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Home > Judgments > 2008 archive

I v I [2008] EWHC 1167 (Fam)

Application by wife to set aside an ancillary relief order on the basis on non-disclosure by the husband. Application refused.

The couple split in 2006. The husband was a stockbroker while the wife had remained mainly at home raising the family. Simultaneously with proceedings for ancillary relief, the husband was contacted by a head hunter and began negotiations with another firm for a possible move and increase in salary. These negotiations were conducted at the same time as the FDR but were not disclosed. At the FDR an agreement was reached and approved by the district judge.

The wife was seeking to have that order set aside on the basis that she would not have agreed to the order if she had known of the husband’s potential change in employment status and increased salary.

In this lengthy judgment Charles J reviews i) whether the husband had failed to make full and frank disclosure and ii) whether such disclosure would have made a material difference to the agreement. He concludes that husband had failed to disclose but that the failure to disclose would not have made a difference, primarily, as there were uncertainties as to the husband’s remuneration whether or not he stayed with is current firm as i) much of it is in the form of bonuses and the bonus for that year had yet to be determined and ii) the negotiations and level of remuneration from the new employer had not been agreed at the time of the FDR
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Neutral Citation Number: [2008] EWHC 1167 (Fam)

Case No: FD05D06161
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 23/06/2008

Before :

THE HON Mr JUSTICE CHARLES
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Between :

I (Applicant)

 - and - 

I (Respondent)

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Martin Pointer QC and Nicholas Yates (instructed byHughes Fowler Carruthers) for the Applicant wife
Jonathan Cohen QC (instructed by Shentons) for the Respondent husband

Hearing dates: 18 to 20 February and 4 April 2008
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Judgment Approved by the court
for handing down
 
Charles J: 
Introduction

1. I will for convenience refer to the parties as the wife and the husband. 

2. This is an application by the wife to set aside an order for ancillary relief made by a District Judge at an FDR on 20 July 2006. 

3. The grounds relied on were non-disclosure and a supervening event.  In my judgment correctly, counsel for the wife did not pursue an argument based on supervening event.  In their opening note for the purposes of the hearing Counsel for the wife asserted that the husband was:

"engaged in negotiations for a new position; had agreed terms of employment; and was in consequence materially financially better off (as to both capital and income) than under his old employment contract". 

It is asserted on behalf of the wife that this information was suppressed by the husband and thus, and less contentiously, that it should have been disclosed by him.  This allegation focuses on a comparison between the alleged agreed terms for a new position and the husband’s old employment contract.

4. In her final statement stated 8 February 2008 the wife said that as at 20 July 2006 she did not know that the husband “was about to sign a new contract of employment” and then sets out incorrectly the amounts payable under what became his new contract of employment (in that they were too high).  She went on to state that this gave the husband considerable guaranteed and increased liquidity and that if he had made her aware of:

“the terms of his new contract of employment I would not have agreed to settle the case on the terms that I did, whereby [the husband] retains a charge over the matrimonial home in which the children and I continue to reside, nor would I have settled my maintenance claims at £55,000 per annum.”

She gave oral evidence to similar general effect to the quoted passage.  Following disclosure of the FDR material, and in the light of the documents evidencing the history of the negotiations and the terms of the new contract the wife was not either (a) asked further questions in chief as to her thinking as at 20 July 2006 when the parties put their agreement before the court and it was approved and became an order, or (b) cross examined on that assertion by reference to that material and documentation.

5. It is accepted that in the period leading up to 20 July 2006 the husband was in negotiations relating to a new job and that he did not disclose the existence of such negotiations, or the position reached in respect of them, to the wife.  In his oral evidence he accepted that he decided not to do so. He asserts that given the position reached in those negotiations (a) he was under no duty to do so, and if he was (b) disclosure of the position relating to them would not have caused the court to make an order that was substantially different.
6. Those assertions raise issues of fact relating to the credibility of the husband on which I heard evidence.  For example as asserted by counsel on behalf for the wife in their opening statement: Had he agreed terms of employment? Or as asserted by the wife, in her statement: Was he about to sign a new contract of employment?  In addition the point arises whether the husband had in his possession or control a new contract of employment, or a draft of that contract at the FDR.  As will appear later, in my judgment the answer to all of those questions is in the negative.

7. If there was a duty to disclose, issues arise as to the materiality of the non-disclosure and thus the true position reached concerning the husband moving job.

8. Jenkins v Livesey [1985] 1 AC 424 is high and long standing authority on both the existence of the duty of full and frank disclosure and the consequences of its breach when a consent order has been approved.  Unsurprisingly both sides referred me to it and relied on it.

Background
9. The parties met when they were at university.  They lived together from 1992 and were married in August 1996.  When they were married the husband was 28 and the wife 27, they are now respectively 40 and 38.  When they were married they were both employed but neither had any significant resources.  They have two children, both girls, one of them is 10 and the other is 8.  They bought their first house in 1996.  That house was sold in 2004 and shortly thereafter they bought a larger house from the proceeds of their first home, savings of about £200,000 and a mortgage of about £150,000.  Substantial renovations were then carried out to that property.  This house is an attractive family home.

10. The parties separated in June 2005.  So they had lived together for about 13 years and been married for about 9 years.

11. The husband has been described as a stockbroker and an investment banker. Nothing turns on the description and from 1989 to July 2006 he had had seven employers in the financial sector. He resigned from his employment with AA on 31 July 2006 (i.e. 11 days after the order) and took up his present employment with BB on 4 September 2006.

12. In early August 2006 the husband told the children that he had left his employment at AA.  This led to enquiry being made by the wife as to his new employment which was followed by the application to set aside the order.  That application was issued on 30 October 2006. 

The position as at 20 July 2006
13. I have been provided with (a) figures that were under discussion, and in the papers, in July 2006, and (b) figures for the purposes of this hearing.  There are some differences.  In looking at the position as at July 2006 I have had primary regard to the figures then in the papers.

14. There is common ground that as at 20 July 2006 the relevant assets had all been acquired during the relationship.  As is not uncommon in his field of work the husband’s remuneration package was made up of a basic salary and bonus some of which was paid in shares, or stock units, which were to vest over a period of time.  The wife had no relevant income and, as I understand it, had not been in employment for some time.  The marital partnership therefore was one in which, by agreement between them, the husband was the earner and the wife the home builder and the primary day to day carer of the children.

15. The position was that over the years of the relationship the couple had been able to make savings from income the great bulk of which were represented by the matrimonial home.  It was common ground that the savings, assets and borrowing power of the parties did not enable there to be a clean break.

16. To my mind, the position was that the moneys representing assets acquired, savings made and income earned during the continuance of the relationship, which became a marital partnership, and the co-operation and agreed lifestyle based thereon (and thus up to separation in 2005) were moneys to which the approach that they should be shared equally applied with considerable force. This is because they were the product of that relationship.  In my view that approach would effectively apply to all income up to and including the bonus declared at the end of 2005 and thus to the vested assets (and the unvested RSUs) as at July 2006. 

17. However an issue existed (and exists) as to how later income, and savings (and thus capital) derived from it, should be approached, shared and taken into account having regard to (a) the point that the income was earned after the end of the relationship and agreed lifestyle, and (b) the common ground that there should be periodical payments set at a level that has regard, amongst other things, to the level of the lifestyle enjoyed during the marriage.

18. The former matrimonial home still remained subject to a mortgage of £150,000 and, after provision for selling costs at 3%, had a net value of £723,000.  The husband had an account at the Halifax which had been funded primarily by his bonus for 2005.  In July 2006 the credit balance on that account was approximately £140,000.  That account, together with the husband’s basic salary, was used to pay day to day expenses and was therefore an “income sinking fund”.  At the end of the year a balance would be left that would constitute savings for that year.

19. The husband held the following (a) 151 shares in AA, (b) 410 RSUs in AA, which had vested, which needed to be valued on a net basis after tax, and (c) some shares in Regent Pacific Group (his Vested Assets).  If their net value is netted off against his liabilities the credit balance is approximately £33,000.  The wife had a small overdraft liability of about £1,100. 

20. The husband had pensions totalling approximately £110,000 and the wife had pensions valued at approximately £10,000.

21. The husband also had an entitlement to unvested RSUs in AA which would vest in November 2006, 2007, 2008, and 2009 (and deliver in the following January). At current values the total net value of those unvested RSUs, after deduction of tax, was of the order of £230,000 to £250,000 (different figures are included in the papers as at 20 July 2006 and now).

22. The husband's remuneration package at AA was that he was entitled to a basic annual salary of £100,000 payable monthly, and a bonus decided at the end of each trading year (30 November) paid part in cash and part in RSUs.  This complicates the position because part of his remuneration does not vest for some time, also unvested RSUs would generally be lost if he moved job.  For the calendar year 2005 his total remuneration was £516,705 ($ 950,000) made up of basic salary £100,000, cash bonus £343,512, and 1,027 unvested RSUs (£73,193).  That is net pay in cash of about £262,000 (59% of £443, 512) plus unvested RSUs.  The husband's P60 for the fiscal year 2005/6 (not the calendar year 2005) evidenced a net salary of £278,030. So in broad terms by reference to his salary and bonus for 2005 the husband was earning at the rate of £260,000 to £270,000 net a year and was also in receipt of RSUs which would vest in the future.  In addition he had the benefit of a payment of £5,000 as a pension contribution.

23. In the years leading up to the separation of the parties, and the order in July 2006, the husband had been successful and his total remuneration package from his employment had increased year-on-year.  So, looking forward to what might be awarded by way of bonus for the calendar year 2006, there was a real prospect, and thus a justifiable expectation, that his overall remuneration would increase significantly over the 2005 levels and therefore result in a receipt by the husband at the end of 2006 (or in early 2007) of:

i) a cash bonus considerably in excess of  £343,512 gross (£202,672 net) paid at the end of  2005,
ii) the vesting of 720 of his unvested RSUs (net value around £34,000), and
iii) more RSUs that would vest in the future, so long as he remained an employee of AA.

24. In my judgment both parties were aware that the husband’s bonus at the end of 2006 could be, and probably would be, significantly higher than that paid in 2005.  This is borne out by the documents at the time.  As to this expected incease, and to my mind correctly, the presentation on behalf of the wife at the FDR was that the husband was a high earner and that:

“it is obvious that [his 2005 earnings] will continue to rise exponentially over the years”. 

In the financial climate of the time that was a fair and correct approach.  Indeed in my view an approach on behalf of the wife that failed to take into account that it was likely that the husband’s bonus for 2006 would be significantly greater than that for 2005 would have been folly, and fallen below the standard of care owed to the wife by her advisers.  This is mirrored in what was said by counsel for the husband before the District Judge when he said that there had (as was common knowledge) been a very successful rising market and that counsel for the wife had calculated a general rise in that period (I have not seen that calculation) and the husband’s remuneration by way of bonus could go up or down.

25. The exchanges at the FDR demonstrate, and if I had not had sight of them I would have assumed, that the parties and the District Judge were all expecting the 2006 bonus to be significantly larger than the 2005 bonus had been.

26. What would not have been known was the amount of such bonus and thus the size of the likely and expected significant increase.

27. I pause to comment that in my view this expectation is important because it means that:

i) comparisons between the 2005 income position at AA and the 2006 income position following the husband’s change of job are misleading and inappropriate if the expected increase in the husband’s bonus for 2006 is left out of account, even though as at July 2006 this was uncertain and unquantifiable, and
ii) if this expected increase was left out of account by the wife, or not fully and properly discussed with the wife by her advisers, that would give rise to issues as to whether they had acted in breach of their duties to the wife. 

28. As is apparent from the exchanges at the FDR, although absent sight of those I would have assumed and found that, both sides were fully aware that if the husband was to move jobs he would probably receive compensation for the unvested RSUs he would lose in the form of stock or units in his new employer.  From the history they would also have known that on a move it was likely that the husband would receive a guarantee as to his total remuneration for at least a year; this is what had happened when he moved to AA.

29. The cash flow position was that the sum of £140,000 in the Halifax account, plus the husband’s monthly pay (approx £5,000 net) would be available to meet income needs for the rest of 2006.  The bonus for 2006 would become available to meet those and other needs in early 2006.  That bonus would relate to a year’s work that began 6 months after the breakdown of the relationship and therefore a year during which the husband and wife were living in separate households.

30. The wife for a number of reasons was understandably keen to avoid a sale of the former matrimonial home so that she and the children could remain living there.  One of those reasons was that the upset of one of the children following the breakdown of the marriage had been such that the assistance of a psychotherapist had been sought.

The order
31.   This provided that:

i) The former matrimonial home be transferred to the wife with a charge back of a sum equal to 24% of the gross proceeds of sale to the husband (24% of £900,000 = £216,000 or 29.9% of the net value of the house).  The wife therefore obtained 76% of the gross value of the property but had to bear the costs of sale and the mortgage.  The result was that her interest in the property was worth £507,000 or 70.1% of the net value of the property.  She also had the benefit of the use of the whole property with the children.  The provisions included in the order for realising the charge and the purchase of a substitute property were fairly standard.  They provided that the wife could live in the house (or a substitute property) subject to her paying the mortgage interest or instalments.
ii) The payment of periodical payments of £55,000 per annum to the wife during their joint lives until the wife’s remarriage or further order (to increase pound for pound by any reduction in the child maintenance further to an assessment by the CSA). 
iii) The following payments for the children by way of periodical payments:
a) £10,000 per child per annum (so £20,000 per annum), and
b) School fees and extras.
iv) By way of undertaking for the children fees for music lessons, dance and gym clubs and school clubs.
v) The total income package was therefore £75,000 a year plus school fees and extras relating to the children and that package was capable of variation from time to time.
vi) A payment of £13,000 towards the wife’s costs.
vii) The wife also retained her small pension and indebtedness.

32. The husband therefore retained:

i)  24% of the gross value of the former matrimonial home (29.9% of the net) which was not immediately realisable, and therefore which he would not benefit from for some time (£216,000),
ii) His pensions (£110,000).
iii) His unvested RSUs (£230,000 to 250,000).
iv) His Vested Assets (£33,000).
v) The sum of £140,000,
vi) His monthly basic salary, and
vii) His expectation that at the end of 2006 he would receive a bonus (most in cash but some in RSUs) and some of the exiting RSUs would vest.  (Or his remuneration on a change of jobs).

33. The husband’s liabilities under the order for £13,000 costs, the periodical payments and extras and his own day to day living expenses (including the provision of accommodation)  would fall on items (iv) to (vi), and primarily if not exclusively (v) and (vi), until (vii) – the 2006 bonus – was paid.

The negotiations for the new contract, the stage they had reached and what had been agreed when the order was made on 20 July 2006
34. The wife, through her counsel made a sustained attack on the husband’s credibility in asserting both in opening and closing that by the time of the FDR there was an agreement, or an understanding, that the husband would move, and thus by reference to their opening note that he had:

“agreed terms of employment with the consequence that he was materially financially better off (as to both capital and income)”. 

35. The purpose of this attack on the husband’s integrity was to support findings that he is willing to give a coloured or economical account of his financial affairs and thus a factor in favour of a finding that he suppressed information relating to the new contract during July 2006 and thus before the divorce was settled.  “Suppression” involves a conscious decision to keep quiet about relevant information and thus to deceive.  The attack was therefore I assume in part to show that the husband thought that the negotiations were relevant and if he disclosed them this would mean that he would have to pay more to the wife, or that it would weaken his negotiating position.  But this was not actually put to him, and in final submissions counsel for the wife submitted that the relevant test was an objective one.

36. However the attack on his credibility was also, and importantly, relevant to issues concerning the degree of certainty that the husband would move jobs, and his salary if he did, at the time the order was negotiated and made at the FDR on 20 July 2006.

37. It is plain, and in oral submissions it was accepted by the wife, that by the time of the FDR a contract had not been entered into.  It is thus clear, and was so accepted, that as at 20 July 2006 there was:

i) no legally enforceable agreement that the husband would move,
ii) the agreement or understanding asserted by the wife must be something less than a legally binding commitment between employer and employee, and thus
iii) what is asserted by the wife has some element of uncertainty.

She argues that that level of uncertainty was small and the move was by 20 July 2006, when the order was negotiated and made at the FDR, effectively a “done deal”.
38. It is also clear that when he attended at the FDR hearing no draft contract had been provided to the husband and it was correctly not suggested that at any time before the order was made the husband knew that a draft contract had been sent to his employment solicitors (and as appears later I conclude that such a draft was not sent until very shortly after the order was made).   

39. A draft employment contract was sent to the solicitors, engaged by the husband to advise him as to that employment, first it seems at 16.23 and again at 18.26 on 20 July 2006.  This was very shortly after the making of the order.  I return to the timings on the day.

40. A travelling draft showing the changes made to that draft has helpfully been produced.  I do not propose to go through these changes, not least because in final submissions it was correctly accepted that some of them were important.   In my view a reading of the changes made to the contract demonstrates that the husband was justified in describing some of the changes sought and obtained by him, and by his employment solicitors, as ones that were “deal breakers” if they had not been agreed.   Others, as he accepted, were more negotiable.  But the position was that not only had a binding legal agreement not been entered into on 20 July 2006, but negotiations on the draft sent on that day had not commenced, were necessary and there were a number of points that needed to be altered to that draft before the husband would have committed himself to a move.   To have done so without finalising the contract would clearly have been folly because of the risk that it would leave him without a job.

41. To my mind it is obvious common sense, and therefore something that should be, and should have been, clear to the wife and her advisers that the husband would not commit himself to resigning and moving until his new contract was finalised and that until that was done there was real uncertainty as to whether he would move.

42. As the husband points out it is common, or at least not uncommon, for agreements or understandings in principle as to a change of employment (which on the documents is the very highest that the wife can put her case) to break down.  I also accept his evidence that he has had experience of negotiations for a change of employment breaking down a late stage, and his point that in his sector of employment moves in the second part of a year can break down more easily than those in the first half of a year because the employer has to pay a bonus for a period when the new employee has not been working for it.

43. It follows that in my view just having regard to the clear position on the documents relating to the entry into of a contract of employment it cannot fairly be said, without significant qualification, that as at 20 July 2006 that the husband was “about to sign a new contract of employment”, or that he “had agreed terms of employment and was in consequence materially financially better off”, or that his move of jobs was effectively a done deal.

44. This is not being legalistic.  Rather it is being realistic and pragmatic. 

45. I now turn to look at the negotiations leading up to 20 July 2006 to see whether there was an agreement or understanding in principle by the time of the FDR.  I conclude that there was not.

The negotiations leading up to the sending out of the draft contract
46. The fact that a draft contract (it seems incorporating a number of standard terms from other BB contracts) was sent to the husband’s employment solicitors on the afternoon of 20 July 2006 (after the order had been made) indicates, as was clearly the case, that negotiations had reached an advanced stage.  As this draft was sent to his employment solicitors it is clear that the husband had taken steps to arrange this before 20 July 2006.

47. The husband was approached by head hunters in January 2006 but no progress was made.  A meeting was cancelled because the husband was not ready.  The husband was approached again in late April or early May and by the second week in May the husband had a meeting with the “number 2 at BB”.  This was followed by further meetings in May with representatives of BB and after those meetings the husband was sent accounts of BB on 19 May 2006.  In early June 2006 the husband was told, as was the case, that there was another senior individual being considered for a wider remit.  The husband’s reaction to this, as recorded by the head hunters, was that if BB wanted him he was ready to move, but if they did not, he would like to be told as soon as possible.  He was worried about not being kept up to date and the preservation of confidentiality.   The head hunters’ view was that the husband had had enough of AA politics.

48. There was therefore a change in thinking and direction at BB in late May and early June as to what they might offer the husband.  They had another person in mind for a more senior management role, similar to that for which the husband had been considered, but still thought that he would make a good Head of Sales who would work with, and report directly to, this new person if and when he was recruited (Mr R).  This was followed by an indication to the husband that an offer would be made to him by BB for a different role to that originally envisaged, but no such offer was made.  By mid June 2006 the husband thought, and it was reasonable for him to do so, that, as the head hunters recorded in an email to BB “the game is over”, although they had tried to assure him that this was not the case.

49. At the end of June 2006, a meeting was arranged between the husband and Mr R.  Mr R had not then been employed by BB.  I accept that the husband thought that this was the restart of an interview and negotiating process because if he was to be offered a job it would be one working directly to Mr R, who was still to be taken on by BB.  I accept his evidence that interviews by, and the reaction of, Mr R, as the person he would directly report to if they were both taken on, were important.

50. The precise role and authority of Mr R within the decision making at BB as to the employment of the husband is not clear on the evidence.  For example it is not clear when Mr R was employed by them.

51.  After this meeting the head hunters contacted the husband and he had a meeting with them on 7 July 2006.  Their internal log is generally positive about him in connection with a move to BB.  The first mention of remuneration in the records is in a log entry of the head hunters dated early on 14 July 2006.  It records that he was looking for a two year guarantee (which he had had on his two most recent moves), it sets out what he had been paid for 2004 and 2005 and records that he was:

“50% up on his budget and anticipates that his total cash compensation will be up 40/50% for 2006”. 

52. This note also records that a meeting with Mr R was fixed for the next Monday (17 July 2006) and that the husband should be ready with two positive tactical subjects that had not been offered to date.  In his final statement the husband indicates that by 14 July 2006:

“ the principal terms of his potential employment had been agreed but that significant areas of disagreement remained in particular an indication that his employment could be terminated if he failed to meet a performance target and the extent to which he would be required to take bonus in shares and his holidays. ”  

53. A meeting between the husband and Mr R took place on 17 July 2006 and on 18 July 2006 Mr R told the husband that the compensation / remuneration package he was seeking was in the right ball park.  That package was one that sought guaranteed bonuses for two years of the amounts he was offered and are included in his contract of employment.  This indication from Mr R did not rule out the possibility of some negotiations on the figures themselves, or conditions by reference to performance targets, or the split between shares and cash.

54. But at this stage matters had moved on in that the interview on 17 July 2006 and the husband’s presentation at it had gone well, and Mr R, who the husband must have thought was in discussion with relevant decision makers at BB and centrally involved in any decision to employ him, was indicating that something similar to the remuneration / compensation package the husband was seeking would be included in any offer made to him.  But the husband’s final statement, and oral evidence, indicate and I find that:

i) there were still important points outstanding as to the package he would be prepared to accept, and
ii) at this stage no offer had been made to the husband by Mr R, or anyone else.

And I also find that:

iii) the common understanding of all involved was that as the interview process had gone well the next step would probably be the making of a formal offer, and  
iv) notwithstanding the passage cited from the husband’s final statement, the husband reasonably thought that that offer might not match the figures he had proposed for his guaranteed remuneration but would include lower figures that could be said to be in the same ball park.

55. On 18 July 2006 there was an email from the head hunters to BB which refers to the negotiations being at the final stages, there having been a verbal acceptance and asks for help concerning the stock element.  As I read it the email on 18 July 2006 is referring to a verbal acceptance from the husband in the context of ongoing negotiations.  The wife seeks to rely on this as evidence that the husband had verbally accepted an offer which had not been formalised (and did not contain details relating to the stock).  But:

i) as appears above I have concluded that this had not occurred in discussions between the husband and Mr R or anyone else at BB,
ii) I find that the husband, as he said in evidence, had told the head hunters that if BB came up with a contract that was 100% O-K he would move, and
iii) I also find that he had indicated to the head hunters that he and his lawyers would deal with any draft contract quickly.

A representative of the head hunters produced the file.  Apart from that I did not hear any oral evidence, and there is no written evidence, from anyone at the head hunters. 
56. It follows that in my judgment the email of 18 July 2006 does not found the conclusion that the husband had by then received or accepted an offer in principle.  The emails on 19 July 2006 support this conclusion. 

57. On 19 July there are emails from the head hunters to BB:

i) at 12.26 stating that “we have agreed an offer for [my emphasis] the husband, that he will joining and reporting to Mr R [and another more senior employee], that the numbers have been agreed [and setting them out], that “we have him on the hook now and I don’t want to loose the psychological advantage” and that his passport scan and stock valuation were on the way, and
ii) at 14.27 stating that Mr R and the number 2 at BB had asked that the offer to the husband be expedited with a view to getting him to resign that Friday, before his holiday, that the husband has confirmed that his lawyer is around [although I comment that, as appears later, they had not by then conducted their conflict check] and Friday resignation is possible.

58. The first email on 19 July is clearly referring to matters agreed internally at BB and with the head hunters and not to an agreement with the husband and the second email on that day indicates that no offer had by then been made although the expectation at BB and the head hunters was that matters could be finalised very quickly.  In my judgment the husband had not made any commitment to such an early resignation.  Rather, as appears above, he had indicated to the head hunters that he and his lawyers would deal with a draft contract quickly.

59. In my judgment that remained the position at the FDR and when the order was made on 20 July 2006.

60. I pause to mention that telephone records of the husband (and others) relating to this period were not before the court (although the husband’s had been asked for).  There was a dispute as to their availability which was not gone into.  Those records would not have shown the content of conversations but could have shown when the husband contacted relevant people.  Records of his text messages were also not before the court, these might have shown what was said and what was sent to the husband (e.g. a draft contract).  His assertion that his only email address was at work was not disputed.

61. On 19 July 2006 there are internal memos by a secretary at the husband’s employment solicitors timed at 15.40 and 16.14.  The second asks for a conflict check to be carried out to see if there was any reason why they could not act for the husband in negotiations with BB.  This is an indication that on that day (or perhaps before) he asked them to act for him and to expect a draft contract.  Also on that day, or earlier, he must have given the head hunters the details of his employment solicitors and provided them with a scan of his passport and stock valuation.

62. The timing at court on 20 July 2006 was that at 12.20 the parties went before the judge, at 13.10 the case was adjourned for further consideration, at 16.10 the parties entered court to submit the agreed terms and at 16.18 the parties left court.

63. During the time at court (at 15.39) BB sent a draft contract to the head hunters. The draft contract was forwarded by the head hunters to the husband’s employment solicitors on 20 July 2006.  As I have mentioned the papers contain two trails of emails as to this.  One times this email at 16.23 and the other times it at 18.26.  The one timed at 16.23 contains a reply from the solicitors on 21 July 2006.  It therefore seems that a copy of the draft contract was emailed twice from the head hunters to the employment solicitors.  The husband is not copied in to these emails.

64. At 17.05 (and thus between the two emails sending the draft contract) the husband telephoned his employment solicitors.  The record shows that he spoke to a secretary who left an internal memo asking the solicitor to call the husband.  There is no record of such a call. 

65. In his cross examination the husband said that he had also called the head hunters after he came out of court. 

66. That evening the husband had a drink with Mr R.  He told me that he could not remember when this was arranged.  Mr R emailed the head hunters at 00.14 on 21 July 2006 saying that he had had a beer with the husband earlier that night, that he (Mr R) was very keen to get things sorted before the close of play on the next day and that:

“the issues he [the husband] raised from the contract are fairly benign and can easily be worked through (his concerns were similar to mine so no reason why it will take long with the lawyers)”. 

He then asked the head hunter to try and arrange things so that things could be sorted out on 21 July 2006.

67. This email indicates that by then Mr R had been employed (or had at least agreed his contract), and that when he and the husband had their drink they had a draft of the husband’s contract.  The husband’s oral evidence as to this was confusing.  But, in my judgment the upshot of it was that he did have a draft of the contract at that time, indeed in one of his answers I understood him to accept this although in another he said he did not have a clear recollection of that evening. 

68. He did not say, and the documents before me do not indicate, where he got the draft contract from.

69. It was submitted that the husband’s answer to questionnaire, which he repeated in his first statement, that:

“the day after the hearing (21 July 2006) he received a call from the head hunter saying that they had an offer for him and a draft contract which was handed to him by the head hunter of the steps of St Paul’s Cathedral”

was completely untrue.

70. At one stage in his oral evidence he said that this occurred on the evening of 20 July 2006 but I am not clear whether he was referring to the call, or the handing over of the draft contract.  In his final statement he said that he first saw the draft contract on 21 July 2006.   As I have said I do not accept that.

71. In my view the fact that the draft contract had been provided to the husband’s employment solicitors does not make it untrue, or even unlikely, that the husband was handed a copy by one of the head hunters.  Nor does the respective locations of the offices of the solicitors and the head hunters.  Rather it seems to me that the head hunters may well have wanted to make this personal contact to directly assess the husband’s position and thus whether matters should be left to the lawyers, or whether the head hunters should do something to promote the move being completed.  This would be in line with the email from Mr R in the early hours of the morning of 21 July 2006.  It would also be in line with the urgency being expressed at the BB end in the emails of 19 July 2006 and the wish of the head hunters to get the husband signed up, if the draft was handed over on the evening of 20 July 2006.  As I have mentioned the head hunters gave no written or oral evidence.

72. I accept that there was such a hand over and in my view it would be an odd thing for the husband to make up given the ability of the wife and her advisers to check it with the head hunters.  However it seems to me that the hand over could well have been on the evening of 20 July 2006.   But if it was not, I find that before he saw Mr R on that evening, or at that meeting, the husband had received, or was given, a copy of the draft contract.  I accept that he had not by then discussed it with his employment lawyers.

73. The upshot of this is that I accept and find that the assertions of the husband that he did not get a copy of the draft contract until 21 July 2006 are untrue but I accept that he did get a copy from the head hunter on the steps of St Paul’s, even if this was his second copy.

74. To support the attack on the husband’s integrity I was referred by counsel for wife to a number of points asserted to be false presentations of his position in his statements and his first and second Form Es.    In my view none of them as free standing points do so in any effective way, when they are considered with the entirety of his written and oral evidence and what was known to the wife and her advisers.  At best they go no further than providing support for the conclusions I have reached in rejecting parts of the husband’s evidence, and answers to questionnaire, concerning the position reached in his negotiations with BB, what he was hoping and expecting to be the next stage of those negotiations  and when he first had a draft  contract. 

75. I find it difficult to see how, and do not accept that, any of them could have misled the wife.  In view of my overall conclusion as to these alleged false presentations I shall not deal with each of them individually. 

76. I refer to his prospective bonus at AA elsewhere.  But I record that I do not accept the general and unparticularised assertion that his evidence as to his state of knowledge of prospective bonuses fluctuated.  In my view his consistent position (and that of the wife) was that his bonus for 2006 would be considerably bigger than that for 2005.  The assertion in his last statement that he did not have the slightest inkling until December 2007 that his 2007 bonus at BB would be increased over the guaranteed amount was confirmed by him in oral evidence. Notwithstanding the provision of the contract that indicates that the 2007 remuneration might exceed the guaranteed 2007 bonus I accept that confirmation which in my view accords with an understandable approach in respect of an uplift over the guaranteed amount.

77. I do not accept that the husband’s alleged failure to disclose his promotion and his threat to seek an injunction adds anything in this respect and, in any event, this was not investigated in any depth in evidence, or submission.

Further answers to questionnaire by the husband
78. The husband in answers to questionnaire dated 11 January 2007 and signed by his solicitors said that:

“on the day of the hearing, he had assumed that talks would go no further”

and that

“he was very surprised with the money [BB] were willing to pay him”. 

In my judgment the chronology of events and discussions I have set out, and what happened at and after the court hearing shows that the first of these assertions, like his assertion in his final statement that he did not get a draft contract until 21 July 2006, is not true.   

79. In my judgment the second assertion is exaggerated.  The communications and exchanges at the FDR show that the husband was expecting a significant rise, through his bonus, at AA and I do not accept that what BB was prepared to pay was a very surprising acceptance of his “market rate”.  Rather I take the view that the husband set his proposal as to the amount of his remuneration at a level above the top of the range of what he thought he would get at AA, but not so far above it that it would be likely to put BB off.  This would be a natural commercial approach.  He told BB that he was expecting a 40/50% increase at AA.  His proposal was for a figure of $1.6 million which is above that bracket ($1.33 to 1.45 million, see paragraph 101 below) and it therefore left room for manoeuvre down to, as well as within that bracket.  I therefore accept that the husband may well have been surprised that BB did not try to negotiate him down.  But by the latest 18 July 2006 when he was told by Mr R that his proposal was in the right ball park (and his final statement indicates that he may have understood this by 14 July 2006) in my judgment the husband was expecting the offer made by BB to be one that mirrored that response and thus in my view to be one at the top of, or above, his bracket.  In his evidence by reference to what another employee was awarded the husband has estimated what he would have been paid at AA by reference to a 35% rise.  In my judgment this is an indication that the proposal put forward by the husband was a negotiating figure.

80. Given my conclusion that, like the husband, the wife and her advisers expected that there would be a significant rise in the husband’s bonus for 2006, the first assertion cited from the answer to questionnaire, which I have concluded is untrue, is more important. 

81. To my mind it is clear that on 18 and 19 July 2006 there had been a number of discussions and the message coming from all relevant participants (including the husband) was that a formal offer was likely and imminent.  So although I accept the husband’s evidence that he did not know that a draft contract would be sent out that day, and that negotiations of the type he was involved in with BB can break down at the last minute (particularly in the second half of the year), I find that he knew that a formal offer was a real and imminent possibility.

82. I therefore reject his assertions to the effect that at the FDR he was not expecting his negotiations with BB to result in a contract.  In my judgment the position was that he was expecting and hoping for a formal offer by and through a draft contract on that day or the next.  

The position relating to the negotiations with BB at the FDR
83. In my judgment it is clear that the truth lies between the two positions advanced by the parties.

84. I have concluded and find that at the time of the FDR the husband had not agreed to move, or to move in principle or agreed the terms of his new employment.  In my judgment on that day the move was far from being “a done deal” even though it became one shortly afterwards.  Further, in my view there was not then an understanding that the husband would move.

85. I therefore reject the wife’s primary assertions of fact relating to the move.

86. But I find that the prospects of a move and the husband’s expectation relating to it were significantly higher than he has asserted, and is asserting.

87. So, in my judgment the husband has underplayed the advanced state of the negotiations and his expectations and hopes relating to them.  In doing so he has made assertions that I have found are untrue.  In my view, and I find that:

i) the stage had been reached that if the husband did not receive a formal offer on 20 July, or very shortly thereafter which substantially reflected his proposals as to remuneration, and the discussions he had had with Mr R, he would have regarded the negotiations as off, and
ii)  he was expecting and hoping for such an offer imminently. 

It was therefore make or break time in the negotiations.

88. His hopes and expectations were fulfilled.  This could not have been a surprise, and he accepted that he decided not to tell the wife at the FDR of the advanced state of his negotiations for a move.  His reasons for that decision were not gone into in any detail but the acceptance that he did not do so was against the background that he was asserting that the prospects of a move were considerably less than I have found them to be.

89. My rejection of parts of the husband’s evidence does not however lead to, or found, a conclusion that the position was as asserted by, and on behalf of, the wife, namely that he had agreed terms of his new employment, was about to sign a contract and his move was effectively a done deal.

90. Further, having heard the husband give his evidence, and notwithstanding:

i) my rejection of parts of it, and
ii) my view that he must have appreciated that the true position relating to the negotiations was relevant to the question what he would or might be earning and was therefore something the wife would or might be interested to know,

I am satisfied that he was not consciously suppressing information that he thought he had a duty to disclose.

91. In my view the husband took the commercial stance that as (a) a move was far from being a done deal and therefore may well not happen, (b) the negotiations were confidential and their disclosure, if they did not result in a move, could be damaging, and (c) the negotiations did not affect what he was offering and would accept, and thought was fair, he should not tell the wife about it.  His wish to keep the negotiations confidential is reflected in some of the exchanges with the head hunters.

92. I am of the view that the percentage offer made by the husband supports this conclusion and therefore its disclosure (through the disclosure of the FDR material) is relevant to the credibility issues raised by the wife.  In saying that, I accept that, as was submitted on behalf of the wife, that that offer can fairly be described as a capped indexation of the periodical payments order.  This is because it defined increases and would thus have a possible side effect of making a variation application more difficult.  But the offer of 34% (including maintenance, school fees and extras for the children) of the net cash element of his salary up to a maximum of £350,000 (and thus an increase over 2005) plus 10% of the cash element of his net salary over £350,000 to my mind provides an indication that his thinking (on advice) as to both (a) future increases in his salary and (b) division of existing assets, was that he wanted a share of existing assets, and was offering a limited benefit to the wife from his increased earnings, and thus his earning capacity.

93. The cap at £350,000 would have provided periodical and other payments of £119,000 (as compared with approximately £98,000 under the order (see paragraph 169 below). On top of that there would have been 10% of the excess over £350,000 of the cash element of his salary and I do not accept that there was a real risk that the husband could or would seek to increase the proportion of his salary paid in shares. 

94. In my view that offer and thinking provides support for the conclusions I have reached relating to his decision not to tell the wife at the FDR of his negotiations with BB.  This is because the percentage offer recognises that his salary was likely to increase and, although what he was seeking as remuneration from BB might prompt discussion as to the amount of that increase, this percentage offer thinking could well have led him to conclude that such discussion (and thus disclosure and discussion of his negotiations with BB) would be a red herring.  The reason for this is that what he was offering in respect of his earnings and earning capacity for the future, and thus the future as opposed to the division of existing assets, was:

i) a percentage (34%) of the net cash element of his remuneration (which in cash terms equated to the percentage of the cash element of his remuneration for 2005 that he became bound to pursuant to the order made on 20 July 2006) up to a higher figure (£350,000) than that paid in 2005, and a smaller percentage (10%) thereafter, and so
ii) the actual amounts of the increases in his earnings for 2006, 2007 and thereafter, wherever he may be employed, become much less relevant.

95. The wife’s rejection of this offer, and her categorisation of it in submissions before me, also provide some guidance as to what may have been her  thinking,  namely that:

i) she did not want to cap, or hamper, her application for an upward variation of the periodical payments order as and when the expected (and as it was put on her behalf) exponential pay rises came through, and
ii) she was looking to share in that increase in remuneration through varied periodical payments that were not assessed or capped by reference to her reasonable needs or the standard of living during the marriage, rather than advancing that increase as the basis for a transfer to her of the whole beneficial interest in the matrimonial home and thereby jeopardising an agreed solution.

96. It was submitted that she wanted the certainty of a fixed figure rather than a percentage.  I accept, as did the District Judge, that time and money might be spent in correspondence identifying the remuneration and the percentage.  But time and money would also be spent on an application for a variation.  Her expectation (and the position taken on her behalf) as to increases in the husband’s remuneration, and the point that any decrease by reference to a percentage could have been covered by providing for a minimum, would support the view (a) that the wife was expecting to make, and intended to make, an application to vary the periodical payments, and thus (b) that her thinking was not limited to the certainty of a fixed sum and the costs that would be incurred in calculating and agreeing the percentage each year.  The exchange between the District Judge and the wife’s counsel relating to the periodical payments not being confined to her reasonable needs, which I accept was arguable in 2006 by reference to Miller v Miller; McFarlane v McFarlane [2006] UKHL 24; [2006] 2 AC 618, which was referred to at the FDR, provides further support for this view.

97. I accept that these comments and possible conclusions as to the thinking of the parties were not put to them.  They are speculation (and not findings) based on the making and rejection of the percentage offer and my views on what would be reasonable approaches of the two sides. 

98. However, as appears later, in my view these indications as to the thinking of the parties accord with my view as to what would have been a reasonable and fair objective approach, and thus an approach the court could have taken whether (as the District Judge did) it knew of the percentage offer, or it did not. 

What would have been a fair and accurate description of the position at the FDR on 20 July 2006 or on the evening before.
99.      In my view this would have been as follows:

i) the husband was in an advanced stage of negotiations relating to a move to BB and the expected next stage was an offer probably through a draft contract,
ii) he had been told that the remuneration package he was seeking was in the right area (ball park) and this package was:
a) guaranteed remuneration for 2006 and 2007 of $1,600,000 and $1,750,000 respectively split between basic salary and bonus (part of which would be taken in options or shares), and
b) replacement of his unvested RSUs (and at this time the evidence does not show whether what he had proposed included part of that being in cash),
iii) the offer (draft contract) might include lower figures (in the same ball park) and there was from the husband’s viewpoint some room for negotiation,
iv) the husband had said that if he got what he wanted (and thus an acceptable level of remuneration) and everything else in his contract was O-K he would move,
v) he was hoping and expecting to receive a draft contract imminently which would confirm what was being offered and what proportion of bonus he would receive in shares,
vi) there could well be a number of points in the draft contract as to remuneration (e.g. performance targets and the split between cash and shares) and other matters (e.g. holidays) that were unacceptable and could lead to him not moving,
vii) he was still cautious and thought that there was a risk that BB would back out having regard to the history of the negotiations and the time of year, and
viii) if he was to move before the end of the year it is likely that this would happen very quickly.

100. So far as the level of remuneration is concerned what would have been volunteered, or asked and answered, would have been that although his primary reason for moving was not money he had set the level of remuneration he was asking for in the way I have mentioned earlier, which left some room for negotiation. But by this stage from his perspective the parameter of any such negotiation was set by the indication that his proposal was in the right ball park and he would be unlikely to accept a figure for 2006 that was not at the top of his bracket ($1.425 million) and a higher figure for 2007 (see paragraphs 79 and 101 hereof). 

101. It would follow from that that a fair “guesstimate” of what the husband would be likely to receive from AA if he did not move would be based on the bracket recorded in the email of 14 July 2006 namely that he was 50% up on his budget and anticipated that his total cash compensation would be up 40/50% for 2006.  That indicates such a percentage uplift in all elements of his remuneration because the stock element of the bonus is a percentage and thus one that would take him to $1.33 to $1.425 million on the basis that the increase applies to all of the 2005 remuneration of $950,000 and not to that sum less the basic salary, which was the approach taken in the evidence and argument. The husband’s evidence as to what a close colleague was paid (namely a 35% increase)  indicates that this may have been an overestimate.

102. This would have been compared to his proposal of a guarantee of $1.6 million with some room for negotiation. If this comparison was discussed this would almost inevitably have led to discussion of differences or possible differences relating to stock and exchange rates and a reasonable assertion by the husband that the overall packages would be in the same range albeit that he hoped that a move to the BB would bring both financial and other benefits.

The upshot of that
103. It informs the parties as to the husband’s likely remuneration for 2006 and to a lesser extent 2007.  But it does not provide any certainty.

104. From the wife’s perspective it informs the “guesstimate” made by her, and her advisers, as to the bonus for 2006.

105. It also means that it adds to the range of possibilities and uncertainties in that either:

i) the husband would remain at AA and the uncertainty would be as to the amount of his discretionary bonus, or
ii) he would move and in respect of that possibility there are the following uncertainties:
a) whether he would in fact move, and
b) if he did what the level of his remuneration would be, although it would be at, or approaching, the figures suggested by the husband.

106. The position was therefore that as at 20 July 2006 in my view the court (and the parties) could not properly have proceeded on the basis that the husband would receive on a guaranteed basis the remuneration the husband had asked for and which was, as matters turned out, what he became contractually entitled to at BB. 

107. In short the position was that there was a real prospect that the husband might move jobs and that if he did his remuneration for 2006 (and 2007) would be likely to be higher than, but in a similar range to the remuneration he would be likely to receive from AA for those years and he would have the advantages (but also the potential disadvantages in very good trading conditions if the guarantee is used as a ceiling) that flow from a guarantee for 2006 and 2007.

Was there a duty to disclose the position reached in the negotiations, and thus the position as I have described it above?
The duty of disclosure
108. It is trite law that parties to ancillary relief proceedings owe a continuing duty of full and frank disclosure of all material facts.  In my judgment what is a material fact, or piece of information, that has to be disclosed pursuant to the duty to make full and frank disclosure is not the same as, and the extent of the duty is not to be assessed by reference to, what would or would not be “material non-disclosure” as that phrase is used in the cases to describe a breach of the duty to make full and frank disclosure that founds an application to set an order aside.

109. That use of the phrase “material non-disclosure”  is a short hand for the views expressed by both Lord Scarman (at 430 E/F) and Lord Brandon (at 445H) in Jenkins v Livesey that to set aside the order made by the court on the basis of a breach of the duty to disclose it has to be shown that the absence of full and frank disclosure (and thus the breach of duty) has led the court to make an order that is substantially different from the order that the court would have made if such disclosure had taken place.  This is a two stage process.  First it has to be asked and answered whether there has been a breach of the duty to make disclosure and then, if there has, whether it is a material breach of duty or non-disclosure in that sense.

110. The earlier cases overlap with the general approach to the duty of disclosure under the Rules relating to civil litigation described as the Peruvian Guano test which was regarded as the principal test as to relevance.  It was that:

“ It seems to me that every document relates to the matter in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may – not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary.  I have put the words “either directly or indirectly” because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of enquiry, which may have either of these two consequences. ”

111. In my view in Jenkins v Livesey, and for example Robinson v Robinson [1983] 4 FLR 102, the courts in describing and confirming the duty to make full and frank disclosure were doing so against the background of that general approach to adversarial civil litigation and were expressing the view that the duty was at least that extensive, in the context of ancillary relief proceedings.

112. CPR Part 31.6 limits the extent of standard disclosure but the court can order further specific disclosure.  No point was raised before me that the duty of full and frank disclosure is limited by reference, or by analogy, to the more limited extent of standard disclosure under the CPR, which does not apply by default by Rule 1.3 of the FPR 1991.  The pre application protocol annexed to the President’s Practice Direction of 25 May 2000 [2000] 1 FLR 997 underlines the obligation of parties to make full and frank disclosure of all material facts, documents and other information relevant to the issues and also includes a reference to the overriding objective in FPR Rule 2.51D, which mirrors the CPR and by, for example, its reference to saving expense and proportionality potentially has a limiting effect on the width of the Peruvian Guano test of relevance.  However in my view it does not limit the duty to the equivalent of standard disclosure under the CPR.  Rather it introduces value judgments in respect of the Peruvian Guano test.  Further, and in any event, in my view the test for standard disclosure under the CPR would require wide disclosure when it is applied to the issues in ancillary relief proceedings.

113. That conclusion is in line with the regularly repeated view of the importance of the performance of the continuing duty of full and frank disclosure to ensure that the court is provided with correct, complete and up to date information on the matters to which it must have regard when applying s. 25 MCA (see, for example Rayden and Jackson 1(1) paragraph 17.28).  This information is vital to a proper exercise of that discretion and thus the attainment of a fair result.

114. In my view it follows that the duty of full and frank disclosure of material facts, documents and other information relevant to the issues arising under the MCA includes a duty to provide information that would set the other side on a line of enquiry, or a thought process, on matters to which the court must have regard under s. 25 MCA 1983.  So, and apposite here, it includes a duty to inform the other side of information that may (a) result in the removal of uncertainty as to the value of assets, or the amount of a party’s future income, or (b) inform the assessment of the income or earning capacity of a party to the marriage or the value of his or her assets.  Indeed, in my view that disclosure would fall within the description of standard disclosure by reference to the issues under the MCA as being material which adversely affects the case of the disclosing party or supports the case of another party.

115. So, for example, offers to buy, or the existence of negotiations relating to, the sale of a property or shares whose value was relevant should be disclosed.  This would go to value and marketability.  Equally it seems to me that offers of employment and negotiations relating to existing employment or new employment that would or may have an impact on income should generally be disclosed.

116. I accept that some information as to such matters may be (a) too speculative or uncertain, or (b) so in line with known and regularly occurring approaches, that they need not be disclosed, essentially because in those circumstances they would not be relevant because they would have no, or would be most unlikely to have any, impact on the thinking and position of the other party.  This introduces a value judgment for the person having the duty to disclose and his or her advisers applying a test of what may be the effect of the information on relevant issues and not (a) what its effect would be, or (b) whether its disclosure would lead to a substantially different result (albeit if that would be the case it is plain that the information should be disclosed).  In my view those exercising that value judgment should take an approach that if there be doubt there should be disclosure.

Was there a breach of the duty of full and frank disclosure.
117. In my judgment there was.

118. There was no duty on the wife and her advisers to enquire as to whether the husband was thinking of moving jobs or negotiating to do so (see Robinson v Robinson) or to seek details of what the husband expected to earn in his current employment.  But this does not mean that the wife’s advisers could properly proceed on the basis of the 2005 figures and ignore the prospect that the 2006 bonus would be significantly higher than that for 2005.

119. It is of note that, no breach of the duty of full and frank disclosure relating to the husband’s employment at AA was alleged even though in final written submissions on behalf of the wife the comment was made that he did not disclose, as he had asserted in evidence, that on 22 June 2006 AA had announced record results for the half year. No comment or submission was made that the husband should have estimated his 2006 bonus or disclosed what is recorded in the email of 14 July 2006, namely that he “was 50% up on his budget and anticipates that his total cash compensation will be up 40/50% for 2006”, which relates to him, rather than to published information about the firm generally. 

120. In my judgment this stance of the wife reflects:

i) the reality that the wife and her advisers should have been (and indeed were) aware that the 2006 bonus at AA was likely to be much higher than that paid for 2005 because the husband’s income had been, and was likely to be, on a steep upward curve, and
ii) my view, that unless (a) AA had provided the husband with information as to the actual or likely amount of his 2006 bonus, or (b) the husband knew of other specific information that would inform thinking as to the likely rise in his 2006 bonus over that paid in 2005, the husband was not under a duty to disclose that there was a real prospect that his 2006 bonus would be significantly greater than his 2005 bonus, or to estimate the increase.

The qualifications in the last sub paragraph as to specific information that would inform thinking as to the amount of the likely bonus, and thus reduce uncertainty, reflects my view that information that has that effect should be, or should arguably be, disclosed and therefore gives rise to the value judgment I have referred to earlier.

121. The alleged breach related to, and only to, the failure of the husband to disclose the position, as the wife alleged it to be, in respect of him moving employment.  This effectively overtakes any failure to disclose information relating to his 2006 bonus at AA.

122. In final submissions on behalf of the wife it was submitted, in this context and in my view correctly, that the label attached to the position does not matter and that the real question is whether the circumstances as they then were, are such as ought to have been disclosed.  I was also correctly reminded of the terms of s. 25 (2)(a) and its reference to income and financial resources which a party is likely to have in the foreseeable future.

123. In my view the question for me is therefore whether the position reached in the negotiations with BB as I have found it to have been may (a) result in the removal of uncertainty as to the value of assets, or the amount of a party’s future income, or (b) inform the assessment of the income or earning capacity of a party to the marriage or the value of his or her assets, or (c) be a relevant consideration in the approach of the wife to the timing and terms of any agreement to be put to the court.  

124. Given the position reached in the negotiations, in my view the remuneration package, and thus its quantum, sought by the husband and the information he had that it was in the right ball park satisfies that test because it would inform thinking as to his likely level of remuneration both if he moved and if he did not. This is so notwithstanding that the uncertainties I have referred to remained as to what he would be paid if he moved and whether he would move, and what he would be paid if he did not move because the position relating to the negotiations provides information as to his worth.  It could also prompt a wait and see approach.

125. Put more generally and as a check I have asked myself whether if the husband’s counsel or solicitors had known of the position relating to the negotiations at the FDR they should have advised that it must be disclosed I am confident that they should have done so.  For my part if I had known about the negotiations I would not as a representative of the husband have felt able to conduct the FDR on his behalf if that information was not disclosed.  In my view the discussions during the FDR about the possibility that the husband might move and what would happen if he did provides strong support for the view that such information would have been disclosed if the husband’s legal team had known about it. 

126. Before I leave this aspect of the case I would like to record that in my view there are circumstances in which, absent any current possibility of a move, information as to the expected level of a bonus, or discretionary award,  should be disclosed, and in which it would at least be prudent, having regard to the duty of full and frank disclosure and the goal of reaching a fair result on a fully informed basis, for the income earner to give his or her estimate (couched in appropriate terms as to its uncertainties) of a discretionary bonus or award.

The effect of the breach of duty to make full and frank disclosure and thus of non-disclosure
Introduction
127. Before turning to consider the law, and thus the test to be applied, I set out conclusions I have reached as to what the position would have been if the husband had disclosed the position relating to his negotiations with BB as I have found them to be.  They are that:

i) if the parties had then presented the agreement approved by the District Judge to her, it is almost inevitable that she would have made the order, and putting myself in her position I would have done so,
ii) the evidence does not enable me to find whether the parties would or would not have put that agreement to the District Judge, and
iii) there are some problems in the court asking whether it, or the District Judge, would have made the order made by the District Judge if it had not been put before it pursuant to an agreement between the parties.  This is because the function of the court at an FDR is to take part in exchanges with a view to promoting an agreement and then, at the invitation of the parties, to consider, and to approve an order in terms they have agreed, if it thinks that such an order would be fair and appropriate.  If the parties do not invite the court to do this the court is not in a position to go on and make an order, first because the judge who hears the FDR is precluded from doing so and in any event the court could not do so without hearing evidence and argument.   

128. I give my reasons for these conclusions elsewhere.  I mention them now because they inform my discussion of the law.  Also my preliminary view that they might be conclusions I would reach, caused me to ask counsel to specifically address and help me on the question whether there was a subjective element to the relevant tests. 

129. I asked this when the case was adjourned.  Counsel for the husband did not address this issue.  Counsel for the wife did and asserted that the test was an objective one.

Discussion
130. de Lasala v de Lasala [1980] AC 546 at 560, is referred to in Jenkins v Livesey.  It is authority for the well established proposition that when parties to ancillary relief proceedings agree the provisions of a consent order, and the court subsequently gives effect to such agreement by approving the provisions concerned and embodying them in an order of the court, the legal effect of those provisions is derived from the court order, and does not depend any longer on the agreement between the parties (see page 435 of Jenkins v Livesey).

131. In my view this underlies the conclusion referred to earlier of Lord Scarman (at 430 E/F) and Lord Brandon (at 445H) in Jenkins v Livesey that to set aside the order made by the court on the basis of a breach of the duty to disclose, it has to be shown that the absence of full and frank disclosure has led the court to make an order that is substantially different from the order that the court would have made if such disclosure had taken place. 

132. The point whether an order could be set aside on the basis that but for a non-disclosure, and thus a misrepresentation, no agreement would have been made and then put before the court was not an issue that arose for consideration and decision in Jenkins v Livesey.   

133. To my mind the language of the test expounded in Jenkins v Livesey directs the court hearing the application to set aside to decide what it would have done on the day the order was made if full disclosure had then been made, albeit that that approach would probably not give a different answer from one that asked what the judge who made the order would have done.  The approach is an objective or “court centred” approach because of its duty under the MCA.

134. To my mind this approach has the difficulty that it effectively proceeds on the basis that the court was invited to make the order and thus in the case of many consent orders (and in particular ones where the test is satisfied) on the fictional basis that there would have been an agreement placed before the court for consideration.  But, as the duty to disclose is a continuing one the approach can be applied when the information should have been disclosed before the agreement was reached on the basis of the court asking itself whether it would have endorsed and approved the agreement (reached in the absence of full disclosure) on the basis that there had been full disclosure between the time that the agreement was reached and the consideration of the matter by the court.  Indeed it seems to me that when the court has taken no part in the negotiation, and thus the agreement does not result at an FDR, this is the way in which the court has to approach such cases to ring fence its statutory role if the only test is an objective or court centred one.

135. An alternative in the case of an FDR could be for the court to ask itself whether at the negotiating stage of the FDR the order made was one that it would or would not have indicated it might make as being within the range of appropriate and fair orders it thought a court would or might make at a final hearing (or it would make at the FDR if it was agreed).

136. On these approaches issues arise as to how the court should take account of arguments that might have been put by reference to the further disclosure by the parties for and against approval of the order and thus on the point whether the court would have made a substantially different order.

137. Different points arise in respect of the identification of a supervening event and the test is expressed differently because it has to be shown that the new events invalidate the basis, or fundamental assumption, upon which the order was made, so that, if leave to appeal out of time were to be  given, the appeal would be certain, or very likely to succeed (see Barder v Calouri [1988] 1 AC 20, at page 43 and for example Cornick v Cornick  [1994] 2 FLR 530 at 533.)  Although there is some overlap this is different from a consideration of whether the court would have made an order that was substantially different.

138. Also the width of the discretion under the MCA, and thus the range of orders that could be made, means that there is potential for argument as to how the concept of “substantial difference” should be assessed, and as to the weight that should be given to the possibly or probably fictional assumption that the court would have been invited to make the order made if there had not been a breach of the duty of disclosure and the relevant information was before it.

139. The difficulties referred to in the preceding paragraphs will effectively disappear in many cases and in particular when it is clear that either:

i) the non-disclosure has the consequence that the order made is not within the range of orders that could have been considered fair, or the test set by Barder v Calouri (referred to above) is satisfied, or
ii) is of no real relevance and would have little or no impact on any fair  assessment. 

In my view this disappearance provides guidance as to the degree of certainty with which a court has to conclude that it would have made a substantially different order.

140. These alternatives reflect the primary approach of both sides premised on their widely differing factual positions. 

A subjective approach or one that has subjective elements?
141. It is clear that before making an order under the MCA the court has a duty to consider whether the agreed provisions are fair and thus whether to make the order asked for in the exercise of its discretion.  But the practical reality is that when, at an FDR, or at another time (save possibly after it has heard all the evidence and argument and agreement is then reached), the court is making an order in terms agreed between the parties it does not, and cannot, go through all, or much of, the detailed thinking which it would carry out when there is no agreement.  Not least it will not have heard evidence or full argument. Rather it considers whether the order is fair on the information it has and thus in my view in the sense that it is an order, or an order within the range of orders, that it might well have made after a full hearing.

142. It follows from this, and the point that different people can reach different and reasonable decisions within the range of fair results, that a party might be able to establish that he or she would never have agreed to put the terms that the court approved to the court for that approval if full and frank disclosure had been made, even though, if there had been full and frank disclosure, and the agreed terms had been put before the court, it would have made the order because in the court’s view it was in the range of fair orders. 

143. To my mind it follows that a question arises whether, an order made by consent (at an FDR or otherwise) can be set aside by establishing that if there had not been a failure to disclose (and thus there had been full and frank disclosure) no agreement would have been put to the court for its consideration and approval.  This argument involves (or could involve) subjective elements and is based on a submission that the court would have made an order that was substantially different because no agreed terms would have been put before it for consideration and therefore it would not have made any substantive order. 

144. This argument would not have to be put by analogy to a contractual approach.  It could be put on the basis that it is unique to orders made under the MCA.

145. I was referred by counsel for the wife to the recent case of Soulsbury v Soulsbury [2007] EWCA Civ 969, [2008] 2 WLR 834, but no detailed argument was directed to that case.  In it the Court of Appeal discuss and comment on Xydhias v Xydhias [1999] 2 AER 386, and interestingly for present purposes at paragraph 40 Ward LJ states that he shares the doubts that the conclusion in Xydhias  that “ordinary contractual principles” do not apply  to determine whether or not the parties had reached a concluded agreement is correct.  As to those doubts I add that it seems to me that the doubts expressed by Lord Brandon in Jenkins v Livesey at 440 as to the correctness of the decision in Tommey v Tommey [1983] Fam 15 that undue influence was not a ground for setting aside a consent order are relevant, because those doubts support a contractual or quasi contractual approach, or one in line with other agreements and settlements, rather than one that simply focuses on the order and what the court would have done in the exercise of its discretion.

146. As I have mentioned the point whether an order could be set aside on the basis that but for a non-disclosure no agreement would have been made and then put before the court was not an issue that arose for consideration and decision in Jenkins v Livesey.  The wife did not become engaged to be married until after the agreement was reached and the question that arose was whether before the matter was put before the court the wife had a duty to disclose the fact that she had become engaged, so that that information was before the court when it made the order.  At 434C Lord Brandon says that the suggestion that the wife had made any misrepresentation to the husband or his solicitors which induced him to agree to the making of the consent order cannot be supported.  It is therefore easy to see why the focus was on whether the court would have approved the agreement already made if before the order was made it had been disclosed that the wife had become engaged, and points that the husband would have tried to resile from the agreement, or argued against its approval, were not covered in the speeches.

147. As the hearing of this case progressed it seemed (and seems) to me that there is potential for an argument that if the position relating to the negotiations and prospects of the husband moving jobs had been disclosed, and therefore the parties and the court could have assessed the prospects and uncertainties of a move from AA to BB, then:

i) even though on 20 July 2006 the court would or might well have made the same order if its terms had been put to it by the parties, this does not matter because
ii) it would never have had the opportunity to do so because the wife would not have agreed to the court being invited to consider and make that order, and therefore
iii) the order made on 20 July 2006 should be set aside.

148. Such an argument would be subjective, or have subjective elements, because it would be based on findings as to (a) the important elements in the thinking of the wife and, in the light thereof, (b) her likely reaction to disclosure of the position relating to the negotiations and the husband moving jobs. The wife’s contention was that the test was an objective one. Therefore no such argument was advanced and importantly the written and oral evidence was not directed to it.  This has the results that:

i) I have not researched whether it has been argued in other cases that a substantially different order on an FDR (namely an order for directions) would have been inevitable because one of the parties would not have agreed to invite the court to consider and approve an agreed solution, and
ii) I am not in a position to deal with this argument.

The argument put on behalf of the wife
149. In final submissions, it was asserted on her behalf that the test as to whether the court would have made a substantially or materially different order was an objective one but that that dos not mean that the attitude of the wife (and thus the husband) is irrelevant, and although details of her thinking cannot be explored, because to do that would involve the parties waiving their legal professional privilege (which I add is something they can do), the court can have regard to their open stances.  It was repeated that the FDR material should not have been disclosed, but nonetheless it was relied on by the wife (at least in part) to assert that:

i) the stance of the wife was if at all possible to achieve the outright transfer of the value of the house and she wanted the certainty of a fixed level of periodical payments, and
ii) the court can safely conclude on the evidence that has been given that had the truth of the position in respect of the husband’s contract negotiations been disclosed on or shortly before 20 July 2006 then the FDR would have been adjourned.

As set out elsewhere in my judgment point (i) is not made out in its entirety on the evidence and the conclusion advanced in point (ii)  cannot be reached on the evidence.
150. But it was submitted that whether the parties (a) would not have agreed to put any agreement to the court, or (b) would have put a different, and a substantially different, one before the court, are irrelevant considerations and that the question is: “What substantive order would the court have made had it been in possession of the true material at the relevant time in the summer of 2006”.  Earlier in the same paragraph of the written submissions it was said: “The test as to what order a court might have made is to be assessed on the assumption that the court was in possession of all the true facts at the time that the actual order was made”.  That formulation is in my view correctly more precise as to time, in that it focuses on the true position on 20 July 2006.

151. As appears above in my view these formulations raise questions as to how they are to be applied. 

152. In oral submissions at times counsel seemed to be asserting that the true position to be taken into account was as it turned out to be by the end of July 2006, namely that the husband had entered into a new contract of employment and that there was a two stage process, in considering what the court would have done namely:

i) whether it would have adjourned the FDR, and
ii) then an assessment of what the court would have done on a later occasion (possibly an adjourned FDR) in the knowledge of the change in employment and its terms.

153. I may have misunderstood this because this two stage process does not accord with the written submissions.  In any event, I do not accept that such a two stage process is correct because as I have already mentioned the test as set out in Jenkins v Livesey, as a matter of language, focuses on the date that the order it is sought to set aside was actually made.  Further, in my judgment the logic and reasoning of Jenkins v Livesey and the natural approach to issues whether an order (or anything else) should be set aside for non-disclosure founds the conclusion that the issues have to be assessed on the day the order (or other arrangement) was made (or entered into).  That does not mean that in assessing the position on the relevant day the court has to disregard what happened afterwards but it does mean that if on the given day there were uncertainties these cannot be discounted by reference to what happened afterwards.

154. In any event the first stage of any such two stage process would be sufficient to set the relevant order aside.  The second stage would therefore only be relevant if there was some overriding discretion not to do so if it could be shown that in the events that happened the order was fair and/or would have been made and/or an alternative remedy was more appropriate.

155. It was argued that there was effectively no, or no significant, difference between the true position on 20 July 2006 and the position as it turned out to be because it was asserted that by 20 July 2006 the husband had agreed terms of employment, or the understanding reached by that stage was such that there was no real doubt that he would move.  Indeed this lay at the heart of the wife’s case.

156. As appears elsewhere, in my judgment that does represent the true position as at 20 July 2006.  Equally I have rejected the husband’s assertion as to the position on that day.  The lack of argument based on alternatives, and thus by reference to a conclusion that the true position lay between the widely divergent stances of the parties, means that I have not had the benefit of submissions on the application of the test set by Jenkins v Livesey by reference to what I have found to be the true position as at 20 July 2006, as I have found it to be.

An objective / court centred approach -- Further general comment
157. Returning to Jenkins v Livesey, on the facts of that case it seems to me that it was understandably clear to the House of Lords that as at the day the order was made the order would have been substantially different, if the true position had been disclosed (see 434D and 438 C/E).

158. As I have already mentioned, if when it is looked at only from the viewpoint of the court the position is that having regard to:

i)  the background circumstances and facts known to it at the relevant date, and
ii) the additional material that should have been disclosed to it at that time,

it is obvious that the order was not a fair one (and thus one it would not have been prepared to approve and make) points as to

a) whether the parties would have put the agreed terms before the court, and 
b) the unreality of a court asking itself either whether it would have made an order in terms that would in fact never have been put to it, or what it would have done if at the time the agreement was put to it for approval one party was arguing against the order being made,

raise points that are more academic than real.  This is because that conclusion satisfies the approach in Jenkins v Livesey and effectively founds a conclusion that the agreement would never have been put before the court by the parties without any need to address their subjective thinking.

159. The same can be said if the Barder v Calouri test is applied.  This is because if that test is satisfied in respect of undisclosed material the answer to the questions what the court (and the parties) would have done become obvious.  But that alternative line of argument has (in my view correctly) been abandoned in this case.  Further, in applying it by analogy, the problem arises that to my mind it cannot be said that it was not in the expectation of both sides that (i) the husband’s bonus for 2006 would substantially exceed that for 2005, and (ii) he might move jobs.  In my view this is clear if the FDR material is ignored, because it is so inherent in the history of (i) the husband’s employment and its terms, and (ii) more generally City employment, remuneration and the performance of the stock market, which were well known to this intelligent wife and her advisers.  The FDR material confirms this.

The wife’s case
160. Although the wife beguilingly introduces the point that on the evidence it can safely be found that there would have been an adjournment she argues that the approach to be taken is an objective, or court centred one. 

161. As I shall explain in my judgment no such finding can be based on findings as to the actual thinking of the wife and thus on a subjective basis.

162. However her essential argument is that set out earlier namely that, in the surrounding circumstances (or factual matrix) known to the court from open exchanges, knowledge of the true position concerning the negotiations of the husband’s move to BB makes it obvious, or obvious enough, that the order made is not fair and thus not one that the court would have approved and made, or one the wife (with proper advice) would have agreed to.

163. In my view there are three main flaws in the way in which that argument was developed, namely:

i) most importantly it proceeded on an incorrect assertion as to the true position relating to those negotiations,
ii) it proceeded on a false comparison between (a) the approach of, and position the wife and the court were in, on 20 July 2006, and (b) the remuneration package on the change or employment, in that it focused on a comparison between what the husband had earned in 2005 and with, in the events that happened, what he earned in 2006 and thus failed (a) to properly factor in the common expectation that the husband’s 2006 bonus would probably be significantly higher than his 2005 bonus, if he stayed at AA, and therefore (b) to conduct (or properly include) a  comparison between what the husband was likely to earn in 2006 on the two possibilities namely if he stayed at AA and if he moved to BB, and
iii) it failed to give any, or any proper, weight to the points that the relationship between the husband and wife had ended in 2005, the wife’s income needs in her Form E were based on the standard enjoyed during the marriage, and the arguments and difficulties concerning the basis or bases upon which, and the extent to which (if at all), the wife should enjoy or share the fruits of the husband’s earning capacity, and thus, increases in his remuneration and the savings they might enable him to make, or  increases in standard of living that this might enable them to enjoy, in the years 2006 and onwards.

164. Both sides spent some time examining the level of remuneration under the new contract and comparing it with the position at AA.  I refer to this in the schedule hereto.  As the contract reflected the figures put forward by the husband, and which he had been told were in the right ball park, this analysis is relevant.  But in my view when factoring it into what the true position would have been on 20 July 2006, the uncertainties as to entering into a contract with BB and the level of remuneration provided by it, and thus as to his level of remuneration if he moved to BB, have to be taken into account as do the uncertainties relating to his bonus for 2006 if he stayed at AA.

Objective thinking as to the order on the information disclosed and thus on the basis that a move of job was not being negotiated and the husband was likely to remain at AA
165. The order was approved by the District Judge who therefore considered that it was fair.

166. It provides a conventional and fair solution in that in broad terms (a) the husband who is the earner takes the illiquid existing assets and has to provide a home for himself, whereas (b) the wife takes the benefit of the immediately usable existing assets which are primarily represented by the matrimonial home, subject to a charge back and, for the future, receives periodical payments for herself (and for the benefit of the children) which she and the husband can apply to vary.

167. If one nets off the pensions and takes £60,000 as the saving element of the £140,000, his RSUs at £250,000 and his Vested Assets at £33,000 the result is that:

i) the wife (a) takes assets worth £507,000 and (b) has the benefit of periodical payments which on a Duxbury calculation would be capitalised at between £1.2 and £1.3 million), and
ii) the husband (a) takes assets valued at £636,000 (from which he would have to pay his costs) and of which on the above approach only £60,000, and his Vested Assets, were then, or would shortly be, available, and (b) retains his future earnings (which would include his bonus for 2006) from which he must pay periodical payments and his own outgoings.

168. If you take out the pension and discount the RSUs by £30,000 that equates to a 50/50 split of assets and a long term commitment by the husband to make periodical payments to the wife for herself (and for the benefit of the children). 

169. The wife’s budget in her Form E was £66,413 for herself and £37,310  per annum for the children.  A total of £103,723.  The sum for the children included the school fees and extras the husband agreed to pay (approximately £23,000).    So the total periodical payments and extras agreed and ordered totalled approximately £98,000 (£55,000 + £20,000 + £23,000) which is about £6,000 short of the sum claimed by the wife for herself and the children (which included the sum of £8,400 per annum on the mortgage).

170. In his Form E the husband’s schedule of outgoings (and thus income needs for himself) totalled £4,361 a month (£52,332 a year) which included a provision of £1,667 a month (£20,004 a year) to cover mortgage payments.  He also included outgoings in respect of the children the main items of which were also included in the wife’s Form E and are the school fees etc that he agreed to pay.

171. I do not know the full thinking of the District Judge but her comments during the FDR indicate, as one would expect, that she had regard to the size of the mother’s budget, the lifestyle during the marriage, the lack of substantial savings, the desirability of keeping the home for the mother and the children and the very good earning potential of the husband.  Indeed, as I would have assumed in any event, she said that there was no reason to think that his income would suddenly take a plunge down from its upward trajectory which it had had for some years.  In my view any judge properly directing himself or herself would have had regard to those matters.

172. It is thus plain that what was envisaged was that from a rising income the husband would provide a home for himself where he could have contact with the children, maintain the wife’s standard of living with the children and meet his own standard of living. 

173. The total of the periodical payments (together with the payments for the children) was close to the wife’s budget and this indicates that it provided her and the children with income that enables them to continue a standard of living that equated to that enjoyed during the marriage.  They continued to live in the old matrimonial home.  Subject to her earning, or remarrying, in the future and of course the level of the husband’s income, the scheme and general effect of the order was that through periodical payments (as varied from time to time) the husband would fund the standard of living of the wife and the children in a home of the wife’s choice (until the Mesher order was triggered) at a level which equated to that enjoyed during the marriage and catered for any uplift by reference to compensation or sharing.

174. The order also put an end to the litigation, subject to the possibility of applications to vary the periodical payments. 

175. No provision was included for any automatic increases of the periodical payments orders.  As I have already mentioned when commenting on the percentage offer, this is an indication that would support a conclusion that part of the thinking was that the levels of the periodical payments would be revisited on an application to vary when the 2006 bonus was known.

176. It is plain that the periodical payments can be varied, and as was pointed out on behalf of the wife that variation could be back dated to the date of the July 2006 order and perhaps the petition (see Morley Clarke v Jones [1986] Ch 311 at 316 to 318 and Warden v Warden [1982] Fam 10).

177. Also, as already mentioned, it was pointed out on behalf of the wife, and I accept that, built in increases by way of indexation or a percentage of salary are commonly welcomed by high earning husbands (and thus I add resisted by wives who have been and will continue to receive periodical payments as the primary carer of the children) because they define increases and make variation applications for an increase more difficult.

178. To my mind this informs the range of objective thinking (as well as potentially the subjective thinking of the parties) as to the level of the agreed and ordered periodical payments without any built in and automatic increases and the overall structure and fairness of the order.  Namely that reasonable and fair objective thinking would include an approach that the issue of how to deal with the sharing of the husband’s earning capacity, and thus his expected significant increases in earnings, was through variations of the order for periodical payments against a backdrop of orders dealing with how the assets acquired during the continuance of the marital partnership were to be shared. That sharing was effected through the Mesher order which is the other significant part of the overall structure of what was provided to the wife under the order made on 20 July 2006.

179. It was common ground between the parties before me that on a variation of the order for periodical payments the court could not make an order that provided that the wife should be the sole beneficial owner of the home, and thus effectively vary the Mesher order.  I expressed some doubt as to that but I accept that the reasons for it have force and that the common ground represents conventional objective thinking as to the effect and permanence of the Mesher order when, as here, there is an expectation that periodical payments will continue for some time and will not be varied and capitalised to create a clean break.

180. So, on that basis the Mesher order was a once and for all order relating to the division of the existing assets which was thought to be fair by the court.

181. Objective thinking as to that is that it represents a fair division of existing assets based on earnings to the end of 2005 against the background of (a) the separation of the parties in the middle of 2005, and (b) an expected significant increase in earnings for 2006.  In my view it represents a fair conclusion having regard to (a) the starting point of equality and equal division of the matrimonial assets, and (b) the factors favouring a departure from that in respect of the husband’s earning capacity and future earnings, including the points that the wife’s transition to independent living and her standard of living as a divorced wife is being supported by periodical payments.

182. So it seems to me clear that not only did the parties think that the Mesher order was fair because they presented it to the District Judge, she was plainly right to consider that it was a fair provision in respect of the existing assets to which the starting point of equal division applied with force.  Of course it was only a part of the order, but again it seems to me that the District Judge was again plainly right to consider that this “once and for all” provision was fair and therefore to approve it on the bases that (a) the wife and children were to receive periodical payments by reference to the standard of living and the husband’s income during the marriage, and (b) the expected significant rise in his income for 2006 was catered for by the power of the court to vary the level of the periodical payments.

183. Put another way, and by reference to the wife’s argument before me, in my view having regard to all the circumstances the District Judge was plainly right in exercising her discretion under s. 25 MCA 1983 not to refuse to approve and make the order in the agreed terms put before her because having regard to, and as result of, the expected significant increase in the husband’s income in 2006, at the end of that year, the husband would be materially financially better off (as to both capital and income), and therefore the wife should receive the whole of the beneficial interest in the old matrimonial home, or higher periodical payments or both.

184. Although I accept that, notwithstanding the Miller decision and the reference to it at the FDR, it is at least open to doubt, having regard to the development of the cases, whether the following argument would have been in the minds of the court or the parties in July 2006, I comment that if, on an application to vary the periodical payments, arguments were successfully advanced that the amount of the wife’s periodical payments should not be confined to her reasonable needs, which in my view is an argument that is open to her (see VB v JP [2008] EWHC 112 (Fam)) it seems to me that an upward variation could include provision to meet the cost of borrowing to enable the wife to buy out the husband’s interest in the former matrimonial home pursuant to Recital E to the order made on 20 July 2006. 

What if any changes to that objective approach would disclosure of the true position relating to the husband’s negotiations for a change of job have made?
185. In my view the answer is that it would have made no effective difference.

186. As indicated earlier the issue whether the non disclosure has led the court to make an order that is substantially different from the order that it would have made if there had been full and frank disclosure can be approached in two ways.  First by reference to the part played by the court in giving indications and expressing views during the FDR with a view to seeing if agreement can be reached, and secondly in the approval of the order.  The second could be taken alone by treating this case as one in which, as in Jenkins v Livesey,  the disclosure should have been made between the time the parties reached agreement and the time the court was asked to make an order reflecting the agreed terms.  Here however the disclosure should have been made before, or during, the negotiating process at the FDR and in my view essentially the same issues arise in considering whether in the negotiating process the court would have indicated that the terms, or some of the terms, of the July 2006 order were inappropriate or unfair or something it would not approve, and in considering whether it would have approved and made the order.

187. In considering these questions I repeat that it is important to remember that albeit that the uncertainties concerning the husband’s change in employment, I have found to exist as at 20 July 2006, were removed shortly thereafter they were real and extant at the time the order was approved and made on 20 July 2006.  In my view this is fatal to the wife’s arguments because those uncertainties mean that it cannot be said that the prospects of the husband being materially financially better off (as to both capital and income) would have been effectively or materially different if he had disclosed the true position relating to the negotiations.

188. In my view the points that if the negotiations progressed to a contract it would contain guarantees and a real prospect of higher remuneration in 2006 and 2007 when compared with the expected substantial increase for 2006 if he did not move do not provide (a) an objective, or court centred, basis for a different approach to that set out above underlying the order made on 20 July 2006, or thus (b) the foundation for an argument that the court would have made a substantially different order (whether an adjournment or a final order).  This is because the reasoning that underlies the fairness of that order applies to the husband’s earning capacity, and the expectation that he will receive a significantly higher bonus at the end of 2006 (compared to 2005) whether he changed or did not change jobs.  The possible differences in amount and a guarantee for both 2006 and 2007 are not of sufficient size or weight to alter that underlying thinking.

189. I add, although it is academic that if by 20 July 2006 the husband had entered into his new contract of employment, or I had found that the degree of certainty he would do so would have enabled the court and the parties to proceed on the basis that he would do so:

i) I would accept that the periodical payments would probably have been set on a different and higher basis because the income for 2006 would have been known, but
ii) I am not satisfied that it is obvious or sufficiently obvious that on an objective, or court centred, basis the Mesher order would not have been approved.  

As to (i), how much higher could well have been the subject of argument.  The wife may have sought more than the figure derived from the husband’s percentage offer, but that offer indicates that he was prepared to pay a higher sum to reflect his earning capacity and thus his higher earnings.  As to (ii), this is because (a) it would still be reasonable and fair to apply the objective thinking underlying the 20 July 2006 order, which I have set out above and which treats assets representing income up to the end of 2005 as the subject of the “once and for all” orders, and covers earning capacity and increased income by the prospect of variation of the periodical payments, and (b) as I have mentioned, the wife’s arguments fail to take properly into account the points referred to in paragraph 163 (ii) and (iii) hereof and so, in my view,  her arguments (on the basis of the hypothesis introducing this paragraph) do not make it obvious, or obvious enough, that the Mesher order would not have been made.

The wife’s assertions that there would have been an adjournment
190. In my judgment, by reason of the objective reasoning set out above the court cannot safely conclude on the evidence that has been given that had the truth of the position in respect of the husband’s negotiations with BB been disclosed on or shortly before 20 July 2006 the FDR would have been adjourned.

191. I have already indicated that the evidence does not enable me to reach conclusions as to the subjective thinking of the parties and thus on a subjective basis what would have occurred at the FDR if the truth of the position in respect of the husband’s negotiations with BB had been disclosed.  But I add that:

i) I accept that the indications from the percentage offer made by the husband are that he would not have agreed an order that transferred the whole beneficial interest in the former matrimonial home to the wife, 
ii) albeit that I accept that the wife wanted to achieve an outright transfer of the house, as mentioned earlier in my view her refusal of the percentage offer is an indication that her thinking was not only that she wanted certainty as to the level of periodical payments from time to time, but that she favoured a “wait and see” approach to the determination of their amount after the expected increase in the husband’s salary through the expected increased bonus for 2006 was known, and did not want to jeopardise or prevent an agreed solution in which she remained in the former matrimonial home by arguing or holding out for a transfer of the whole beneficial interest in it, on the basis that a large increase in remuneration was expected in 2006 and later years,
iii) the citation from her evidence in paragraph 4 hereof is based on the existence of a contract of employment.  Although no such contract existed at the time, I am of the view that this should be read, and her oral evidence should be taken, as being a reference to an undisclosed agreement or understanding which she has argued existed.  But on that basis the detail of her thinking was not pursued by reference either to her assertion as to the degree of certainty of a move and/or the terms of the husband’s new contract, and
iv) the objective thinking I have set out in favour of the conclusions that the order agreed, and an order in the same terms if the true position relating to the negotiations had been disclosed, would both be fair provides factors in favour of a conclusion that the wife would have agreed the order if that position with its uncertainties had been disclosed.

Conclusion
192. For the reasons I have given I dismiss the wife’s application to set aside the order made on 20 July 2006.

Tail piece
Discretionary refusal of the wife’s application
193. As appears above my reasons for dismissing the wife’s application mean that I have not had to consider:

i) an alternative argument put on behalf of the husband by reference to cases on supervening events that in the exercise of the court’s discretion the application should be dismissed because a more appropriate remedy was available namely an application to vary the periodical payments, and thus
ii) whether that argument applies in respect of a breach of the duty of full and frank disclosure which the court has concluded has caused an order to be made that is substantially different to the order that would have been made if there had been no breach of duty.

194. It seems to me that it is at least arguable that there is a distinction to be drawn in respect of this alternative argument between an application based on supervening event and one based on a breach of duty.  Also the common  ground that the Mesher order could not be changed on the application to vary the periodical payments counsel was suggesting as the alternative may have caused the husband difficulty, subject to the point that their level could be set to enable the wife to borrow sufficient to discharge the Mesher charge.

The FDR material
195. I gave an ex tempore judgment relating to this and do not propose to revisit it. But I record that in my view:

i) there was a lack of clarity in the arguments presented as to the reasons (a) for its disclosure, and thus its asserted relevance, and (b) against its disclosure, which was resisted as a matter of principle, and
ii) if and when this is revisited in another case it may be appropriate to consider whether in addition to points relating to issues of credibility (which were advanced) the disclosure should be based on points relating to either (a) the thinking of the court (and thus its part in the negotiating and approval stages of an FDR), and/or the offers considered and rejected or not pursued, because they would be relevant to an objective or court centred approach, or (b) the subjective thinking of the parties, on the basis that there is a subjective element to the relevant tests.

Conflict
196. As the parties know, because I asked to see counsel and also raised it in court, on a number of occasions during the hearing I was concerned that there was or may be a conflict of interest between the wife and her solicitors and junior counsel who had represented her in 2006.  This arose from two main sources, namely (a) my uncertainty whether it was being argued that a subjective test was being advanced relating to the wife’s thinking and thus the advice she was given, and (b) submissions which seemed to carry with them the implication that the wife’s advisers had proceeded in July 2006 simply on the basis of the husband’s 2005 remuneration and did not take account of an expected (or likely or possible) increase in 2006.

197. Over the adjournment the position was considered by those advising the wife who concluded that there was no conflict.  It seems to me that in part that conclusion was based on the manner in which it was confirmed the case was being presented namely that (a) the test was an objective one, (b) at the second stage of that test alternatives were not advanced on the basis that the degree of certainty that there would be a move might be found to be less than that being asserted by the wife and (c) the FDR material showed that the wife and her advisers were proceeding on the basis that there was likely to be an exponential rise in the husband’s salary.

198. The argument advanced on behalf of the wife that what mattered is whether the true position should have been disclosed (and the label to be attached to the state of the negotiations was not relevant) was directed to whether there was a duty to disclose the position relating to the negotiations, and did not lead on to alternative arguments at the second stage of the objective test if I did not find that a move was as certain as the wife alleged.

199. In my view the introduction at that second stage of issues relating to the nature and degree of uncertainty of a move and thus of a comparison between (a) the uncertainties relating to the bonus to be paid by AA, and (b) the uncertainties as to whether the husband would move to BB and what he would be paid if he did if, contrary to the wife’s case, there was not effectively a done deal with BB, would have given rise to a real potential for conflict.

200. More generally in my view advisers at the time an order is made by a court that incorporates agreed terms should give careful consideration to whether they should act on a claim to set that order aside.