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Roberts J quantifies wife’s ‘needs’ claim under Part III MFPA 1984

Assets almost exclusively ‘non-matrimonial’

In Z v Z and Others [2016] EWHC1720 (Fam) Mrs Justice Roberts had to consider the quantification of a wife's claim under Part III MFPA 1984 application following a concluded agreement in Russia and where the assets which had been generated were nearly exclusively non-matrimonial.

The wife's Part III application followed a Russian divorce, and Russian financial remedies proceedings that were concluded by agreement and included broad finality clauses. In Z v Z & Others [2016] EWHC 911 (Fam), Roberts J had determined that it was appropriate for the English court to make financial orders in this matter, and Her Ladyship stressed that the two judgments must be read together as part of a single decision. Crucially, the Russian proceedings, even if contested, would not have been able to consider the Kensington House, a property that W lived in in London but which was held by a trust, a structure not recognised by Russian law and therefore which could not form part of a Russian award.

It was agreed between the parties that this was a 'needs case', but the husband argued that W's needs had to be assessed in light of:

1. The delay in W's application (the Russian order having been finalised in 2009).

2. The non-matrimonial source of H's wealth.

3. The agreement that W gave to compromise all her worldwide claims, including those against trust property (and the reliance that H and his family had placed upon that finality).

In relation to the delay, Roberts J found that there had been a tactical element in the timing of W's claim, and that she had deliberately waited until her flat in Moscow had sold before she made her application so as to increase her connections to this jurisdiction. This resulted in a more conservative assessment of W's future needs [52], [102]. However, no finding was made that W had deliberately delayed in the expectation that H's financial position would improve and therefore that she made have a greater claim in 2015 than in 2009 [53].

In relation to the source of H's wealth, Roberts J noted that 'the provenance of the wealth against which she is claiming is gifted or inherited wealth, none of which is the product of marital endeavour' [54]. H's wealth was derived from his father, Dr Z, as it had been throughout the marriage. Having referenced H's submissions on N v F (Financial Orders: Pre-Acquired Wealth) [2011] EWHC 586 (Fam) and Vince v Wyatt [2016] EWHC 1368 (Fam) [26], Roberts J held that this factor should also act as a limiting factor on the assessment of W's needs [54].

The previous agreement between the parties (reduced into an order as part of the Russian proceedings) was not sufficient for the English court to make no financial provision for W. The existence of the agreement was an important factor, and meant that Roberts J could not simply consider what an English court would have done had the divorce proceedings occurred here in 2009 [78]. Roberts J analysed the relevance of Granatino v Radmacher (formerly Granatino) [2010] UKSC 42 in Stage I of her judgment, and noted in the Stage II judgment that the Radmacher test required more than a simple assessment of whether the division of the visible assets on their values at the time looked fair at the time [90]. The Russian court had been unable to consider any remedies in relation to the Kensington House [72] and had not investigated the circumstances of W's occupation [73]. There was, therefore, a concern as to whether W's housing and income needs would be met at such time as she was no longer granted occupation of the Kensington House [74]. Her Ladyship distinguished the situation in De Renee v Galbraith-Marten [2016] EWCA Civ 537, where there had also been proceedings concluded by agreement in an overseas jurisdiction on the basis that there was potential for continued unfairness in the present case, and that the parties in De Renee had received full and relevant advice on all possible remedies throughout the Australian proceedings [68] – [70].

Ahead of the hearing, H had agreed to pay the rent on the Kensington House so as to allow W to remain living there until their youngest child completed tertiary education. Roberts J therefore considered W's needs outside of this, in light of W having 'substantial' connections to the jurisdiction [82], albeit that there had been a tactical element to her delay, and the assets that W had already received in the Russian proceeding [85].  W had accepted, it was found, that she would not have any claim for ongoing spousal maintenance, and had formally compromised such a claim in Russia [91].

H's case was that W could step down her housing need following the youngest child completing tertiary education (in 2022), and that she would be able to meet her housing need from her own resources by that time [105]. Roberts J accepted that, although the position may have been different under an English divorce, it would not be appropriate for W to remain in the Kensington House indefinitely, and indeed that transferring the property to her risked providing her with an outcome that would exceed what she could have received from purely English proceedings [111], [127].

Against a background of H's assets of £33 million [8], Roberts J found that W would need a housing fund of £2.5 million (on present figures) to rehouse in 2022 [126]. Having reviewed her budget. Roberts J found that her income needs were £138,847 [123]. This would leave H's standard of living significantly greater than hers, although no party had sought parity in this regard, which was appropriate give the delay and the award W had already received in Russia [118]. These needs existed as a matter of fact independent of W's compromise of her spousal support claims, although the compromise was a relevant factor in considering how far these needs were met [124]. Roberts J took no account of W being able to exercise an earning capacity to help meet her own needs, on the basis that she had ongoing obligations to the children and that her language difficulties in England would limit her employment opportunities [126].

Taking account of the £4.685 million of assets already held in W's name, Roberts J calculated W's shortfall against the Duxbury fund she would require to meet her future income and housing needs. In doing so, Roberts J allowed for the fact that W's housing fund would also generate income that could be retained for the six years until she has to rehouse [131]. Treating W's investment flats as liquid capital (as opposed to income streams) [130], this left W with a shortfall of £1,148,480 on her Duxbury fund for her future needs (having accounted for the assets she already retained and the housing fund she would need from this). Roberts J found that, given the scale of his wealth, it was fair and reasonable for H to meet this shortfall [132].

The children's needs were found to be £35,000 pa each, as W had contended, but Roberts J held that W's requested level of extras was too high, even in light of the fact that W and H would be unlikely to be able to agree on individual items of provision in the future [139]. H was therefore also to pay for such tuition as is agreed to be considered necessary by the children's schools, on top of his agreement to meet any private medical bills not covered by the insurance he provided [139].

Roberts J concluded the judgment with a strong steer that, although any costs applications would be considered, they might be inappropriate in light of the needs-based nature of her assessment.

This news item reproduces the summary, by Samuel Littlejohns of 1 Hare Court, of the judgment. For judgment and summary, please click here.

18/7/16