the adult members of their family must be strictly preserved.

    Neutral Citation Number: [2004] EWHC 688 (Fam)

    Case No: FD02D07645

    IN THE HIGH COURT OF JUSTICE

    FAMILY DIVISION

    Royal Courts of Justice

    Strand, London, WC2A 2LL

    Date: 29 March 2004

    Before :

    THE HONOURABLE MRS JUSTICE BARON DBE

    - - - - - - -

    Between :

    M

    Applicant

    - and -

    M

    Respondent

    - - - - - - -

    - - - - - - -

    N. Mostyn QC and M. Emanuel (instructed by Farrer & Co) for the Applicant

    L. Marks QC and A. Lyon (instructed by Withers LLP) for the Respondent

    Hearing dates: 22 - 25 March 2004

    - - - - - - -

    Judgment

    Mrs Justice Baron DBE :

    1. This is an application by Mrs M (hereinafter referred to as the Wife) for full ancillary relief arising from the breakdown of her marriage to Mr M (hereinafter referred to as the Husband). The parties were married on the 5th August 1989 and separated finally on the 1st January 2002 - thus, in simple terms, the marriage itself lasted some 12 years. The parties have 3 children - "Q" who was born on the 27th June 1990 (thus he is approaching 14 years old); "X" who was born on the 24th August 1992 (11 years old) and "Z" who was born on the 22nd May 1994 (9 years old). The younger children attend a local private day school and Q (who has special needs, of which more details are given below) attends the local, state comprehensive. The assets in this case are, by and large, agreed - at some £12.4 million - with the result that the Hearing itself was relatively brief. However, the issues which the case raises are of general interest to the profession and are, to some extent, novel.

    2. In essence, the Petitioner seeks a fair distribution of the assets - there is no real dispute but that she should receive 50% of the assets which were accumulated prior to separation - these total some £6.97 million. However, it is asserted on her behalf that a fairness dictates that, in addition, her award should include (i) a 50% share in the substantial assets (totalling some £5.43 million) which have been built up since the separation and (ii) a proportion (being 40%) of the sums which it is anticipated the Respondent will earn by way of bonus over - as she seeks - the next 7 years. It is the Husband's case that, whilst her needs dictate that she should have a proportion of the assets acquired between separation and trial - put by him at just over 30%, she should have no share in his future income. In the light of these countervailing contentions, I have been referred to no less than 24 Authorities (from many jurisdictions), numerous articles and foreign Statutes which supposedly support of the parties' various propositions. I have read and considered all of them contained - as they are - in a very substantial bundle. If I fail to deal with every point raised in the various cases, then it is only because I do not consider the point there decided to be of direct (or any) relevance to the points which I have to decide pursuant to the terms of the Matrimonial Causes Act which governs this case.

    The Factual Matrix.

    3. The Husband was born of Irish parents on the 12th August 1959. His mother (who lives in Ireland) is still alive - although she is currently unwell. He has one sister who lives in Glasgow. He left school when he was 16 years old. The Husband informed me that his father (now deceased) had told him that in life (and I am paraphrasing) it was important to work hard and to give of your best. Thus, whilst his achievements at school had been indifferent, he decided to "knuckle down" in his twenties and since that time he has been a prodigious worker. He began to study accountancy at Waterford College and then became an articled clerk with an accountancy practice in Cork. By 1982, he had completed his articles and had become a member of the Institute of Chartered Accountants. In 1984 he began to work for a large firm of accountant in London and in April of that year he bought his first home - a modest flat in Dulwich.

    4. The Wife was born on the 12th September 1961 in Kent. She has one sister. She went to school locally and then took a mathematics degree. She began her working life as a junior statistician employed by a local Health Authority. She later took an MSc in medical statistics and then started to work for the Communicable Disease Surveyance Centre. It was her hope that, in time, she would pursue a PhD. She was (and is) obviously a talented and intelligent woman.

    5. The parties met in the summer of 1984 and began to live together in September 1985. By this stage, I am clear they were committed to each other and it was only a matter of time before they married. Accordingly, their relationship lasted some 16 years in total. In 1986, the Husband sold his flat and the parties bought their first home together in Sydenham at a cost of £70,000 (with a 100% mortgage). They had minimal capital and each contributed towards the domestic economy from their respective earnings.

    6. In October 1987, the parties decided to relocate to Hong Kong, with the original intention that they would remain living in the then colony for some 18 to 24 months. At Christmas 1987, they became engaged.

    7. The Husband was employed by the Hong Kong office of the firm of accountants for whom he had worked in London and the Wife found some freelance work and also had part time employment with the Education Department of Hong Kong University. Eventually, she became a statistical research assistant with Barings.

    8. In 1988, whilst making presentations to a client of his then employers, the Husband met bankers from a well known financial institution ["ABC Co"] and came across a tax saving scheme which gave him the genesis of / idea for a financial vehicle which, some 5 years later, he developed into a tax efficient structure.

    9. In August 1989, the parties married in the UK. At about this time, the Wife was offered a job with Cancer Research and the Husband was given the option to transfer back to the London office of the firm of accountants. In the light of this, the parties decided that they would move back to England. However fate intervened. The Wife became pregnant with their first child and the Husband was offered employment with the taxation and banking arm of ABC Co. In the light of these developments the parties decided to remain in Hong Kong.

    10. They continued to live in (subsidised) rented accommodation and were able to enjoy a nice (but not lavish) lifestyle. Over the next 3 years, the Husband's income fluctuated somewhat but was an average of some US$135,000 per annum.

    11. In June 1990 Q was born and X followed in 1992. Despite her responsibilities to the 2 young children, the Wife continued to work on a part time basis. She only ceased paid employment shortly before her 3rd child was born in May 1994. There can be no doubt that during these early years both the Husband and the Wife were giving their all to their partnership.

    12. As the Husband progressed in his career, his earnings increased. By 1993, the year in which his "invention" of a financial vehicle became operative, he was earning about US$370,000 and the next year his salary/bonus increased to some US$430,000. I have no doubt that the conjunction of his improved financial position and the Wife's increased responsibilities at home, meant that it was no longer sensible or necessary for her to contribute financially. Their marriage therefore followed the traditional path whereby the Husband made his contribution to the family's welfare by earning sufficient to fund their lifestyle and the Wife made hers by caring for the family. As such each made an equally valuable contribution. Whilst the Husband's was financially rewarding, the Wife's was equally essential.

    13. As set out above, in 1993 the Husband (who by this time was involved in tax arbitrage) had devised the tax saving scheme. It is not necessary for the purposes of this judgment to give details of the scheme, which, as the husband said during the course of his evidence, are very commercially sensitive.

    14. Like many schemes designed to be tax efficient it has been necessary for the product to evolve in order to remain effective. Over the years, the tax authorities in the USA and UK have acted to close the various loop holes which permit the structure to operate. Consequently, it has been necessary for the Husband (and his team) to keep one step ahead and develop the product so as to ensure its continued tax efficacy..

    15. The Husband thought that his structure would have a limited life span/shelf life of some 2 to 3 years but, to date, in its different formats it has lasted for some 10 years. In his evidence he informed me that he did not think that the structure would last much longer. His particular concerns related to the general move towards international co-operation to reduce/extinguish the tax loss to local exchequers as a result of the use of international jurisdictions. He said that the local Authorities had come under increasing pressure from both the UK and USA, such that periodic enquiries (which, although termed annual, occurred about every 20 months) were made to ensure that local tax laws were not perceived as hostile to foreign jurisdictions. In 2003, the enquiries had become much more rigorous.

    16. Although the Husband had devised the complex structure and, has continued to develop it using his own initiative and ingenuity, he did not (and does not) have any proprietary interest in it. He is the mere servant of ABC Co to whom all profits of the scheme are paid. The Husband's receives his reward through his annual bonus which is related to the profit of his department as a whole and his own personal performance. The bonus is paid partly in cash and partly by way of deferred shares which are redeemable over a 3 year period provided that the Husband remains in the continued employment of ABC Co. This means that the Husband has to work for a further 3 years to enjoy all the benefits of the bonus which he has already been awarded. Clearly this is a form of "golden handcuff" which ensures (as far as possible) his continued loyalty.

    17. In 1994, the parties purchased a property in Chelsea as an investment. It was then rented out. In May of that year, Z was born. In October 1995, the parties moved to their last apartment in Hong Kong - which was furnished with the help of an interior designer.

    18. In 1996, by which date the Husband had devised the next generation of the financial vehicle, he was earning in excess of US$ 1 million per annum. Of course, earnings at this level called for an amazing commitment, long hours and a great deal of travelling. The parties spent increasingly lengthy periods apart which meant that the Wife had increasing responsibilities at home.

    19. In 1997, the Husband earned in excess of US$1.4 million. It was at this date that Hong Kong was ceded back to China and there was a general uncertainty and anxiety as to its long-term future as a financial centre. In the light of this, the parties began to discuss a return to England. The Husband was reluctant to return to the UK because it would mean a huge drop in salary (not least because large amounts of tax would be payable) and the abandonment of his work. However, he was prepared to consider a temporary relocation to the UK to assist the children in settling in to schools on the basis that (i) he continued to work abroad for most of the year and (ii) his tax position was protected. By 1998, the Husband was probably working too hard because he suffered from a stress related illness. The result was that sales of "his" product suffered but, even so, he was able to earn nearly US$ 2 million during that year.

    20. As the parties' wealth increased, they began to enjoy a much better lifestyle. By that I do not mean that they lived extravagantly - in fact, I am of the view, having seen and heard the Husband, that he is by nature rather parsimonious (unless, that is, he sees his expenditure as a form of investment). That year the parties bought a property in Spain, which they used for their summer holidays. They also looked for a home in Kent - although, initially, they rented in Tonbridge.

    21. During 1999 the Husband spent much of the year abroad whilst the Wife was left alone in Kent to care for the children. It was very important to the Husband to ensure his continued offshore status. Thus, he was, in reality, limited in the amount of time he could spend in the UK. He took advice as to the status of the jointly owned Chelsea property and it was decided that it should be transferred into a company called QXZ Limited of which the Husband is the sole owner. The Wife did not receive any independent legal advice about the relinquishment of her 50% interest. In the final analysis, nothing now turns on this fact because it is accepted that she should enjoy a 50% in all assets acquired during the marriage - nevertheless, it does show that the Husband was in charge of all financial decisions.

    22. It was about this time that Q's behaviour became increasingly difficult to control. He was excluded from school on several occasions, diagnosed as ADHD and given Ritalin in an attempt to manage his "symptoms" of bad behaviour. Q suffered quite severe side effects from the medication but persevered with the treatment for some time.

    23. In 1999 the Husband earned nearly US$3 million. The parties had by then decided to purchase a home in a town in Kent and looked at various properties. In the end, none appealed. Accordingly, in April 1999, when land became available in a salubrious part of the town, they decided to build their own home. The project was to be both expensive and time consuming. As the marriage was already in difficulties, the parties discussed their future and decided that they wished to remain together. With hindsight, the declining state of the relationship was hardly surprising because the parties were spending very little time in each-other's company.

    24. The build took some 2 years and, although I have not heard much evidence about it, I expect that the Wife bore the brunt of the day to day difficulties - subject, of course, to the fact that the parties were able to employ high grade professionals. The property was their "dream home" and was built to the highest specification with all "mod cons". It has several reception rooms and 6 bedrooms. It is now worth an agreed £2.5 million. The Wife and children continue to live in the house ("the former matrimonial home"), but the Husband has never really lived there as part of the family (although he stayed in the house for a short period towards the end of the building works). There are a number of outstanding works that need to be completed - for example, the outside wall and pavement. The Husband has now agreed to fund these additional works in the sum of £150,000. It has been argued on behalf of the Husband that this property is too large for the Wife's long-term needs - particularly when the younger children have left home. In the light of this, she was shown house particulars in the price bracket of £1.5 million in order to prove that she could buy a fine establishment for that sort of sum. The argument being that she had a future prospect of releasing about £1 million to augment her lifestyle. Whilst in many cases, this scenario might be a financial necessity, I do not regard it as such in this case. I am of the clear view that the Wife should be able to remain in the former matrimonial home, if that is what she wishes. Of course, it will be a matter of choice as to whether (as she grows older) she decides - like most people - to downsize. If she does so, then her investment income will increase.

    25. In 2000, the Husband earned just over US$ 3 million. Despite this, he was determined to use his resources carefully. He had a modest salary which was paid in the UK and he decided that the family would live on this sum - save for capital expenditure. He is careful by nature and, it is plain, that he always sought good value for money. Thus, whilst he spent lavishly on the former matrimonial home and the Spanish property (which he saw as investments) he was fairly frugal in terms actual lifestyle. The Wife told me that, by this time in the marriage, she did not have to worry about money and could buy what she wished - I accept her evidence on this point. However, like her husband, she was not extravagant by nature and she did not spend rashly.

    26. By the Autumn 2000, Q had been obliged to leave main stream school and, for a period, he was tutored at home. At this time, he was further diagnosed as being dyspraxic. It must have been a very difficult experience for his mother, as Q battled with the side effects of Ritalin and she was effectively without her husband's support. She is to be commended for her devotion to Q and her other children. In September 2001, Q started at a local private school in the hope that this would assist but - in May 2002 - he was asked to leave that establishment.

    27. Over the Christmas break 2001, the parties went to Australia for a family holiday. It was not a success. In January 2002 the parties separated - as set out above - they had been together for some 16 years together (of which they were married for 12 years). Since then, the Husband has been based in Hong Kong - where he lives (in rented accommodation) with his new partner. She is a solicitor. The Wife and children have continued their life in the former matrimonial home.

    28. Unfortunately there has been a good deal of bitterness since the breakdown of the marriage and, to some extent, this has spilt over into the litigation. At the outset, the Husband closed various bank accounts and put the Wife on an allowance of £4,250 per month. He told me that he reasoned that the family had lived on a net income of £50,000 - being his English salary. Consequently, he considered that this sum would be sufficient for the Wife and children. In March 2000, he increased the sum to £5,500. I do not consider that either amount was appropriate and his parsimonious attitude is to be condemned.

    29. The Wife through her advisers sought total interim provision of £11,000 per month - viz: £132,000 per annum - net but the Husband would not make this sum available. His income for 2001 (of which the substantial bonus was paid in March 2002) was US$5.3 million. Eventually in February 2003, the Husband increased his payments to £7,500 per month - viz: £90,000 per annum and he paid for 2 holidays. Even this sum was inadequate. It is unfortunate that he did not pay the monies that the Wife was seeking - particularly as she only wanted some £40,000 more than he was prepared to pay. The Wife did not make an application for maintenance pending suit, she simply soldiered on with the funds that were available. She has not run an overdraft because she has chosen to live within her means. However the result has been that the Wife and children have been kept on short commons for some 21/4 years. In his evidence the Husband apologised for this state of affairs and so he should.

    30. In fact, the Husband has also lived very modestly. Mr. Mostyn prepared a schedule in an attempt to show that the Husband had been spending at an extravagant rate. However, when analyzed, much had been spent on the former matrimonial home and the Husband was able to account specifically for all but about £50,000 of the outflow. Even allowing for the fact that the Husband's living expenses are subsidised when he travels on business, his expenditure on himself is very modest in the context of the assets.

    31. Since the separation the problems with Q have increased. As set out above, he stayed at a private school until May 2002. He was obliged to leave it because the school could not control his behaviour. In July 2002, Q was seen by (i) Dr Sunil Pullaperuma - a consultant Paediatrician with an interest in neuro-disability and neurology and (ii) a Ms Jackie Harland a speech and language specialist. Later he was seen by Mr David Urani - a Chartered Educational Psychologist.

    32. The outcome of these investigations was a diagnosis that (i) Q has a very high IQ of 130 on the verbal scale and 142 on the performance scale and full scale 139 (that is in the 99.5 percentile) but (ii) suffers from an autistic spectrum disorder/Asperger's Syndrome. Thus, he is highly intelligent - "functioning within the exceptionally high range of cognitive ability [per Urani] - and is co-operative in a one to one situation (particularly if engaged in an activity which he finds interesting). But he has profound difficulties in a social setting. Moreover, he has "specific language impairment with features such as vocabulary retrieval difficulties which are indicative of disorder rather than delay" [per Harland.].

    33. According to Dr Pullaperuma, Q presents as

    "a lively and happy boy, slightly immature in his behaviour but lacking social skills. This is evident in the class, free time and in play situations. The school also found behaviour in the formal situation, like mealtimes, very difficult to keep within accepted boundaries. His behaviour often lapses to babylike, attention seeking, which did not endear him to his peers. When he joined [the local private school] he became aggressive particularly, kicking, biting, losing his temper with others...."

    34. In the light of the reports his parents (in reality his mother) decided that he should attend the local comprehensive school on the basis that it had a reputation for good pastoral care and had a "Social Communications" group within the AEN department. The hope and expectation was that Q's social skills could be improved within this school setting. However this plan of action has not succeeded. I have seen Q's school reports which show variable, but generally good, academic results but fundamental problems in relation to his behaviour.

    35. Q is not popular with his peers and has been teased on a regular basis. There have been incidents of violence to staff and fellow pupils which have lead to him being excluded for periods. One of the worst incidents was when he struck a child on the side of his head with a chair. The school have attempted to "manage" the difficulties (i) by reducing his time table (so that he now attends school on a part time basis), (ii) by keeping him at reception (where he reads his book) during breaks and/or (iii) by permitting him to attend "the Haven" which is special area for difficult students. The headmistress has warned that he may be excluded on a permanent basis and in February 2004 there was a "make or break" meeting at which both parents were present.

    36. In June 2003 Dr Pullaperuma stated, inter alia:-

    " Q also shows.... mixed clinical features of Asperger's syndrome and autistic spectrum disorder. From the available research it is well known that children with autistic continuum have a very variable outcome...... the only clear predictor of outcome in almost all the studies is the IQ level..... the outcome amongst those of a high IQ is ... variable and less predictable. Useful speech in early childhood... is also a good predictive of a better outcome.

    Q has shown significant improvement over the years. His language developed early and he was able to communicate by school entry. He subsequently progressed with his speech and language and communication skills, and now has fairly significant abilities in these areas......These features support that Q will have a better outcome in the long run from the available research information.

    The most experienced authors in the field have come across quite a number of children who appear to grow out of autism. The majority of [? these] children actually make some progress in their social skills functioning and hence may not be regarded as suffering from autism at a later stage. However, the majority of children remain socially severely restricted as adults. Q has shown a similar improvement over the years, but he still continues to have major difficulties with social skills especially with his peer group.

    It is somewhat difficult to accurately predict [sic] Q's long-term outcome, but the available research indicates that Q possibly has a better long-term outcome as he has a significantly high IQ and early development of language. He has also shown significant progress over the years, but despite this, he continues to carry significant impairment with his social skills, especially his peer group. This will have a significant impact on future life, finding employment, developing relationships and facing a wider challenging world".

    37. In his written opening submissions Mr Mostyn invited me to read a novel entitled "The Curious Incident of the Dog in the Night-Time". This book won the Whitbread Book of the Year Award 2004 and is based upon the world as seen through the eyes of a 15 year old boy with Asperger's syndrome. Mr Mostyn accepted that the child in the book was a much worse case than Q but considered that the novel would enlighten the Court. I did not read it, as I do not consider that any Judge should be asked to (i) make decisions based upon a fiction or (ii) have his/her view of a case coloured in this way.

    38. During the course of the Hearing, I indicated to the parents that I did not consider that Q's present school's methods of dealing with Q's behavioural problems were assisting him. In fact, I do not consider that the school's current approach will lead to the vital development of his social skills. The aim must be to enable Q to lead an independent life. It would seem from the reports placed before the Court, that Q has that possibility. However, the measures taken in his current placement are not satisfactory. I consider that this child needs a much greater input if he is to reach his full potential in life. That is not to criticise either parent. But it is plain that the Husband has been too busy pursuing his career and the Wife (who, in her heart, has been hoping that time would cure Q's problems) has been distracted by the pressures caused by these proceedings.

    39. Q needs both his parents' attention now. A school must be found that meets his needs and a good deal of research must be undertaken to make sure that it can deal with Q's identified problems. I have no doubt that the main burden of the ground work will fall on the Wife but that does not absolve the Husband from his duty.

    40. It may be possible for Q to gain independence but he will always be vulnerable and his Mother will always bear an additional burden as a result. Indeed, Q may never achieve full independence and his mother may have to care for him on a long-term basis. No predictions can really be made in this case. The prognosis is more optimistic because Q has such a high IQ. But he will only succeed if he receives the right, professional input quite soon. It is in everyone's interests that this is secured. It is obvious that these parties have the financial means to provide whatever Q needs.

    41. In 2002 the Husband earned a cash bonus of £1,089,213 and some £1.9 million in deferred shares - payable in 3 tranches in March 2004 to 2006. In 2003 his net cash bonus amounted to £1,350,876 and the deferred shares totalled £1.089 million payable March 2005, 2006 and 2007. The final assets schedule shows that the earnings in the last 2 years (throughout which the parties have lived apart) total £5,434,526 net of all taxes (based on the current share price). A graph has been prepared of the Husband's salary and bonus since 1990. That graph appears at appendix 2 to this judgment and shows the substantial increase in the Husband's remuneration - particularly over the last 3 years. It is the Wife's case that she should not suffer from the fact that this marriage was terminated just at the point when the Husband began to earn significantly more money.

    42. Since the separation the parties have continued in their respective roles. The Wife has looked after the children - with the attendant, extra work that caring for Q involves. The Husband has continued his gruelling schedule with ABC Co. In 2002, he was responsible for selling 100% of "his" product. In 2003, only some 80% of the product was sold - despite this, his bonus increased and the legend on the letter detailing his bonus was "Another super year. Great performance. Well done". In his evidence the Husband informed me that his managerial role within the department had increased recently. As a result of new management directives, he is now responsible for developing ABC Co's business "to leverage off" existing customers in South East Asia. The Husband said that, currently, this business does not add much to the profits of the department - indeed, on its own, it would barely cover some 10% of the basic overheads, but it is essential work so far as his bosses are concerned. Almost all income of his department still stems from "his" structure but, he says, monitoring/selling the scheme only accounts for some 50% of his current workload. The remainder of his time is devoted to the overall promotion of ABC Co's business in Asia. Accordingly, his recent bonuses reflect - not only the large profits made by ABC Co from tax arbitrage but also his hard work in seeking additional business in accordance with ABC Co's overall, current policy.

    The Assets

    43. The asset schedule has been agreed between the parties and appears at appendix 1 to this judgment. It was altered on the 3rd day of the Hearing to reflect a fall in the share price of ABC Co, a small alteration in that price having had a dramatic effect on the asset schedule because of the proportion of deferred shares held by the Husband.

    44. It has been agreed by Counsel, that when I divide the deferred shares, my order will provide the Wife with a given proportion, so that she "assumes the risks and benefits from the reward" of any share fluctuation over time (this is a form of "Wells sharing").

    45. It is also agreed that she will only receive her funds as and when the Husband is first entitled to "cash in" his shares. Thus, if he is obliged to leave ABC Co and is not entitled to his deferred shares, then the Wife will receive nothing. Likewise, if he moves from ABC Co and receives a "golden hello" to compensate him for the loss of his deferred shares, then the Wife will be entitled to such share of that sum as reflects the loss of the deferred shares - even if the capital sum is not expressed as being directly referable to such loss.

    46. Importantly, the schedule shows as follows:-

    46.1. The former matrimonial home has an agreed net value of £2.425 million. The works required to complete the project may enhance its value somewhat. It is a substantial property, has state of the art facilities and is in excellent condition (subject to the minor, outstanding works). It is agreed that it will be transferred into the Wife's sole name.

    46.2. The Spanish property - the parties' holiday home will be retained by the Husband. It is worth some £420,000 net of mortgage and Spanish sales tax.

    46.3. There are no liquidity problems as quoted shares and cash amount to some £6 million. The deferred shares total just over £3 million. Both these sums include the monies earned in 2002 and 2003. The total pot is now some £12,405,550 - of which the pre-separation assets total £6.971 million and the post-separation assets total £5.434 million.

    47. There has been a suggestion that some £2.8 million worth of UK tax should be deducted from the schedule. This arises from the period when the Respondent was nominally on secondment in the UK. I do not consider, on the balance of probabilities, that this tax will ever become due and payable because (i) the Husband is domiciled abroad (being Irish by birth) and (ii) he was careful not to repatriate earned income to England during the relevant period. Moreover, the parties have agreed that the Wife will give (an unlimited as to time) indemnity in respect of this tax - thus, if the Husband has to pay any tax, she will "repay" such part of her lump sum as reflects her proportionate share of any deduction.

    48. The schedule includes figures for the Husband's unpaid costs (some £71,495) and a loan (some £247,633) which the Wife has taken to fund her costs. This is in line with the modern approach that the Court has realistically to cater for the liability above the line.

    The witnesses

    49. The Wife.

    49.1. The Wife struck me as a devoted mother, who has had to bear the brunt of the responsibility for the children throughout the marriage as a result of her husband's workload and his attendant absences. She will undoubtedly continue with this role until the children achieve independence. In Q's case, her duties in this regard may be life-long. She told me that, in comparison with the other children, Q takes a great deal of extra care. Recently, she has been considering specialist boarding schools for Q (for which she produced 2 brochures). They did not seem to me to be ideal and she acknowledges that further investigation is needed. However, Q may board in the future which would lessen her load. In any event, she should have extra help in house. Indeed, she should have had it over the past 2 years but was unable to have a trained mother's help because of the Husband's failure to provide sufficient finances. I find that this must have added to her burden in the recent past.

    49.2. She was questioned about her budget and some inroads were made because she accepted that (i) some running costs should have been apportioned to the children, (ii) some costs were over-estimates and (iii) some expenditure was "one-off". She did not appear to wish to live extravagantly.

    49.3. She said that her Husband's attitude to the litigation and the lack of funds had caused her to feel under pressure. She did not consider that he had been fair to her or the children in the interim. I accept her evidence on this point.

    49.4. She told me that she wanted to study psychology - in order to improve her mind. It was suggested that she might wish to use this type of qualification to earn money but I do not consider that she needs to work or should be obliged so to do. If she chooses to then, that will be a matter for her.

    49.5. She says that, whereas the Husband may retire from his job, she has no such option. Accordingly, she asserts that her contributions to the welfare of the family have not and will not cease as a result of the divorce because she will have to continue to fulfil her marital role as a mother - albeit that she will no longer be a wife. She wants this continued contribution to be marked - particularly as her "job" does not bring any financial reward. It is her case that, whereas potentially, the Husband will be able to continue to earn huge sums, she has no such option. She believes that the tax structure which he invented during the marriage should, in fairness, be regarded as a marital asset from which she should benefit for the next 7 years (in reality, 10 years because of the 3 year earn-out in respect of the deferred shares).

    50. The Husband.

    50.1. The Husband is a man of talent who is devoted to his work - in fact, to date, it has been all-consuming. His dedication has cost him the marriage and, to some extent, his health. He exhibited clear evidence of stress during his evidence. He was obliged to take beta blockers (for they have to be taken every 3 hours) whilst in the witness box, he looked fatigued and his hands shook throughout. He said that he has suffered from a loss of sensation in his hands and skin. The doctors have told him that they believe this is probably stress induced but it may be the onset of Multiple Sclerosis.

    50.2. Despite advice to slow down, he has continued to undertake a punishing schedule with little consideration for its long term effects on his health. He said that he felt obliged to work in this way because he wanted to ensure financial security for the whole family.

    50.3. He said that he had continued his enormous workload since the separation because he felt that he would then have sufficient funds with which to deal with the financial ramifications of the divorce.

    50.4. He did not consider that the Wife should have 50% of the post separation assets - he felt that 31- 33% was a generous proportion. More importantly, he did not consider it to be fair that she should have any part of his future earnings. He said that he did not know whether he would be able to earn the sums which he had earned in the last 3 years because (i) he remained pessimistic about the longevity of his tax structure and (ii) he did not believe his health could continue to withstand the rigours of his current schedule. Moreover, he said that he would have no incentive to work in this way if he were to lose 40% of his earnings. He told me that the possibility of a large bonus (whatever it might be) was a real incentive but, if he learned that whatever his effort, he would only receive 60% of it then he would not continue. He was cross-examined extensively on this point. I was wholly convinced by his answers and demeanour in the witness box and I am clear that he would not be prepared to work as he has heretofore if there were to be any "charge" on his future earnings.

    50.5. The Husband told me that he was 44 years old and that he did not feel that he had the energy to continue working as he had in the long-term. On the other hand, I accept that he does have an option to continue for a few years and, if he does, the financial rewards may be great.

    50.6. I am of the clear view that the Husband sees his success and, ultimately, his status in terms of his overall capital worth. Thus, he may well feel "compelled" to continue working for the few years - if, for no other reason, than to seek to re-coup the monies that he will pay out as a result of the divorce. Despite this, I am equally sure that any on-going payment would be a huge (perhaps complete) disincentive to him. Moreover, I do not believe that very high earnings are assured in the medium to long-term.

    The Law and its application in this case.

    51. In this case my dispositive powers are governed by the provisions Sections 23 and 24 of the Matrimonial Causes Act 1973. In essence, it is my duty to take into account all the factors set out in Section 25 of the Act so as to produce an outcome that is "fair" in all the circumstances of the case. In seeking to achieve a fair outcome there is no place for discrimination between the spouses and their respective roles. There should be no bias in favour of the money-earner and against the home-maker and child-carer.

    52. The famous passage of Lord Nicholls' in White v White 2001 AC 596 reads as follows pp 989:-

    "Self-evidently, fairness requires the court to take into account all the circumstances of the case. Indeed, the statute so provides. It is also self-evident that the circumstances in which the statutory powers have to be exercised vary widely. As Butler-Sloss LJ said in Dart v Dart [1996] 2 FLR 286, 303, the statutory jurisdiction provides for all applications for ancillary financial relief, from the poverty stricken to the multi-millionaire. But there is one principle of universal application which can be stated with confidence. In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles. Typically, a husband and wife share the activities of earning money, running their home and caring for their children. Traditionally, the husband earned the money, and the wife looked after the home and the children. This traditional division of labour is no longer the order of the day. Frequently both parents work. Sometimes it is the wife who is the money-earner, and the husband runs the home and cares for the children during the day. But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party when considering para (f), relating to the parties' contributions. This is implicit in the very language of para (f): '... the contribution which each has made or is likely ... to make to the welfare of the family, including any contribution by looking after the home or caring for the family'. If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets. There should be no bias in favour of the money-earner and against the home-maker and the child-carer. There are cases, of which the Court of Appeal decision in Page v Page (1981) 2 FLR 198 is perhaps an instance, where the court may have lost sight of this principle.

    Thus, as matters stand, there is a degree of confusion. I venture to think this has arisen because the courts have departed from the statutory provisions. The statutory provisions lend no support to the idea that a claimant's financial needs, even interpreted generously and called reasonable requirements, are to be regarded as determinative. Another factor to which the court is bidden to have particular regard is the available resources of each party. As my noble and learned friend Lord Hoffmann observed in Piglowska v Piglowski [1999] 2 FLR 763, 782, [1999] 1 WLR 1360, 1370, s 25(2) does not rank the matters listed in that subsection in any kind of hierarchy. The weight, or importance, to be attached to these matters depends upon the facts of the particular case. But I can see nothing, either in the statutory provisions or in the underlying objective of securing fair financial arrangements, to lead me to suppose that the available assets of the respondent become immaterial once the claimant wife's financial needs are satisfied. Why ever should they? If a husband and wife by their joint efforts over many years, his directly in his business and hers indirectly at home, have built up a valuable business from scratch, why should the claimant wife be confined to the court's assessment of her reasonable requirements, and the husband left with a much larger share? Or, to put the question differently, in such a case, where the assets exceed the financial needs of both parties, why should the surplus belong solely to the husband? On the facts of a particular case there may be a good reason why the wife should be confined to her needs and the husband left with the much larger balance. But the mere absence of financial need cannot, by itself, be a sufficient reason. If it were, discrimination would be creeping in by the back door. In these cases, it should be remembered, the claimant is usually the wife.

    Hence the importance of the check against the yardstick of equal division.

    There is much to be said for returning to the language of the statute. Confusion might be avoided if courts were to stop using the expression 'reasonable requirements' in these cases, burdened as it is now with the difficulties mentioned above. This would not deprive the court of the necessary degree of flexibility. Financial needs are relative. Standards of living vary. In assessing financial needs, a court will have regard to a person's age, health and accustomed standard of living. The court may also have regard to the available pool of resources. Clearly, and this is well recognized, there is some overlap between the factors listed in s 25(2). In a particular case there may be other matters to be taken into account as well. But the end product of this assessment of financial needs should be seen, and treated by the court, for what it is: only one of the several factors to which the court is to have particular regard. This is so, whether the end product is labelled financial needs or reasonable requirements. In deciding what would be a fair outcome the court must also have regard to other factors such as the available resources and the parties' contributions. In following this approach the court will be doing no more than giving effect to the statutory scheme."

    53. I take all these factors fully into account.

    54. To date, there has been no Authority directly on the point at issue in this case which is, the Court's approach to the division of assets in the following, particular circumstances:-

    54.1. a medium length marriage/cohabitation [of 16 years];

    54.2. a "big money" case - where assets could (and in my view should) be said to exceed needs [£12.4 million]; but with

    54.3. the possibility that the Husband will be able to accumulate very significant further assets through future work. [Specifically, as Mr Mostyn asserts, given that in the last 3 years the Husband's average bonus (per appendix 2) has been US$5.1 million / £2.789 million net (at £=$1.853)].

    55. Section 25 of the Matrimonial Causes Act is so well known that it does not need repeating in the context of this (already lengthy) judgment. Suffice it to say, I consider the following circumstances to be of particular significance:-

    55.1. The Parties are aged 44 [the Husband] and 42 years old [the Wife]. Thus, they are middle aged. The Husband in particular may have many years of working life left and the Wife will have to continue her "job" of caring for the family until the children reach independence and perhaps until her death because of Q's needs.

    55.2. Each party made an extraordinary but equal contribution to the marriage. In their own way, each has had to make a special sacrifice for the family - the Husband by working harder than most and the Wife by caring for the children - especially Q - as if she were a single parent. In the light of the Authorities , particularly Lambert - v - Lambert [2003] 1 FLR 139 I do not regard either as having made a special contribution such that it sounds in the level of award or in the right to retain a larger share of the assets.

    55.3. After the divorce each party will cease to make any contribution as a spouse. However, each will continue to make a valuable continuing contribution as a parent. The Wife will have the day to day care of the children - with the added responsibilities that Q brings - as such she will make a continuing and valuable contribution as a mother. The Husband will continue to make substantial financial contributions because, apart from periods when the children are with him (and at the present rate that will only be some 50 days per annum), he will make his contribution as a father by providing periodical payments.

    55.4. For the avoidance of doubt, I order him to pay for all the children's schooling (including reasonable extras), to provide full medical insurance, to pay the children's usual medical and dental expenses (save to the extent that they are already reflected in the wife's budget) and periodical payments at the rate of £35,000 per annum net for Q and £25,000 per annum for each of the 2 younger children. That is a total of £85,000 per annum net payable monthly in advance from the 1st March 2004 by way of standing order. These payments will be indexed linked. In the case of Q the payments will continue into adulthood on the basis of his special needs. Indeed, his periodical payments may need to be increased beyond inflation. In respect of the younger children, the payments will continue until they cease tertiary education (that is to the end of a 1st degree only). When these go to university (or other training), the amount paid to their mother for the roof element will become the then equivalent of £10,000 per annum (as adjusted for inflation). The remaining sum will be paid directly to the child in respect of his/her allowance and university fees. If this latter sum is insufficient to cover proper expenses, then it will be a matter for direct negotiation between father and adult "child" (or, failing agreement, Court order). These sums are predicated on the basis that that the Husband's annual income from all sources is not less than £350,000 net per annum. If it falls below this figure, then the periodical payments may need to be adjusted.

    55.5. The relationship to which I shall have regard lasted 16 years - I do not draw any distinction between the years of co-habitation and those of the marriage in this case. I take fully into account the precise wording of the Statute but I am clear that in modern society it is a couple's commitment to each other by co-habiting that is the relevant start date for consideration in most cases. Indeed, I consider that it is the norm for most couples to live together for a period before marriage. In this case, the parties are Catholic by religion but even they did not consider their religious tenets to be any impediment to a life together without the formality of marriage. That was, as I find, because they assumed that marriage was inevitable. I am well aware of the decision in Foley - v - Foley 1981 3 WLR 284 and the dicta of Eveleigh LJ at page 290. There are many other old cases dealing with the importance of the married years per se but I consider that society has moved on and it would be old-fashioned (indeed, senseless) to ignore the manner in which people now choose to order their lives. I prefer the modern view and draw a measure of comfort from GW - v- RW [2003] 2 FLR 108 in which Mr Mostyn Q.C (sitting as Deputy High Court Judge) rightly said:-

    "[Foley].... is now nearly 22 years old. The case of White v White has emphasised that the law in this area is not moribund but must move to reflect changing social values. I cannot imagine anyone nowadays seriously stigmatising pre-marital cohabitation as 'living in sin' or lacking the quality of emotional commitment assumed in marriage. Thus, in my judgment, where a relationship moves seamlessly from cohabitation to marriage without any major alteration in the way the couple live, it is unreal and artificial to treat the periods differently. On the other hand, if it is found that the pre-marital cohabitation was on the basis of a trial period to see if there was any basis for later marriage then I would be of the view that it would not be right to include it as part of the 'duration of the marriage'. This was the finding made in the recent case of F v F (unreported) 14 January 2003 by Hartmann J in the High Court of Hong Kong, which decision contains some valuable insights on this and other aspects of the law of ancillary relief. There is no basis for such a finding in this case, and I therefore include the 18 months of pre-marital cohabitation here as part of the 'duration of the marriage'

    55.6. In fact, I doubt that the nice distinction which Mr Mostyn sought to draw will be capable of identification in most cases. He added (at Paragraph 40)

    "I do not shrink from saying that this is a difficult issue. The logic deployed by Mr. Pointer has obvious force. But on the other hand it seems to me that to adopt it requires me to put a blue pencil straight through the statutory criterion of the duration of the marriage. The failure of the judge in L v L (Financial Provision: Contributions) [2002] 1 FLR 642 (Lambert) to give sufficient weight to this factor was specifically criticised by the Court of Appeal. It seems to me that the assumption of equal value of contribution is very obvious where the marriage is over 20 years. For shorter periods the assumption seems to me to be more problematic. I am not attracted to a formulaic solution, as suggested by John Eekelaar, but I do in essence accept his proposition that the entitlement to an equal division must reflect not only the parties' respective contributions but also an accrual over time".

    55.7. Although not without academic controversy, I consider that this point is well made. It seems to me that there ought to be an acknowledgement in the level of award to take account of this factor. I regard this marriage as in the lower end of the bracket of medium to long term, which means that an equal division is not necessarily to be regarded as almost automatic.

    55.8. As the asset schedule makes clear, the financial resources are substantial and liquid. As set out above, they have increased very significantly since the parties separated. I find that it is probable that, for next 2 years or so, the Husband will continue to earn a significant bonus - albeit that this cannot be guaranteed. However, I find it impossible to predict the level of the Husband's future earnings. I doubt that he will be able to continue working at his current pace. Moreover, I accept his evidence that the financial climate is such that his "structure" is likely to end within the foreseeable future. Accordingly, I would not expect his bonus to continue to grow in the exceptional and exponential manner that it has over the last 3 years. His potential future income (at whatever level) is a financial resource but it does require real future effort to bring to fruition and it is not certain.

    55.9. Since the 1980s these Courts have striven to provide a clean break upon divorce to enable parties to conduct their future lives separate and apart. It has only been cases of real need that periodical payments have been ordered because, without them, one party (usually the wife) would not be able to adjust without undue hardship.

    55.10. It would seem to me that it is in the public interest to strike a balance between any future connection (with possible, attendant litigation) and the need to protect a party who needs financial support. If it can be attained, it is better for there to be a clean break. Moreover the mischief is the same whether the periodic payment is called maintenance or is termed a series of proportionate lump sums (since both are to some extent variable). More importantly, such orders mean that the parties are still connected and the Wife is still dependant on her former husband. An instant clean break is always preferable if it can be achieved.

    55.11. In this case Mr Mostyn has sought to argue that the current assets of £12.4 million are not sufficient to cover his client's needs. Indeed, in his final submissions he produced a series of figures which showed that, on the basis that (i) the Wife "needed" a budget of £150,000 per annum net and (ii) no capital was amortised, she required a total of £8.37 million. Even a Duxbury calculation at this level of income showed a "need" for £6.6 million - some £455,000 more than a 50% split of the current assets.

    55.12. On the other hand, Mr Marks produced a series of calculations which showed that, in reality, the Wife's budget was £111,000 per annum after deduction of the expenses which were truly referable to the children and the removal of "one off" items that had, he submitted, been incorrectly included. His alternative Duxbury calculations showed that the Wife only "needed" a lump sum of £1.5 million in addition to the transfer of the house because such sum would provide her with either (i) an annual income of £106,000 until 2016 (and £86,300 thereafter) or (ii) if she sold the former matrimonial home in 2016 - thereby releasing £1 million - a total income for life of £108,000 per annum net.

    55.13. Of course, I am only too well aware that, calculations can be put forward to support any contention - thus, I treat each Counsel's figures with a degree of caution. I find that the Wife needs a home and, on the basis of generosity, she should be able to stay in the former matrimonial home if that is what she wishes (it is worth £2.525 million inclusive of its contents). She needs £150,000 to finish the works to that house and she needs her current car (worth £15,000).

    55.14. Her budget, as adjusted to remove the children's expenditure and the one off costs that she accepted in her evidence, to my mind shows a need for no more than £125,000 per annum.

    55.15. She will be in receipt of £85,000 per annum for the children. Those monies cannot be used to fund her reasonable budget but they will augment her expenditure because they contain a roof element.

    55.16. The figure of £125,000 per annum net is generous given the manner in which the parties lived during the marriage. That annual income need would produce a "Duxbury" figure in very general terms in the order of £3.25 million. Thus, her needs viewed on a generous basis are:-

    House £2,425,000

    Contents £ 100,000

    Payment for works £ 150,000

    Car £ 15,000

    Duxbury £3,250,000

    £5,940,000

    55.17. The Husband has not sought to put forward any figures for his capital needs. Therefore, I assume, given his tendency to parsimony, that his needs will be covered by a similar or lesser sum to that set out above.

    55.18. The Husband's health must give rise to real, long term concerns. He has already suffered a breakdown in his health due to stress. I do not consider that he was exaggerating his current problems and it cannot be good for a relatively young man to be taking beta blockers on a regular basis. He has suffered from a loss of sensation and I do have concerns for his well being unless he reduces his workload in the relatively near future. The Wife has no such worries for her own health. Of course, Q's problems are real and profound and I take them fully into account.

    The Claim.

    56. In reality, it seems to me that Mr Mostyn - although he describes it as a series of lump sums - is, in fact, seeking a form of periodic payment on behalf of his client. This is on the basis that the Husband's income/bonus is a marital resource because it is based upon work undertaken in the marriage and is to be regarded as a form of "investment return on that asset". Thus, whilst the Wife may not need any additional funds, a share of the future earnings is fair given her past and, particularly, her future contributions.

    57. Although the case of White did not involve any question of periodical payments because it was agreed that it was a clean break case, Mr Mostyn prays it in aid. The following passages by Lord Nicholls are stated to support the claim, at pp 987-988

    " The Matrimonial Proceedings and Property Act 1970 made a fresh start. The powers of the court were greatly extended. The relevant provisions in the 1970 Act were re-enacted in substantially similar terms in Part II of the Matrimonial Causes Act 1973. Sections 23 and 24 of the Matrimonial Causes Act 1973 empower the court, on granting a decree of divorce and in certain other circumstances, to make financial provision orders and property adjustment orders. Financial provision orders, under s 23, include orders that one party to the marriage shall make payments to the other party. The payments may be periodical, either secured or unsecured, or lump sums. Property adjustment orders, under s 24, include orders that one party to the marriage shall transfer property to the other party. Section 24A empowers the court to make ancillary orders for the sale of property.

    Section 25, as substituted by s 3 of the Matrimonial and Family Proceedings Act 1984, sets out the familiar list of matters to which the court is to have regard in deciding how to exercise these powers.

    At pp 988-989 he said

    "As originally enacted in 1970, in s 5(1) of the Matrimonial Proceedings and Property Act 1970, the list of factors to be taken into account contained a tailpiece. The tailpiece declared what should be the objective of the court when exercising the statutory powers to make financial provision orders and property adjustment orders. The court was so to exercise these powers:

    '... as to place the parties, so far as it is practicable and, having regard to their conduct, just to do so, in the financial position in which they would have been if the marriage had not broken down and each had properly discharged his or her financial obligations and responsibilities towards the other.'

    'This tailpiece was later deleted from the legislation, and nothing inserted in its place. In consequence, the legislation does not state explicitly what is to be the aim of the courts when exercising these wide powers. Implicitly, the objective must be to achieve a fair outcome. The purpose of these powers is to enable the court to make fair financial arrangements on or after divorce in the absence of agreement between the former spouses: see Thorpe LJ in Dart v Dart [1996] 2 FLR 286, 294. The powers must always be exercised with this objective in view, giving first consideration to the welfare of the children.

    58. It is also asserted that I should pay particular regard to Cornick v Cornick (No. 3) [2001] 2 FLR 1240 which is said to be clear authority for the argument that a fair award for a share of future income (whether framed under deferred lump sum or periodical payments powers) applying the principles in White, is not constrained by a glass ceiling of either "reasonable requirements" or the "marital standard of living".

    59. I accept the principle that a wife's claims are to be dealt with fairly without reference to the discredited concept of reasonable requirements as limited by the Court. However, I believe that the Court is entitled to have a view about a wife's expressed budgetary needs and whether they are sensible. Once this task has been undertaken, the Judge must then decide the fair outcome against the background of the case and the "check" of the yardstick of equality.

    Post-separation accrual

    60. In Cowan v Cowan [2001] 2 FLR 192 CA this issue arose. At Paragraph 21 Thorpe LJ identified the arguments advanced by the husband's counsel justifying a departure from equality, inter alia as:

    [21] 

    However, perhaps his more realistic submission was that the true ratio of the speech of Lord Nicholls of Birkenhead is that the judge's objective is fairness rather than equality. Even applying equality as a cross-check to the provisional award there were in this case sufficient considerations justifying departure from equality to enable us to dismiss the appeal. The considerations identified by Mr. Pointer were:

    The stellar quality of the husband's contribution.

    The judge's finding that the husband held shares in the four companies as trustee or protector for Jeffrey.

    The fact that much of the husband's wealth had been generated since the separation in 1994 by his shrewd insistence on shares in Baco Ltd as part of the consideration for the sale of HD Plastics.

    Neither fairness nor equality would be achieved by awarding the wife a lump sum equalling the difference between the value of what had been transferred to her and one half of the value of the family assets. Careful consideration had to be given to the character of individual assets contributing to the overall total.

    61. Thorpe LJ dealt with this third argument at Paragraph 70:

    [70] All the above considerations are capable of inclusion in a review of the respective needs, responsibilities and/or contributions of the parties. They cover three of Mr. Pointer's four submissions summarised in [21] above. The third, namely that much of the husband's fortune was generated in the 6 years post-separation, receives no reflection because in my opinion it is inherently fallacious. The assessment of assets must be at the date of trial or appeal. The language of the statute requires that. Exceptions to that rule are rare and probably confined to cases where one party has deliberately or recklessly wasted assets in anticipation of trial. In this case the reality is that the husband traded his wife's unascertained share as well as his own between separation and trial, particularly committing those undivided shares to the investment in Baco. The wife's share went on risk and she is plainly entitled to what in the event has proved to be a substantial profit. If this factor has any relevance it is within the evaluation of the husband's exceptional contribution.

    62. In this case, the post-separation accrual does not arise from the trading of capital which existed at separation, rather it has accrued from the Husband's own hard work post-separation - albeit that part of his bonus is referable to a scheme that was "invented" during the marriage.

    63. Moreover, the bonus is also due to the Husband's personal work in fulfilling ABC Co's current policy of developing its overall business. This takes up about 50% of his time albeit that it is not currently profitable. Such undefined part of his bonus as is referable to this aspect cannot be seen as relating to his earlier "invention".

    64. These factors are relevant and I take them fully into account.

    Sharing in the Husband's future bonuses

    65. Bennett J has recently tried two cases (M v M [2003] EWHC (Fam) 2410 and J v J -EWHC (Fam) 53) in which the proper treatment of a husband's large income has been considered in the context of a claim for periodical payments. This case is different from each of the foregoing because, in those cases, a clean break was not possible. The learned Judge simply decided that a wife's periodical payments are not to be determined solely by her expressed needs but are to be assessed as a function of needs and fairness.

    66. Both cases are subject to appeal. In each case the appellants are arguing that the over-arching criterion of fairness entitles an equitable sharing of future income irrespective of need.

    67. Athough prior to White v White [2000] 2 FLR 981 the disposition of capital and income in a clean break was effected solely by reference to needs (or "reasonable requirements"). In the context of continuing periodical payments, this concept had been abandoned long ago - see Cornick v Cornick No 2 [1995] 2 FLR 490 in which Hale J (as she then was) considered a variation application and gave a wife more than the sum set out in budget (in circumstances where she had received a capital sum that, with hindsight, was far too low). Her stance was approved in the Court of Appeal.

    68. The case of Purba v Purba [2000] 1 FLR 444 is also said to be on point. Here the Court of Appeal considered an appeal by a husband against an order for periodical payments that equalled the wife's budget. Thorpe LJ held

    "..... I see no force in the criticism of the judge's acceptance of the wife's budget. In this field of litigation budgets prepared by the parties often have a high degree of unreality - usually the applicant wife's budget is much inflated. Most unusually, in this case the wife's budget seems to have been rather understated in many respects. It is true that one of the major items on the budget was substantial monthly expenditure for rent or mortgage. It is true that that could be said to be a superfluous item once the substantial lump sum was ordered. But the essential task of the judge is not to go through these budgets item by item but stand back and ask, what is the appropriate proportion of the husband's available income that should go to the support of the wife? This was a husband with £66,000 a year gross, £50,000 a year net, and of that available net income it simply could not be contended that £14,400 a year for his wholly dependent wife was excessive.

    69. Those who practice in this field know that a budget is a work of art (and sometimes a work of artifice) but the Court must be entitled to take a realistic view. The original budget in this case was very high in the context of previous lifestyle. However, the figure which I have set out above will permit this Wife to live well and, whilst the children were with her, will give her a total net spendable annual income of £210,000 net. Moreover if Q remains with her for life, she will have a total (in today's terms) of £160,000 net spendable.

    70. I consider £125,000 per annum net for her own annual budget is fair recompense for the work that she will be undertaking caring for the children, even given the additional problems posed by Q.

    The Overseas position.

    71. Mr Mostyn and his team have put a great deal of effort into researching the views of many foreign Courts and I am grateful for the work that has been undertaken in this regard. He submits that "the incessant and repeated theme that emerges from overseas judges and commentators is to the effect that post marital earnings deriving from an earning capacity developed during the marriage is of itself a thing of value that falls to be equitably shared". However, none of the many cases which he has produced is directly on point. There are simply no decisions where the assets are at this level and immediate proper provision can be made. I accept that an earning capacity has, in some circumstances, been regarded as marital asset which can fall for division.

    72. He submits that the following propositions can be drawn from those cases:

    72.1. An earning capacity developed and nurtured during a marital relationship is a thing of value which falls to be fairly or equitably shared at the end of the relationship;

    72.2. A non-working party can validly claim by virtue of her domestic contributions to have contributed substantially to the creation and development of this earning capacity;

    72.3. In determining the extent of the sharing the court must not be falsely confined by "needs", "reasonable requirements" or "marital standard of living";

    72.4. The sharing can be effected by means of augmenting the capital award or by means of a direct spousal periodical payments award;

    72.5. Rather the court should recognise that marriage is an "economic partnership" or "an economic unit which generates financial benefits" or "a joint endeavour" where the "partners should expect and are entitled to share [its] financial benefits";

    72.6. In determining the extent of the sharing the court should have regard primarily to principles of compensation and in particular should have regard to the sacrifices and economic disadvantages suffered by the non-working spouse. The principle of non-discrimination requires this. This process "seeks to recognize and account for both the economic disadvantages incurred by the spouse who makes such sacrifices and the economic advantages conferred upon the other spouse".

    72.7. "Furthermore, great disparities in the standard of living that would be experienced by spouses in the absence of support are often a revealing indication of the economic disadvantages inherent in the role assumed by one party"

    73. It is suggested that there are 4 methods by which the "sharing" of future income could take place, namely:-

    73.1. A loading of the present order in favour of the Wife. This is an Australian technique and is, according to Mr Mostyn, is what (in wholly different circumstances) Munby J effected in B v B 2003 2 FLR 285. Its advantages are said to be that it is more consonant with an immediate clean break (although, it is asserted that, the agreed Wells sharing in this case undermines the need to be concerned with this point). The disadvantages are that loading requires the court to act arbitrarily in fixing the additional lump sum now against future unknown resources. The risks of such an approach were criticised in Wells - indeed a significant adjustment now in W's favour could well be unfair to H in the long term.

    73.2. By making an award of a lump sum by instalments or a series of lump sums for a period of time. This is variant on the first but would meet any liquidity argument advanced by H.

    73.3. By making an award of periodical payments in a fixed amount. This has the advantage that if things do not turn out as expected then one or other party can apply to vary. The problems are (1) this is contrary to a clean break (2) the cases of M v M and J v J indicate that periodical payments should be principally for "maintenance" and (3) that they would end on remarriage.

    73.4. A series of "inchoate" or floating lump sums for a period of time. This was a course adopted by Wilson J in R v R 2003 EWHC 3197 (again in wholly different circumstances so as to enable a mortgage to be repaid; when a husband had no present capital with which to make the necessary repayments). This is the method which is advocated on behalf of the Wife because it is stated that the advantages are that the sums are flexible (being a proportion) and this meets the uncertainty argument. Moreover, they end after a period of time and so a clean break eventually comes into effect. The disadvantages are that it requires continual disclosure, the clean break is deferred and there is a risk that the paying party will cease to work because he is dis-incentivised.

    Conclusion.

    74. The parties' contributions to date have been equal.

    75. Henceforth the marriage partnership will be dissolved and the Court must mark this fact. Future contributions to the welfare of the family will be as mother and father. This is a different qualitative contribution and does not give rise to a continued entitlement in a share of future wealth unless there are special circumstances.

    76. Normally in a big money case, a mother's future care will be counterbalanced by a father's substantial financial contribution to the children's on going maintenance.

    77. In this case the Mother will have to make a contribution because of Q's special needs. In fairness, this will merit a modest overall adjustment.

    78. The Husband may receive substantial bonuses in the future but to do so he will have to work a very punishing schedule. I do not consider his future earnings to be a marital asset which falls for division in this case. There may be cases when needs will dictate that future income must be shared because the parties' capital is insufficient. This Wife's claim for "inchoate lump sums" is effectively a claim for maintenance by another name. It is not justified.

    79. It is important and in the interests of justice to effect an immediate clean break in every case where the assets are sufficient.

    80. I do not consider this to be a needs case. But as a check, the Wife's needs would, as I find, be met by a payment of some £5.94 million. However, needs are only one factor because the Court must produce a fair result.

    81. The assets that have been built up since the parties have separated fall to be considered in this case because the litigation has not been unduly delayed and the parties have been financially linked throughout. In addition, the Husband failed to make adequate interim provision.

    82. In all the circumstances of this case, the fair outcome is an equal division of all the assets in the schedule which appears at appendix 1. Thus, I award the Wife a total of £6,200,000 odd. This will give her some £250,000 in addition to the "needs" set out above. This is to mark the fact that she will make an added contribution in the long-term so far as Q is concerned and all the other matters to which I have alluded in this judgment.

    83. I was presented with a draft order which, save for the precise figures, was in large measure agreed. I am confident that Counsel will be able to finalise the various points which are extant in the light of this Judgment. However, if they cannot agree and/or they need to return to argue about costs or any other ancillary points, then may apply at 10.00 a.m. one morning in consultation with my clerk and the Clerk of the Rules.

Judgment, published: 29/03/2004

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Published: 29/03/2004

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