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Home > Judgments > 2015 archive

MAP v MFP [2015] EWHC 627 (Fam)

Judgment in a big money case oncerning a very successful family business in which Moor J decided not to award an add-back in relation to dissoipated funds.

Factual background
H (62) was the Managing Director and 95% shareholder of an extremely successful family property development company. W (60) was the Company Secretary and Finance Director. She owned the remaining 5% of the shares.

The parties were childhood sweethearts and were married for 40 years, separating in 2012. They had four adult children (C, D, E and F), one of whom remained working in the business (C). All of the assets, including this very successful business, were built up during the marriage. Moor J was in no doubt that both parties' contributions to the marriage, as driving force of the business and homemaker respectively, were equal.

H had serious problems with cocaine and alcohol, as W discovered in 2007. It was estimated that £230,000 had been spent on unsuccessful treatments and that H spent a further £6,000 per week on his drug and alcohol habit. In April 2014 H went into rehab once more but discharged himself against medical advice. At the time of the trial, H continued to have problems with cocaine.

While H was away in rehab, W continued to go into work. However, on Friday 14th March 2014 she discovered that H had been involved with prostitutes. W was told not to go to work, so stayed away on the Monday. She tried to return on the Tuesday but was denied entry, being told later that she had been suspended and that disciplinary proceedings had been started against her, although she never knew the grounds for these. She was summarily dismissed for gross misconduct in November 2014 and her salary was stopped. She had also stopped receiving H's salary earlier that month and was forced to live on her savings. H attempted to justify this on the basis of excessive expenditure and straitened financial circumstances, despite continuing to spend at an extremely high level himself.

The parties had started life together with a very modest standard of living but by the time of separation were spending at an extremely high level, ie several million in a few years. The issue of expenditure remained live in the case.

H was criticised for not engaging with proceedings until October 2014 and even then failing to engage properly with correspondence or disclosure.

Assets, liabilities and liquidity
The family had assets including property and cars of £4.5m. There were liabilities of £2.8m, the majority of which were held by H and related to a tax liability of £871,000 and a director's loan of £1.81m.

H's 95% share in the company was given a net value of £20,625,200. W's 5% shares were valued at £1,087,200, reduced as entrepreneur's relief was not available to her in light of her suspension and dismissal from the company.

The company was said to be able to provide an annual net income of £1.1m to £1.2m. H was able to borrow £3.185m personally, albeit secured against the business premises.

The parties' positions
W valued the assets prior to trial at £25.13m and sought 50% with an additional £750,000 as compensation for H's reckless and wanton spending, claiming that there would be at least twice as much available for division had he not behaved as he had. She proposed the transfer of property, the balancing lump sum in two parts and argued for a limit on H's spending pending payment in full.

H did not make an offer prior to trial but it was recorded on the PTR order that H did not disagree in principle with W receiving 50%.

Many issues were agreed at trial, but the outstanding issues were:

  1. Whether there should be an add-back;
  2. Whether the tax should be deducted if H were to declare a dividend to clear his DLA;
  3. Whether W should receive a dividend;
  4. The timing of payment of the first lump sum;
  5. The timing of payment of the second lump sum;
  6. What periodical payments W should receive in the meantime;
  7. What should happen to W's shareholding;
  8. Whether there should be a cap on H's drawings;
  9. Whether it was appropriate to make the order in full and final settlement of all claims between the parties, including W's potential claim for wrongful dismissal [56].

The law
Moor J took a summary review of the law and principles that applied to this case. Needs were able to be met and this was plainly a sharing case.

The judge considered Wells v Wells and its guidance relating to sharing [60], restating the principle that fair sharing involves a fair division of both the copper-bottomed assets and the illiquid and risk-laden assets, and noting that in this case W was to receive £6m of property and cash whilst H was due to receive his shares, subject to a charge in W's favour, and a property worth £300,000.

The judge then summarised the law on add-backs, referencing Martin, Norris and Vaughan, and stating that in making findings about wanton dissipation justifying intervention by the court, findings as to motivation are very important.

The witnesses
W was found to be an entirely honest witness who had not overspent, contrary to the allegations made. Moor J found that she had worked very hard during the marriage but made no findings as to her role in the business.

In contrast, Moor J described H as very complicated in light of his demons. He was found to have behaved foolishly in respect of the litigation, being evasive at times but not lying in the main. However, he was also found to be wholly responsible for W's suspension and dismissal from the company, and her income being abruptly ended. His attempts to blame W for overspending were hypocritical. W's suspension and dismissal cost her £271,800 by way of lost entrepreneur's relief.

Findings on the add-back
W sought an add-back of £1.5m, representing amounts spent on credit cards, cash, personal, drugs, prostitution and drug rehab expenditure, over a two year period to December 2014 – six months post separation and several years after H's demons took hold. The family expenditure during this period was £1.7m per annum. Moor J found that there was an element of expenditure that was in fact spent on the family or on W, but concluded that £250,000 was spent on cocaine and prostitution.

The fact that W had made an open proposal ignoring any add-back which was rejected by H did not undermine the argument for an add-back. Parties were to be encouraged to make open proposals as early as possible; it remained open to the court to ignore any proposal completely and decide a case entirely on its merits, awarding more than offered in the appropriate case. Add-backs cannot be said to infringe on equality.

In this case, Moor J found that although H had overspent significantly, this was not with the intention of reducing W's claim, therefore he would not add-back the expenditure on the Spanish villa or on monies spent on H's obsession with perfection, nor would he do so in respect of the funds spent on rehab. Most difficult was the money spent on cocaine and prostitutes, but since this was part of H's flawed character and a spouse must take their partner as they find them, this could not be said to be wanton either and would not be added back.

Other findings

On the remaining issues, the court found the following:

  1. It was appropriate to deduct the tax on the dividend necessary to declare a dividend to clear the DLA, albeit that it should be limited to the tax on the liability at May 2014 and not to date in light of H's overspending. The dividend required should not be grossed up to pay the tax on the tax and there should be an add-back of the lost entrepreneur's relief in light of W's dismissal. 
  2. W should receive the dividend and maintenance arrears due to her which had been stopped by H for unsound reasons. 
  3. The total assets were therefore £24.7m of which W should receive 50%: £12.355m plus the arrears of maintenance and dividend.
  4. The first lump sum of £3m should be paid as soon as possible, 42 days.
  5. In deciding when the second payment should be made, Moor J balanced considerations including the desirability of early payment as against H's irresponsible spending, the ages of the parties, the saleability of the company, its ability to make large sums of money despite H's incapacity. In light of the parties' ages, Moor J ordered that the second lump sum be paid by 13th February 2018.
  6. No order for sale was necessary as interest would run from the date of payment and W could apply under s24a if necessary, but any such order may interfere with a sale of the company. 
  7. In light of W's stronger liquid financial position, H should pay maintenance at 3% net per annum pending payment of the second lump sum, totalling £164,770 per annum. 
  8. W's shareholding should be transferred immediately to avoid arguments about its value and tax in future. In the meantime, W would have an equitable charge against H's shareholding.
  9. Despite H's clear overspending, it was not appropriate to place a cap on his drawings going forward as this required policing and the judge had decided on the amount W should receive. If this could not be released without a sale of the company then so be it. 
  10. Moor J found that this outcome should be in full and final settlement of all claims between the parties, howsoever arising. He was content that he had jurisdiction to do so, but if there were to be any doubt this could be resolved by way of contingent lump sum from W to H in the amount of any money subsequently awarded to her from any further employment tribunal proceedings.

Summary by Kyra Corwall, barrister, 1 Hare Court
_______________________________________

IMPORTANT NOTICE
This judgment was delivered in private. The judge has given leave for this version of the judgment to be published.  No person referred to in the judgment may be identified by name or location and the parties' anonymity 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.

Neutral Citation Number: 2015 EWHC 627 (fam)
Case No: FD13D02888

IN THE FAMILY COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Double-click to add Judgment date


Before :

Mr Justice Moor
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Between :

MAP    Petitioner 
- and –
MFP      Respondent
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Mr Christopher Pocock QC and Ms Katherine Kelsey for the Petitioner
Mr Brent Molyneux for the Respondent

Hearing dates:  9th to 13th February 2015 
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JUDGMENT
1. I have been hearing an application for financial remedies brought by the Petitioner, MAP (hereafter "the Wife") following the breakdown of her marriage to the Respondent, MFP (hereafter "the Husband").

2. The Husband is aged 62.  He left school with no academic qualifications at the age of fifteen.  He commenced a four year apprenticeship as a property maintenance engineer. Property maintenance has clearly always been his passion.  He has undoubtedly been extremely successful.    He is the Managing Director of a property maintenance company (hereafter "the company") and owns 95% of the shares of the company.

3. The Wife will soon be 61.  She was the Company Secretary and Finance Control Manager of the company.  She owns the remaining 5% of the shares.

4. The parties were childhood sweethearts. They married in 1972.  They separated some forty years later in May 2012.  This was therefore a very long marriage by any standards.  It is agreed that the entirety of the very considerable financial resources were earned during the marriage.

5. The Wife issued her divorce petition and her Form A on 11th June 2013.  A decree nisi was pronounced on 17th December 2013.  It has not as yet been made absolute.

6. The Wife has remained living in the former matrimonial home in Kent.  This is a substantial property in a gated community with an agreed valuation of £2.3 million.  It is mortgage free.

7. Since the Husband vacated, he has been living in rented accommodation in London.

The children
8. There are four adult children of the marriage, C, D, E and F.  C is the Operations Director of the company. 
 
9. D now runs a shop which supplies property maintenance equipment.  He holds 99% of the shares in the new company and the Husband has 1%.  I am told that the Husband provided £500,000 of working capital to establish the business.   I need not consider this business further as I am satisfied it is not part of the matrimonial assets. 

10. E previously worked in the accounts department of the company.  Her husband is a maintenance engineer for the company.  She was caught up in the difficulties that occurred in March 2014 but has now obtained alternative employment.

11. F used to work for the company as well, in the call centre taking bookings.  Her partner is also a maintenance engineer for the company.

12. There are a number of grandchildren.  Two are apprentice maintenance engineers and a fifteen year old granddaughter works part-time in the call centre.

The history of the company
13. The property maintenance business commenced in the 1970s from the then family home with the Husband doing the maintenance work and the Wife taking the bookings.  The first premises were taken in around 1979 in a basement in a property in London.  This business formed the company.
 
14. In  1993, the company was incorporated and whilst it subsequently  changed its name, it remained privately owned by the Husband and the Wife.  In due course, a property was purchased as the business premises.  The building, which is owned by the company, is valued at £4.5 million.  At present, it is mortgage free.  Indeed, the business does not have any debt at all.

15. The business has undoubtedly gone from strength to strength notwithstanding the recession, the difficulties in the marriage and the Husband's undoubted personal "demons" which I will return to in due course.  Annual turnover was £15.3 million in the year to 31st May 2010.  It has increased year on year to £19.5 million for the year ending 31st May 2014.  I am told that it is likely to be around £24 million this year.  In 2014, the gross profit was £7.1 million and the net profit, after tax, £1.3 million. 

16. The Wife has also worked hard for the business.  There has been a rather unedifying dispute between them as to her exact role which I consider totally irrelevant to the issue I have to decide.  There is absolutely no doubt that I should treat their contributions to this marriage as equal.  The Husband was the driving force behind the business.  The Wife performed the role of homemaker and child-carer as well as working for the company.  It is a tribute to both of them that they have achieved so much, having started with so little.

The Husband's demons
17. In approximately 2007, the Wife became aware that the Husband was using the Class A drug, cocaine.  He has also abused alcohol.  He accepts he satisfies the test for addiction to cocaine but denies it in relation to alcohol.  The root cause may be depression but there is no doubt that the effect has been disastrous both for his health and for the state of his otherwise entirely happy marriage.   

18. He has regularly attended residential inpatient rehabilitation at very considerable cost.  This has been at both Nova Vide in Portugal and at The AB Retreat in the USA.  He has spent approximately £230,000 on such treatments.  Regrettably, the treatments have not provided a lasting cure and he has regularly relapsed on his return to this country. 

19. The Wife's case is that he has been spending up to £6,000 per week on his drug and alcohol habit.  She also alleges that he has spent large sums of money on prostitution. 

20. On 8th March 2014, the Husband was admitted again to The AB Retreat.  He returned to this country following his discharge on 13th April 2014.  It is clear that his treating physician did not want to discharge him.  She said:-

"[MFP] was admitted to The AB Retreat…following an emotional decompensation and suicidal inclinations and severe relapse with cocaine. His immediate referral to residential/inpatient treatment was an emergency and life threatening.  [MFP]  had begun to experience delusional and severe paranoid behaviours that when combined with (h)is cocaine relapse and major depressive disorder created a scenario that necessitated the residential/inpatient level of care.  [MFP]  believes that he has been followed, photographed and that his home has been fitted with microphones that will provide information that will somehow be used against him.  [MFP]  has verbalised a threat to his own life, but indicates that he is ambivalent regarding following through with this."

21. A further report from The AB Retreat dated 24th April 2014 said:-

"[MFP]  entered treatment in a profoundly depressed state and consumed by the consequences of his behaviour both upon his family, business and reputation.  [MFP]  was compliant in his participation throughout treatment, but struggled to accept clinical recommendations regarding length of stay and involvement of his family members in his treatment.  The treatment team recommended that [MFP]  remain in treatment for a minimum of 60 days and involve his family members in his treatment.  [MFP]  has failed to follow treatment recommendations during his previous treatment episodes. Throughout treatment, [MFP]  was focussed on developing a checklist that displayed for him the necessary daily activities that will support his sobriety.  He was able to accomplish this task during his time.  [MFP]  was compliant with his medications.  He also reported increased willingness to participate in 12 step meetings after his discharge as well.  [MFP] 's prognosis is poor due to his failure to address the issues underlying his addiction and engage with his family to begin addressing the tremendous stress that this plays in his life.  [MFP]  will benefit from engaging in a strong clinically appropriate aftercare plan (12 step meetings, psychotherapy, psychiatric support)".

22. It was clear that he discharged himself from The AB Retreat after his initial month's treatment was complete, despite The AB Retreat advising him to remain for 60 days.  When first asked about this, he took the view The AB Retreat was only interested in making money out of him.  Later, when asked again, he suggested he was missing home.  He undoubtedly minimised the consequences of his behaviour on his family.  He did eventually, rather grudgingly, concede that his addiction had "badly affected his family" but there did not seem to be much remorse.   
 
23. I do not have an up to date medical report.  I found it difficult to assess exactly how much of a problem his addiction remains.  He has not remained "clean" since his return from Utah.  He told me he takes cocaine occasionally and that the last time was approximately three weeks ago or, on another account, before Christmas.  It may be that he is a "binge" taker of the drug which, as a layman, would seem to me to have numerous dangers.   Overall, this is clearly a real worry for his long term health. I really hope he will be able to stop entirely, particularly once this litigation is over this afternoon.  If not, I fear for his life.

The Wife's suspension and subsequent dismissal
24. Whilst the Husband was away, the Wife continued to go into work.  It appears that she discovered the Husband's activities with prostitutes on the evening of 14th March 2014.  She was understandably very upset.  There is a dispute as to what occurred thereafter.  I have already indicated that I do not need or intend to resolve it.  Suffice it to say that the Wife, D and E were told not to go to the premises on Monday 17th March.  The Wife did stay away that day but when she went on Tuesday 18th March, she was denied entry.  She was told she was suspended and disciplinary proceedings had been instituted against her on 25th March.  She has not returned since.
 
25. As I have already indicated, the Husband resolved the problem with D by setting him up in business.  Like the Wife, E has also not returned and now has found another job.  The Wife says that she never received any details of the allegations against her.  The Husband said that he had placed the disciplinary proceedings in abeyance but, on 25th November 2014, she was summarily dismissed for "gross misconduct".  She received no compensation for loss of office.  Her salary of £41,600 pa gross was stopped. 

26. She had also been receiving the Husband's salary of £20,000 per annum net into an account which she controlled and used for her expenses.  This money also stopped completely earlier in November 2014.  She has since had to live on her savings. 

27. In his solicitors' letter attempting to justify these changes, it was said on the Husband's behalf that the Husband had become "increasingly concerned regarding (the Wife's) expenditure since the parties' separation in 2012".  On any view, the letter was thoroughly disingenuous.  By way of example only, it complained that "expenditure is currently running at c£2,000 per week for the Spanish builders alone and he has just paid c£100,000 for your client's new walk in dressing room at the villa".  This was simply untrue.  The expenditure on the dressing room had been at least 18 months earlier.  Any expenditure on Spanish builders related to the Husband's villa not the Wife's.

28. I will have to return to the family's spending in due course, but the letter went on to imply that there had to be a marked reduction in spending saying "our client can only discharge your client's expenses by drawing down on the Director's Loan Account which is already significantly high and unsustainable by the business, particularly when the parties need to be focused on how best to meet their respective financial claims".  It is quite clear to me that the Husband has not "pulled in his horns" at all.  Indeed, he spent £39,725 on his main credit card alone in the first full month after the letter, having spent £27,209 the previous month.  

The standard of living
29. The parties started married life with a very modest standard of living.  It increased exponentially as the fortunes of the company increased.  I am satisfied that, in the last ten years, the family has lived at a very high level.  Indeed, it appears that there has been significant "wasted" expenditure.  I will have to return to that in due course.
 
30. In 2000/2001, the former matrimonial home was acquired in joint names for approximately £1 million.  It is a substantial property with an indoor swimming pool.  The Husband says, and I accept, that around £1 million was spent on renovating it to a very high standard.  It now has an agreed value of £2.3 million.  The mortgage that was taken on purchase has since been paid off. 

31. The parties have two villas on the Costa del Sol.  The first (the Wife's villa) was purchased in joint names approximately eight years ago for €980,000.  The Husband told me that a further £1 million was spent on its renovation as well as £500,000 on furniture, although this was not what he told the Single Joint Expert, Jason Lane.  The Wife was not able to help me with the figures but accepted very large sums had been spent.  She told me that the Husband is a perfectionist.  Although he did not accept this in his evidence, it was pretty clear that he would indeed undertake very expensive work that proved not to be to his liking such that he then did the work all over again.  He said that he felt the joint valuation of €880,000 was low.  Notwithstanding the state of the Spanish property market, I find that it actually shows that very significant sums of money have been "wasted".

32. In November 2011, the parties purchased a second adjacent villa (the husband's villa). The purpose was to allow the extended family to be accommodated close by.  The purchase price was €750,000.  There has been much dispute as to how much was spent on works.  The Husband told Mr Lane the spending had been only £93,533 but various schedules point to it being much higher.  I am satisfied it was at least €500,000.  Again, this expenditure had not been well spent as the current valuation is €784,000.  This property is subject to a mortgage of approximately €350,000. 
 
33. I have already indicated in passing that the issue of expenditure is very much live in the case.  Between 1st June 2010 and 31st May 2014 (a period of four years), total spending amounted to £5,209,051, although this does include some tax.  This is an average of £1.3 million per annum.  The Wife has analysed the annotations to the Director's Loan Account from 2nd January 2013 to 29th December 2014.  The resulting spreadsheet shows total spending of £3,444,402 during this period. 

34. I will have to return to this in due course but, on any view, it is a very large amount of money.

The proceedings 
35. I have already noted that the Wife issued her application for financial remedies with her divorce petition.  There is no doubt whatsoever that the Husband did not engage with the process for a very long period of time.  To use a colloquialism, he stuck his head in the sand.  Correspondence was ignored.  He did not allow his solicitors to go on the record.  Indeed, service of the divorce petition had to be deemed.  He did not file his Form E in accordance with the rules.  He did not attend the First Directions Appointment on 27th September 2013, nor was he represented.  He only finally filed his Form E on 26th February 2014.  He did not attend the initial FDR before Coleridge J on 27th March 2014 although I accept that he was at The AB Retreat on that day. He told me that he had hoped for a reconciliation but ignoring the proceedings would be the last way to achieve that.  
 
36. He has engaged since 27th October 2014 when there was a second listed FDR before Richard Anelay QC sitting as a deputy High Court Judge.  Having said that, Mr Pocock makes a number of significant complaints as to failure to deal with correspondence or supply documentation even after October 2014.  It does appear that this has been more to do with disorganisation rather than deliberate obstruction.  His addiction issues may have contributed. 

The assets
37. I have already noted that the former matrimonial home has an agreed valuation of £2.3 million.  It is held in joint names.  After costs of sale, the net equity is £2,231,000.  The wife's villa is valued at £664,151, using an exchange rate of €1.325 to the pound.  There is no Capital Gains Tax.  After costs of sale, the net equity is £611,019.  Again, it is held in joint names.  The husband's villa has a valuation of £591,698.  There is a mortgage of £232,755.  There is no Capital Gains Tax.  After costs of sale the net equity is £311,607.  It is held in the Husband's sole name.  Finally, there is a mobile home.  It has a valuation of £68,584 after costs of sale.  It is held in joint names.
 
38. There is one joint policy with a surrender value of £4,055.  The Husband has an account in Spain which is overdrawn by (€1,424) or (£1,075).  The Wife has bank accounts containing £369,040.  The Husband has a number of personally owned number plates with total value of £393,750.  On sale, Capital Gains Tax of (£71,131) would be payable giving a net value of £322,019. 

39. There are a number of valuable motor cars.  In his Form E, the Husband values them in total at £221,848.  They include a Bentley Azure, two Porsche Cayenne, a Bentley Continental and a Mercedes SUV.  
 
40. There are only modest pension policies.  I accept the evidence of the Wife when she told me that the parties did not bother to save for their retirement as they had always envisaged selling or floating the company.  In any event, the total pensions are £362,638, all in the Husband's name.

The liabilities
41. The Wife owes her lawyers (£8,000) and has an estimated tax liability of (£50,000).  I understand this relates to the dividend of £150,000 declared in May 2014 that she has not, in fact, received.
 
42. The Husband owes his lawyers (£70,800).  He has a tax liability of (£871,000) which relates to his share of the same dividend declared in May 2014.  In his case, this was £2,850,000. 

43. His biggest liability relates to his overdrawn Director's Loan Account with the company.  Even after the dividend of £2,850,000 was credited to the account last May, he still owed the company a further (£1,810,000).  It will have increased since.  This is an issue to which I will have to return. 

The value of the company
44. Jason Lane of Saffery Champness was appointed as Single Joint Expert to value the company.  His initial report was dated 22nd May 2014.  It valued the company at £23.1 million net after payment of the dividend of £3 million.  It goes to the great credit of the parties that his conclusions are fully agreed.  As a result, I do not propose to rehearse his conclusions at length.  In short, he valued the business on the basis of its future maintainable earnings after tax and depreciation.  He applied a multiplier from comparable companies, adjusted for matters such as lack of liquidity and marketability as well as for the Husband's control.  He then made further adjustments for matters such as the ownership of the business premises, various other assets and the Husband's overdrawn directors' loan account.  He did not, however, include cash at bank, other creditors and debtors.  I assume he viewed this as working capital.
 
45. Mr Lane updated his report on 23rd January 2015.  He used exactly the same methodology but was working on the draft figures to 31st May 2014 rather than those to May 2013.  In addition, he had a new valuation of the business premises dated 17th December 2014 in the sum of £4.5 million.  The draft financial statements of the company to 31st May 2014 showed net assets of £4,260,312.  He was also given a figure of £868,500 for other assets owned by the company.  There was, by then, cash at bank of £756,000.  Mr Lane calculated the value of the company itself at £26 million and the value of the property at £4,370,000. 

46. On this basis, the Husband's shares are worth £28,850,000.  There will be Capital Gains Tax.  I am satisfied that the Husband will be entitled to Entrepreneur's Relief on the first £10 million gain, which will be charged at only 10%.  The balance of the gain will be charged at 28%.  This gives rise to total CGT of (£6,224,800).  He will then have to repay his overdrawn Director's Loan Account in the sum of (£1,810,000) and pay sale costs, estimated at (£190,000).  This gives rise to a net figure of £20,625,200.

47. The Wife's shares are worth £1,520,000.  As a result of her suspension and subsequent dismissal, she will not be entitled to Entrepreneur's Relief.  Her tax will therefore be (£422,800) with sale costs of (£10,000), giving her shares a net value of £1,087,200. 

48. There is a dispute as to one matter that I will have to resolve.  The Husband seeks to reduce his assets by a further (£855,680) which he calculates as the tax due if he declared a dividend to clear his current overdrawn Director's Loan Account.  The Wife argues that "enough is enough" and he should simply pay the tax due on the overdrawn account which is a modest £14,625 per annum per million pounds owed. 

49. Mr Lane also reported on income and liquidity.  He concluded that the net maintainable income was in the region of £1.1 to £1.2 million per annum based on post tax profits of £1.4 million after cash remuneration of £500,000.  There would be income tax of around (£211,000) on the salary element, national insurance of (£13,000) and income tax of (£397,000) on the dividend required. 

50. I do not need to deal with his report on liquidity as the position is now agreed.  Although the Wife would say that the Husband took steps to ascertain his borrowing capacity very late in the day, it is accepted that he can borrow £3,185,000 from Santander personally although it would be secured against the business premises.  The loan interest would be (£228,000) per annum.  

The Open Offers
51. The Wife's Open Offer is dated 3rd February 2015.  She calculated the total assets as being £25.13 million.  She sought 50%, namely £12,560,000.  In addition, she sought a further sum of £750,000 to reflect the Husband's "reckless and wanton expenditure over the last seven years".  She argued that there should have been at least twice that amount available for division if he had acted responsibly.
 
52. She sought a transfer of the former matrimonial home to her sole name as well as her villa and the mobile home.  She asked for a pension sharing order of 100% of the Husband's pensions.  She calculated there should then be a balancing lump sum of £9,580,812.  She sought £3 million immediately and the balance by 31st January 2017 (two years).  Until payment, she argued she should retain her 5% interest in the company. She should receive the dividend due to her in the sum of £150,000 pa.  She asked for periodical payments of 6.2% on the amount outstanding and that she should have security by way of an equitable charge on the Husband's shares.  Subsequently, she has sought a limit on the Husband's expenditure until she has been paid in full.

53. The Husband did not make a formal Open Offer prior to the start date of the trial.  It is right to note that the order of Robinson DJ on the Pre-Trial Review began by reciting that "the Husband does not say in principle that the Wife is not entitled to 50% of the assets".
 
54. The Husband's offer is made in his counsel, Mr Molyneux's, case summary.  Much of what the Wife seeks is agreed.  There is no dispute about the transfer of the former matrimonial home, the wife's villa and the mobile home.  The initial lump sum of £3 million is agreed but the Husband seeks four months to pay.   He says that the balance of the lump sum (which he calculates at £4.19 million) should be paid in five years not two.  In other words, he seeks a date for payment of 31st January 2020 although the Husband told me in oral evidence that he wanted to pay his obligations as quickly as possible.

55. The proposal went on to provide for the Wife to retain her shareholding until payment in full and receive 5% of whatever dividends are declared.  He proposes periodical payments at 3% on the outstanding balance.  It is not agreed that the Husband should not be permitted to draw more than £500,000 pa whether by salary, dividends or on his director's loan account.  The Wife can have an equitable charge on the Husband's shareholding but it must rank subsequent to the charge required by Santander as security for the loan they intend to make.  The Wife should not receive her share of the May 2014 dividend.  She should not pursue any claim against the company and, finally, there should be a cross-undertaking as to confidentiality.   
 
The issues
56. It follows that there are approximately nine different issues that I have to resolve although some are undoubtedly more significant than others:-

(a) Should there be an add-back and, if so, how much?

(b) Should I deduct the tax that would be payable if the Husband was to declare a dividend to clear his Director's Loan Account?

(c) Should the Wife receive the £150,000 dividend?  To this I add a further issue, namely whether or not she should receive the £20,000 per month that was terminated in November?

(d) Should the first lump sum of £3 million be paid in 28 days or 4 months?

(e) When should the second lump sum be paid?

(f) What periodical payments should the Wife receive in the meantime?

(g) What should happen to the Wife's 5% shareholding?

(h) Should there be a cap on the Husband's drawings?

(i) Is it appropriate to make my order in full and final settlement of all claims either may have against the other and, in particular, the Wife's potential claim against the company for wrongful dismissal?

The law
57. I can deal with most of the law briefly as there is no dispute as to the approach I should take.   I am asked to make orders pursuant to the Matrimonial Causes Act 1973.  My powers are to be found in sections 23 and 24.  In order to decide whether or not to make such an order, I must apply section 25.  It is the duty of the court to have regard to all the circumstances of the case but, in particular, the matters set out in section 25(2).  All the children here are now adults, so they are no longer my first consideration.  
 
58. Overall, I must be fair to both parties in the way that I approach my task.   The contributions of both parties to the marriage have undoubtedly been equal.  It was made clear in the seminal House of Lords decision of White v White [2001] 1 AC 596 that there is to be no discrimination in financial remedy cases between the breadwinner and the homemaker, as each, in their respective roles, contribute equally to the family.  Indeed, White goes on to decide that, in the absence of good reason to the contrary, the fruits of the marriage are to be divided equally.   This is commonly referred to as the sharing principle.   It is undoubtedly engaged in this case as both parties fully accept. 

59. The authorities, particularly Miller/McFarlane [2006] UKHL 24; [2006] 1 FLR 1186, establish two other principles, namely satisfying the needs of the parties and compensation.  Fortunately, the assets in this case are more than sufficient to cater for the needs of both these parties, although there are, of course, liquidity issues that may give rise to short term difficulties.  The principle of compensation does not apply in this case as neither party gave up a significant earning capacity as a consequence of their respective roles within the marriage.

60. I should at this point make brief reference to the case of Wells v Wells [2002] EWCA Civ 476; [2002] 2 FLR 97.  In general, fair sharing is achieved by a fair division of both the copper-bottomed assets and the illiquid and risk-laden assets.  In Wells, the court found that the judge at first instance had erred in awarding the wife the bulk of the assets that were readily saleable at stable prices, leaving the husband with those assets which were substantially more illiquid and risk laden.  Thorpe LJ said at Paragraph 24:-

"Having read the skeleton arguments and the judgment we were at once struck by the security of the result that the wife had achieved in contrast to the risks confronting the husband's economy.  The family's standard of living has throughout been dependent upon the fortunes of the husband's business.  Had the marriage survived the family would undoubtedly have shared adversity as it had shared prosperity…"

61. It is, of course, right to note that the Husband very much wants to retain the company, at least in the short term.  He could have agreed to an immediate sale, which would have obviated any Wells v Wells points.  Equally, I accept that there is opportunity as well as risk in relation to the business.  It has been going from strength to strength so the valuation may well continue to increase over the next few years.  If it were to go the other way as a result of the Husband failing to rid himself of his demons, he would only have himself to blame.  
 
62. It does appear to me, however, that I cannot completely ignore the fact that, at least initially, the Wife will be left with slightly over £6 million in property and cash whereas the Husband will be receiving his shares, subject to a charge in her favour and one property worth just over £300,000 net.  

The add-back arguments
63. I now turn to the law as to add-back.  It does seem to me that arguments in this area essentially come down to an issue of conduct as defined in section 25(2)(g) namely "conduct that it would in the opinion of the court be inequitable to disregard".  As Baroness Hale makes clear in Miller/McFarlane, for such conduct to bite it has to be "gross and obvious".  
 
64. The add-back authorities essentially say the same.  For the court to "add-back" assets that have been spent, the court has to be satisfied that there has been "wanton dissipation of assets".  In Martin v Martin [1976] Fam 335, Cairns LJ said:-

"A spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to if he had behaved reasonably".

65. Bennett J considered the same issue in Norris v Norris [2003] 1 FLR 1142 where he said:-

"The overspend…at a time when he was about to and then did enter into protracted litigation with the wife, can only be classified as reckless...In my judgment, there is no answer that the husband can sensibly give to the question "Why should the wife be disadvantaged in the split of the assets by the husband's reckless expenditure? A spouse can, of course, spend his or her money as he or she chooses, but it is only fair to add back into that spouse's assets the amount by which he or she recklessly depletes the assets and thus potentially disadvantages the other spouse within the ancillary relief proceedings."

66. The matter was considered by the Court of Appeal in Vaughan v Vaughan [2007] EWCA Civ 1085, [2008] 1 FLR 1108 where Wilson LJ said:-

"The only obvious caveats are that a notional reattribution has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element) and that the fiction does not extend to treatment of the sums reattributed to a spouse as cash which he can deploy in meeting his needs, for example, in the purchase of accommodation…"

67. The question of moral culpability was canvassed later in the judgment where it was said that:-

"No doubt there are cases in which the mental incapacity of the dissipating spouse is such as to render reattribution unfair; but I agree with the circuit judge that the husband's problems were not of that severity". 

68. Mr Molyneux, in closing submissions, argued that there needs to be deliberate, unprovoked and morally culpable conduct.  The most obvious example would be where a spouse deliberately dissipates a fund simply to prevent his or her former partner receiving a fair share of that fund.  The court cannot permit such conduct.  I further accept that there will be other situations where conduct justifies a financial penalty although such cases will undoubtedly be rare.  
 
69. I am going to have to determine whether or not there was dissipation with a wanton element that justifies intervention by the court.  Findings as to motivation are clearly very important.  I do, however, accept that a spouse cannot take advantage of all the good characteristics of his or her partner whilst disavowing the bad characteristics.  To put it colloquially, you have to take your spouse as you find him or her.  

The Wife
70. Before resolving the issues in the case, it is necessary for me to make some findings as to the parties themselves.  Both gave oral evidence before me.  There was quite a contrast between them.

71. I find that the Wife was an entirely honest witness who was doing her very best to assist me.  I accept Mr Pocock's description of her as "straightforward" and "long suffering".  She was indeed still sympathetic to the Husband's plight.  She told me at the conclusion of her evidence that, provided she got her fair share, she did not think the Husband should sell the company as "it may get him off the drugs".  
 
72. At one point, Mr Molyneux tried to suggest that she had been less than frank in her disclosure because she had omitted to include a Spanish bank account in her Form E or her Answers to Questionnaire.  I reject any suggestion of non-disclosure.  She was a palpably honest witness.  I do not know whether or not she forgot the account or whether there was a breakdown in communication with her lawyers but she was not trying to hide anything material from me.

73. I equally reject as having no foundation at all the suggestion that she has at any point overspent.  For example, during the course of the proceedings, her bank accounts have increased from £290,000 to £370,000 notwithstanding her having spent £194,000 on costs.  I accept that she has had the benefit of expensive holidays and cars paid for her by the Husband.  I further accept her evidence that an associate of the Husband's actually came to the former matrimonial home and asked her if she wanted any new furniture for her property as the Husband had said "she could have anything she wanted".  As a result, she spent around £15,000 that was added to the Husband's Director's Loan Account. 

74. I am not going to make any findings of fact as to her role in the business other than to accept that she has worked very hard throughout the marriage.  Equally, I am not going to investigate the reasons for her suspension in March 2014 (other than who instigated it) although I am sure it caused her great pain.  Her dismissal in November 2014 will have been equally distressing for her.

The Husband
75. The Husband is clearly a very complicated character.  His personality is very forceful.  Mr Pocock described him as being a "man of huge positive energy for what he enjoys".  I accept that description.  He is a very engaging man. He has undoubtedly been driven.  I am satisfied that he was the driving force behind the company, regardless of the role of the Wife.  It was his project and he has made a tremendous success of it.  He is entitled to enormous credit for having left school with no qualifications and ended up with a company worth tens of millions of pounds.
 
76. Having said all that, he has undoubtedly got a number of serious personal demons.  Whoever introduced him to cocaine in his early fifties deserves a very long prison sentence as that person has destroyed a forty year marriage and come close to wrecking a family.  The Husband, however, was the one that took the cocaine, became addicted to it and allowed it to destroy his marriage.  I am prepared to accept that depression may well have contributed although I am not entirely clear if the depression contributed to the addiction or was a consequence of the addiction.  The Husband has clearly not been able to act on the advice of his treating professionals.  I sincerely hope that, once this divorce is behind him, he will be able to rid himself of this problem for ever.  If he does not, it will probably kill him.  At the very least, it will cause his family yet more turmoil.

77. I accept that he has behaved very foolishly in relation to his conduct of this case.  He was at times evasive in his evidence although in the main I did not consider he was lying to me.   I do find that he underplayed considerably the extent of his addiction and the financial cost to him of it. In the same way, I find that he understated the amount spent by him on escorts and the frequency of this activity, although I can perhaps understand why he did so, given the presence of his Wife in court as he gave his evidence.  

78. I accept further that he is financially disorganised.  Paperwork is not his strong point.  He leaves this aspect to others.  I do not accept that this chaotic approach extended to the way in which he treated the Wife, D and E's work in the company.  He tried to blame others for their suspension but I am quite satisfied that he controls the company.  No-one else, not even C, would have authority to suspend the Wife and two of the majority shareholder's children.  He was ultimately responsible.  I do not therefore accept his evidence in this regard.

79. I equally accept that he was entirely responsible for the Wife being dismissed in November 2014 and her income being abruptly terminated.  He was also responsible for her not being paid her dividend.  His denials did him no credit.  His attempt to blame her for overspending was not just wrong.  It was hypocritical given his spending.  I equally reject his claims that he has already "pulled in his horns".  His credit card spending over Christmas and the New Year puts the lie to that, although it may be that the need to curtail spending is beginning to become clear to him.  

80. The suspension and subsequent termination of the Wife's employment is significant.  In consequence, she has lost the ability to claim Entrepreneur's Relief on a sale of her shares.  This has cost her £271,800.  

My findings on add-back
81. The Wife seeks an add-back of £1.5 million to the assets for dissipation allegedly undertaken by the Husband during the period 2nd January 2013 to 29th December 2014, namely a two year period.  Mr Pocock argues that this is a proportionate period, commencing some six months after separation and many years after the Husband's addiction commenced.  I have already noted that a schedule has been produced showing total expenditure during the relevant period of £3,444,402 which is a staggering £1.7 million per annum.  The main figures are broken down as follows:-

Expenditure

 

Amount spent

Credit card

£420,155

Payments to the Husband

£510,203

Payments to the Wife

£260,369

Cash withdrawals

£327,155

Household furniture

£416,130

Marketing

£122,868

Legal fees

£107,303

Rent

£196,344

Miscellaneous

£103,800

Drugs therapy

£229,290

Tax paid

£435,058

Holidays/hotels

£214,033

82. Mr Pocock concentrates on four elements which he says justify an add-back, namely credit card expenditure (£420,155), payments to the Husband (£510,203), cash withdrawals (£327,155) and drugs therapy (£229,290).  These total £1,486,803. 
 
83. Mr Molyneux's cross-examination of the Wife satisfied me that, in certain respects, the Husband had been generous to the Wife.  It was not just the furniture at the former matrimonial home.  He paid for the entire family, including her, to spend two weeks at the Hotel Atlantis in Dubai over two Christmases.  One year, this cost over £60,000. The other cost around £40,000.  He spent over £50,000 on cars for her both in the UK and in Spain. These items, however, were not included in Mr Pocock's calculations.
 
84. Mr Molyneux produced his own spreadsheet attempting to justify the expenditure on the disputed items.  Some of his points were undoubtedly well made.  For example, it was clear that a significant number of the £20,000 per month payments to the Wife were included in the £1.4 million.    There were also a large number of items of expenditure through the Husband's credit cards that were spent on clothes, meals, travelling expenses and the like.  For example, there was a payment of £10,000 to Chopard, Dubai in December 2013.  This was largely spent on a watch for the Wife herself as a Christmas present.  Some of the credit card expenditure was on very expensive designer items.  It was true that the Wife also spent money on expensive designer items but I was satisfied that her expenditure was on a far more modest scale to that of the Husband, who purchased such items in abundance every month.

85. There is no doubt that Mr Pocock cross-examined the Husband to considerable effect.  He was able to show very large sums of cash being withdrawn by the Husband from credit cards over and over again.  He would regularly take out £700 per day from his RBS credit card and larger sums from American Express, despite his initial denials.  I cannot accept the explanation in Mr Molyneux's schedule ("no evidence; this is personal to  MFP; possibly business expenses; no receipts so treated as personal for accounts purposes only").  Whilst there may have been the odd business taxi fare with no receipt, this would have been insignificant compared to the overall cash withdrawn. 

86. The Husband told me that he had spent around £1,000 on escorts and a minimum of £25,000 and a maximum of £50,000 on cocaine.  I reject this evidence.  I consider the expenditure was far higher.  I am unable to put an accurate figure on it. I do accept that some of the cash withdrawals would have been spent legitimately.  For example, he told me he made cash payments of £2,000 per month to his driver.  I consider, however, that a significant part of these cash withdrawals was spent on cocaine and prostitution.  On the balance of probabilities, I find it was closer to £250,000. 

My conclusion on the first issue – add-back
87. Before I deal with my conclusions, I propose to deal with two matters raised by Mr Molyneux in relation to add-back that I do not accept.  First, it is correct that in October 2014 the Wife did make an open proposal to divide the assets equally without add-back.  Mr Molyneux attempted to rely on this as evidence of the injustice of add-back.  I reject that submission.  Now that we no longer have Calderbank offers, litigants must be encouraged to make open proposals as early as possible that are designed to encourage settlement.  If the other party spurns such an offer, the court is entitled to ignore it completely and decide the case entirely on the merits. I will have no hesitation in a suitable case in awarding an applicant more than an open offer he or she has made if that is justified.   
 
88. Second, Mr Molyneux suggested that the add-back argument infringed the principle of equality.  Again, I do not agree.  If there has been spending that should be added-back, the court is in fact finding that the assets should have been greater than they are, thus justifying a higher payment to the party who had not wasted those assets to achieve the equality that he or she should have had.

89. I accept that the Husband has significantly overspent.  I further accept that it is the Husband who has done, this not the Wife.  In the relevant period, he spent £259,559 on Spanish builders, who were working on the Spanish Villas.  I am satisfied that this was, during this period, almost exclusively spent on the Husband's villa  but that is more an accident of time.  Equally substantial sums had previously been spent on the Wife's villa.  Mr Molyneux described it as being like the painting of the Forth Bridge.  It is only similar to the Forth Bridge in one sense, namely that it never finished.  I am satisfied that perfectly good work would be done but the Husband would not be satisfied and would decide to start again.  That, however, is his personality. 

90. I do not find, however, that the Husband overspent to reduce the Wife's claim.  In part he did it because he could not prevent himself from doing it.  It was down to his flawed character.  This court could not possibly add-back the expenditure on drug therapy. This was him trying to put matters right.  Whilst I accept that he did not always take advice, I reject Mr Pocock's description of him going to this therapy as a "holiday" to get away from the pressures of life or the litigation.  He was ill and he needed treatment. The same illness, however, prevented him at times from accepting the treatment.

91. Equally, I cannot add-back items of expenditure that were simply extravagant or part of his obsession with perfection.  I have had the most difficulty with the expenditure on cocaine and prostitution.  I have, however, come to the clear conclusion that I should not add-back even these items.  As I have already noted, a spouse must take his or her partner as he or she finds them.  Many very successful people are flawed.  This is true of this Husband.  I have decided that it would be wrong to allow the Wife to take advantage of the Husband's great abilities that enabled him to make such a success of the company while not taking the financial hit from his personality flaw that led to his cocaine addiction and his inability to rid himself of the habit.  It may have been morally culpable.  Overall, it was irresponsible.  But I find that this was not deliberate or wanton dissipation.  It would be wrong to add it back.  

Should I deduct the tax that would be payable if the Husband was to declare a dividend to clear his Director's Loan Account?
92. I have found this a difficult issue.  On the one hand, Mr Pocock is correct that the expense to the Husband of maintaining an overdrawn Director's Loan Account at £14,625 per £1 million is not significant in the context of this case.  Nevertheless, if I agreed with Mr Pocock, I would have to allow the annual tax charge until sale of the company.  Moreover, Mr Pocock accepts that the overdrawn loan account would have to be repaid on sale.  The repayment would have to come out of the Husband's share of the proceeds of sale which will incur Capital Gains Tax. Mr Pocock accepts that this figure will be £390,000 at a CGT rate of 21.7%.   
 
93. Mr Molyneux tells me that the Husband has told Santander that he will clear his personal indebtedness by declaring a dividend now and thus incurring the tax charge.  I can understand that Santander would consider this necessary before they grant him a large personal loan.  On the balance of probabilities, I am prepared to accept that this will happen.  The Husband will therefore have a further tax debt.  Overdrawn directors' loan accounts are, in fact, impermissible.  Moreover, the authorities are clear that the court should, in general work from net figures. 
 
94. I have therefore decided to permit the deduction of income tax on a dividend to clear the Loan Account.  Nevertheless, I consider it is only fair to do so with three caveats.  First, I am only going to permit tax on the overdrawn account as at May 2014 which is the date at which the valuation of the company has been undertaken, namely £1.8 million.  Mr Molyneux has indicated that the overdrawn account is now £2.6 million.  Given the Husband's rate of expenditure, that would not surprise me at all.  Any increased balance can be financed out of the profits made since May 2014 and will therefore be the Husband's sole responsibility.  Second, I am not going to gross up the dividend required so he will still have to find the money to pay "the tax on the tax".  I therefore calculate that the tax to be deducted at a tax rate of 30.56% is £550,000. 

95. Perhaps most significantly, I am going to add back into the schedules the Entrepreneur's Relief that the Wife will not now be able to claim on the sale of her shares in the company, namely £271,000.  I am quite clear that she was suspended and then dismissed at the instigation of the Husband. Although I have not determined whether or not there was any justification for her dismissal, I am quite satisfied that the Husband could, if he had so wished, found a way around any problem.  He chose dismissal.  The Wife should not be penalised for this in terms of the lost Entrepreneur's Relief.  

Should the Wife receive the £150,000 dividend?  To this I add a further issue, namely whether or not she should receive the £20,000 per month that was terminated in November? 
96.  I have come to the clear conclusion that the Wife should receive her £150,000 dividend.  The expenditure on the Director's Loan Account that related to her was insignificant compared to that of the Husband, particularly in the last two years.  Indeed, in so far as there was expenditure, I am satisfied that it was, at the very least, approved by the Husband.  In some instances, I find it was at his instigation, possibly as a result of his guilt in relation to his expenditure.  The Husband's lawyers had acknowledged that the dividend was due to the Wife.  The Husband then decided it should not be paid to her.  The money remains in the company for the Wife.  She should receive the payment. 
 
97. I take exactly the same view in relation to the three payments of £20,000 that the Husband unilaterally decided should no longer be paid to her in November 2014.  This was, in effect, her share of the profits of the company since May 2014.  She has, after all, not as yet received her share of the value of the company and, as I have already noted, the profits since May 2014 are not being taken into account in the case.   Moreover, I do not see why she should have to account to the Husband for one half of this money for the same reason.

Overall calculation
98. Mr Pocock and Ms Kelsey calculate the overall assets as being £25,139,445 made up as to £20,827,010 in the Husband's column, £1,397,777 in the Wife's column and £2,914,658 as joint assets.  The Wife's dividend payment is already included in these figures.   As I am going to direct that she receive that money, I consider it should come out. The add-back is not included as Mr Pocock and Ms Kelsey added half thereafter to the lump sum they argued their client should receive.  Both can therefore be ignored in the calculations.  Equally, the missing £60,000 maintenance will be ordered separately.
 
99. The only adjustments that therefore need to be made to the assets schedule relate to the tax on the Husband's Director's Loan account (£550,000), the loss of the Wife's Entrepreneur's Relief (£271,000) and the removal of the Wife's dividend.  The Entrepreneur's Relief has already been removed from the Wife's assets.  I therefore believe that the correct way to account for this is to reduce the Husband's tax allowance by £271,000 to (£279,000).  This reduces the assets to £24,860,445.  Once the dividend is removed, the figure reduces further to £24,710,445 of which half is £12,355,222.  In past cases, I have found there to be considerable disagreement over such figures after judgment has been delivered.  I do require counsel to agree the figure or point out any errors to me within seven days to avoid any problems in the future.  If mistakes are not rectified within that period, the alleged error will remain for all time.

100. The Wife will therefore receive:- 

Item

 

Value

Former matrimonial home

£2,231,000

Wife's villa

£611,019

Mobile home

£68,584

Bank accounts

£369,040

Policy

£4,055

Personalised number plates

£200,000

Pensions

£362,640

Liabilities

(£58,463)

Initial lump sum

£3,000,000

Second lump sum

 

£5,567,347

Total

£12,355,222

 

101. Over and above this sum, the Wife will receive a further £60,000 immediately as being arrears of maintenance and £150,000 in relation to the dividend.  Both Mr Molyneux and Mr Pocock have since made further submissions to me as to this.  I consider that they are both right in part and wrong in part.  I am quite clear that I did order that the Wife should receive the dividend of £150,000 over and above the provision made above as well as the sum of £60,000 maintenance.  I was clear, however, that only the sum of £60,000 was to be treated separately as set out in Paragraph 98 above.

102. It therefore follows that I consider that the Wife has to account to the Husband for one half of the dividend payment.  If she had already received it, she would have had that money in her bank account.  The assets would have increased by that amount.  It follows that a strict equal division requires a reduction in her second lump sum payment of £75,000.  The second lump sum will therefore be reduced by £75,000 to £5,492,347.  I decline to make any adjustment in relation to the euro account as being de minimis. 

Should the first lump sum of £3 million be paid in 28 days or 4 months? 
103. I have no doubt that the initial lump sum of £3 million should be paid as soon as Santander can make it available.  Santander has, in the last twenty four hours, approved the loan subject to being satisfied that the Husband can afford the payments.  As my judgment has made specific allowance for these payments (see below), there is no difficulty.  I do not know how long it will take for the legal process to be completed.  It can sometimes take longer than would be expected.  I therefore propose to order payment in 42 days, which should give more than ample time for the relevant charges to be obtained on the business premises and the money made available by Santander.  

When should the second lump sum be paid? 
104. There has been significant disagreement between the parties as to when the balancing payment should be made. The Wife argues that the Husband is, in effect, investing her money.  She says that she should, therefore, only have to wait for payment for as short a period as possible.  She therefore seeks payment in full by the end of January 2017, in two years' time. 
 
105. The Husband asks for five years.  He points to the large personal loan he is going to have to take to fund the first payment.  He reminds me of the Wife's own evidence that she did not think the Husband should sell the company.  He also points to the extended family, who make their living from the business.

106. I have to balance a number of considerations.  I accept that delay in payment in such cases should, in general, be as short as is consistent with fairness to the payer.  I am particularly mindful of the fact that I have found the Husband to be irresponsible when it comes to spending.  I also have in mind the ages of the parties and the agreed evidence that they had not made substantial pension provision due to an intention to sell up prior to retirement.  Moreover, although I have not heard expert evidence, I consider this company to be readily sellable given that it does not appear to be tied nearly so closely to the skills of its owner as many companies that are considered by these courts.  Put shortly, it continues to make large sums of money even when the Husband is incapacitated through his addiction.  Consideration has, in the past, been given to flotation.  Although I have again not heard expert evidence as to this, I would have thought flotation in one form or another would be a real possibility for this business.

107. In two and a half years time, the Husband will be 65.  I take the clear view that, at that point, he should come to a final decision as to the future.  Either he has to find the money to pay the Wife or he has to sell up or float.  He should have a reasonable period in which to do so following his 65th birthday.  I propose therefore to direct payment on or before 13th February 2018, which is in three years' time.  

Should there be an order for sale at that point?
108. The Wife will have an equitable charge over the Husband's shareholding although it will have to rank subsequent to any charge required by Santander.  If payment in full has not been made by 13th February 2018, interest at the High Court Judgment Debt rate will then accrue on the outstanding lump sum.  This has been at the very high rate of 8% for many years now.  There is therefore a huge incentive to pay this lump sum on time.
 
109. I have therefore decided that I do not need to make a formal order for sale at that point.  I have no doubt that, if the money is not paid, the Wife will apply for such an order pursuant to section 24A of the MCA 1973.  I do not consider it is necessary to make the order at this stage, which might interfere with legitimate attempts to float the company.
 
What periodical payments should the Wife receive in the meantime?
110. It is agreed that the Wife should receive periodical payments in the meantime, albeit on the basis that the order terminates on 13th February 2018 with a section 28(1)(a) direction to prevent extension.  The advantage of ordering periodical payments is that they will be tax free in the Wife's hands whereas interest would be taxable.  However, the Husband has to pay out of net income on either basis.
 
111. The Wife has sought interest at 6.2%.  The Husband suggests 3%.  There is no doubt that the latter is more normal than the former.  The Wife has argued that, as she is being kept out of her money, she should share in the greater return that the Husband generates on the value of the company.  She points out that the tax saving made by paying maintenance is 45%. She argues that this would justify a reduction from 8% to 4.4%. She then proposes that the "saving" is shared between them so that she receives 6.2%.

112. I consider that there are a number of serious flaws with her reasoning.  First, the High Court Judgment Debt Rate is not remotely reflective of market rates.  It is designed to encourage compliance with orders.  Second, I do not accept the risk argument.  Her lump sum will be guaranteed regardless of future performance of the business, so she is not at risk.  Third, I accept that the Husband has to pay the interest on the Santander loan at £228,000 per annum, his rent and the mortgage on his villa.  The Wife has no rent, no mortgage and the investment income on the £3 million.  I have therefore come to the clear conclusion that the periodical payments should be 3% net which is still £164,770 per annum. 

What should happen to the Wife's 5% shareholding? 
113. I have come to the clear conclusion that the Wife's interest should be quantified now.  I do not want to have ongoing arguments about the business and, in particular, whether any actions of the Husband have damaged the value of the Wife's shareholding.  Other cases suggest that such arrangements cause significant difficulties.  I do not consider such an arrangement assists with separating the finances of these parties as cleanly as possible.  Although it was the Husband that asked for this provision, I do not in fact consider it to be in his interest either. 
 
114. The shares should be transferred now.  This has the added advantage that there will be no issue about her share of dividends subsequently declared.  Given the concession made by HMRC, my understanding is that the CGT on transfer can be rolled over given that I am making this order as part of an overall divorce settlement.  I expect both parties to cooperate in achieving such an outcome.  The Wife will, however, have an equitable charge on the Husband's shares, subsequent to any charge required by Santander.

Should there be a cap on the Husband's drawing?
115.  I have found this issue difficult as well.  I have found the Husband to have spent irresponsibly.  Nevertheless, going forward, he has very significant financial commitments.  Before he spends any sum on his own expenditure, he has to pay (in round figures):-

  (a) The Santander loan instalments  £228,000
  (b) The Wife's periodical payments  £164,770
  (c) His rent                                    £130,000
  (d) The mortgage on his villa              £40,000
                                                       £562,700

116. Mr Pocock suggested a limit on his drawings of £500,000 per annum net but the above figures show that is not possible.  Equally, Mr Pocock relied on the Husband's own budget of £260,000 pa.  It was clear that this budget was not even remotely reflective of the Husband's actual spending.  The Wife's budget in her Form E was £396,960 pa in the UK and £148,608 pa in Spain, making a total of £545,568 pa.  I am quite clear that this budget does not reflect the reality of her spending which is very considerably less.  If I was to allow the Husband her budget, his overall spending would be £1.1 million.  I actually consider a reasonable budget for both to be around £350,000.  If this is added to the expenditure above, I would have to allow the Husband to draw £912,700 pa rather than Mr Pocock's figure. 

117. Overall, I have decided not to do so.  First, such an order would need policing.  Second, given that I have determined the Wife's entitlement, I cannot see that the level of the Husband's drawings directly concern her provided the company is not endangered.  There is nothing to suggest that the Husband's irresponsible drawings to date have done so.  Finally, it is a matter for the Husband.  If he continues to draw unreasonably, he will be unable to pay the Wife out in three years and will have to sell up regardless of his wishes.  It is a matter for him.  

Is it appropriate to make my order in full and final settlement of all claims either may have against the other and, in particular, the Wife's potential claim against the company for wrongful dismissal?
 118.  I am firmly of the view that my judgment should be the end to litigation between these parties.  A dispute in an Employment Tribunal would be unedifying, costly and, as I understand it, public.  I do not know how much the Wife could expect to receive for unfair dismissal. I have made what I consider to be a fair award to her, taking the value of the company fully into account.  It is undoubtedly a substantial award.  It includes £60,000 of "arrears of maintenance".  I am quite sure that this should be an end of the matter.  I propose to make my order on the basis that it is in full and final settlement of all claims of whatever nature either may have against the other arising out of their marriage.  I am satisfied I have jurisdiction to do so but, if there is any doubt, it can be resolved by a contingent lump sum by the Wife to the Husband in the amount of any money subsequently ordered in her favour by an Employment Tribunal.