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N v N [2010] EWHC 717 (Fam)

Judgment in high value ancillary relief case involving inherited, gifted and business assets. Lump sum awarded.

The wife, who was 54, applied for ancillary relief from the husband, 55.  The parties met and married in 1978 when the wife was 22 and the husband 23.  There were four children of the marriage, all now over 21.  The couple separated in May 2007. Each had a new partner but that of the husband was not wealthy and it was accepted by the judge that the wife had no present intention to marry or depend financially upon her new partner.

The principal asset comprised shares in an unlimited private company (REC) which had been incorporated by the husband's father to consolidate the ownership of properties owned by the husband's family for generations and was now an investment company, also owning shares in other companies. All of the husband's shares had been gifted to him and he in turn had gifted shares to others, including some held on trust for the benefit of the children and wider family. The husband retained just under 50% of the issued shares. These were valued at £8.8m (see below).

Other assets included an apartment in New York and a home in South America (£1.6m), bank accounts and investments (£1.8m), declared bonuses for the husband (£800K), pensions (£350K), a lease (£1.25m) and inherited chattels (£2.3m).

The wife sought a lump sum representing 42% of the total assets. Charles J awarded the wife a lump sum of £5.3m, equating to 32% of the total assets.
In his judgment, Charles J adopts and applies the analysis and approach followed by him in R v R [2009] EWHC 1267 and J v J [2009] EWHC 2654

"and in particular the passages relating to (a) the "general starting point", (b) the relationship between the application of the need principle and the sharing principle, (c) the way in which the parties led and organised their lives together, (d) the analysis of how the court is to assess the departure from equality for good reason in the application of the sharing principle (and see Behzadi v Behzadi [2009] 2 FLR 649), (e) the impact of post separation events, (f) cohabitation and new relationships after the breakdown of the marriage (and see Grey v Grey [2009] EWCA Civ 1424), (g) the spring board based on pre-acquired or gifted assets, (h) budgets  and (g) clean break."

Charles J rejected the argument, advanced on behalf of the wife, that in accordance with Charman (No 4), the court should, when applying the sharing principle and the departure from equality, look only at all the assets as 'a composite whole'.

The judge decided that in respect of the husband's deferred bonuses for years subsequent to the separation, the gifted shareholding in REC and inherited chattels and photograph albums, there was a "good reason" for a departure from equality in the application of the sharing principle.

The valuation of the company, REC, was at the heart of the case. Whilst accepting that the correct approach is to include a valuation based on (a) the realisation of assets and (b) the hypothesis of a sale (per White v White), Charles J states:

"this departure from the likely reality does not have the consequence that the methodology of the valuation (and thus the assessment of an unlikely conversion to cash) should be based on an approach that is unlikely to happen, or worse that effectively has no link to reality if the underlying hypothesis of sale was to take place.  Rather, the methodology should reflect the approach (or approaches) that a vendor and purchaser would be likely to adopt if the unlikely event of a sale was to take place."

Charles J also had to decide whether it was appropriate to discount the value of the husband's shareholding on the basis that it was a minority interest. After considering earlier dealings in the shares of the company Charles J concluded that a discount would not be appropriate.

_______________________

Neutral Citation Number: [2010] EWHC 717 (Fam)

Case No: MS07D00596
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 28/04/2010

Before : 
MR JUSTICE CHARLES

Between :

N (Applicant)

- and - 

N (Respondent)


Nicholas Mostyn QC and David Burles (instructed by Hughes Paddison) for the Applicant
James Turner QC (instructed by Charles Russell LLP) for the Respondent

Hearing dates: 1 to 4 February 2010
Draft circulated 11 March 2010
Judgment Approved by the court
for handing down
(subject to editorial corrections)


Charles J : 
Introduction

1. For convenience I shall refer to the Applicant as the wife (who is 54) and the Respondent as the husband (who is 55).  This is the wife's application for ancillary relief.  The parties met in June 1978 and married in October 1978.  They formally separated in May 2007, having decided between themselves earlier in 2007 that they would separate.  They have four children, three boys and a girl.  The oldest, a boy (N), is now 27 and the youngest, also a boy, is aged 21.  N lives in New York and hopes to remain there.  He is engaged to be married.  The younger three children are all involved in tertiary education and are living in England.

2. The parties met in Buenos Aires (the city of the wife's birth).  The wife was then 22 and the husband was 23.  The wife was taking a five-year degree in social science, which she gave up to marry, and the husband was in the middle of a PhD course at Stanford University, California.  Their wedding reception was held at a house (S Hall) where the husband's maternal grandmother then lived.  It is a very large Queen Anne house, set within the walls of a three and a half acre garden and surrounded by fields, parkland and woodland.  It is a property that has been in the husband's family for some time.  It replaced an earlier property where members of his family had lived for many years.  It is now owned by a company (the "Company" or "REC") and is subject to a 50 year lease granted to the husband in 1987. 

3. After their marriage the parties lived in California whilst the husband completed his PhD.  They lived in graduate student housing.  The husband had a stipend from the University and a small dividend income from the Company.  The wife took up some odd jobs to supplement their small income.  Whilst continuing his course the husband got a part-time job at a software company in Silicon Valley (DT Ltd) and in 1981 he moved to England to start up its European Distribution.  He was based in Cheshire.  With the benefit of a loan from the Company of about £20,000 and a mortgage, the parties bought their first home, in Cheshire.  It was a semi-detached Edwardian house, in need of repair.

4. In 1984, DT Ltd opened an office in Isleworth and the parties moved to London.  They sold their home in Cheshire and bought a home in Balham, again with the benefit of a loan from the Company and a mortgage.  In 1986 they moved to a slightly bigger house, in Clapham.  The eldest three children were born in 1980, 1984 and 1986, and the youngest was born in 1988.  Both of their homes in the London area needed work doing to them.  The wife took the main responsibility for the day-to-day supervision of that work and did much of the more manageable work herself (e.g. decorating and tiling).  She did this at the same time as having and looking after their young family.  The husband was working long hours for DT Ltd, in which he acquired some shares. 

5. In 1987, the parties sold their home in Clapham and moved to S Hall.  The husband was granted his 50 year lease, and the net proceeds of the home in Clapham were largely spent on decorating and other work at S Hall, which became the matrimonial home of the family.

6. In early 1989, the husband's grandmother gave the vast majority of the chattels at S Hall to the husband.  She died in 1990.  At that time the husband's salary was £55,000 per annum from DT Ltd, the oldest child had just gone to prep school and the intention was that all four children would be privately educated.  This is what happened. 

7. In 1991, the husband ceased working for DT Ltd.  This event, and the background to it, was a disappointment to both the husband and the wife and put an end to what the wife described as a dream to create a Silicon Valley type success.  DT Ltd was sold the next year and the husband received about £150,000 net for his shares which, as he pointed out, enabled him to pay a lot of school fees.

8. After a short spell working as a consultant, in 1992 the husband's career took a change in direction, in that he moved to work in the Banking sector, where he found his niche in the sphere of financial market's technology.  His earlier working life had given him expertise that was relevant to this area of technology. 

9. In 1996, he changed Banks and in 2000/01 he was transferred to work at that Bank's New York office.  He was successful and his promotion was meteoric.   The parties moved to New York.  At first they lived in a large rented apartment (over 4000 square feet).  They bought a smaller apartment in 2004 for US$ 2.325m, with the help of a mortgage of about US$ 1.46m (which was subsequently repaid from the husband's earnings and options) and US$329,008 from a successful investment made by the husband's cousin, Mr G.  This apartment has three bedrooms and a large living space.  It was transferred from joint names to the wife in 2008.   

10. Between 2000 and 2005, the children were at boarding schools in England and the wife did a considerable amount of travelling between New York and England to see them and to oversee the general running of S Hall (which was also used over the years for some business entertaining).  By this stage the husband was earning a very high salary and the circumstances and lifestyle of the parties were very comfortable.

11. The husband loved and excelled at his work.  The wife greatly enjoyed the urban life (now in New York rather than London) that she had been reluctant to give up when the parties moved to live at S Hall in 1987, and which she had missed.  The wife also developed her talent for art.  She is passionate about her work as an artist but has no income from it.  She told me, and I accept, that if people became interested in buying her work she would be delighted.

12. The husband says, and I accept, that he planned to retire when he stopped working for the Bank in New York.  But his time there was shortened by the departure of his boss in October 2004 and he left in May 2005. 

13. A firm of head hunters had told the husband that he should consider the Chief Information Officer role (CIO) at another Bank in the UK.  The parties discussed this and they agreed that he had unfinished business in the industry and that he would be bored and unhappy if he was to quit then and not try for this CIO post.  He did apply for the post and was appointed in June 2005.  This is the post he still holds.

14. When the husband took on this new post he was based in London and the parties returned to live at S Hall.  In her statement the wife says that the move back to S Hall was a deeply unhappy event for her, that by then their relationship had deteriorated greatly and without New York as a back drop the differences between them became insurmountable.  A significant factor in this was that the wife did not want to return to live at S Hall and wanted to have a home in London where she could live and work, and to use S Hall for week-ends.  The husband took a different view.  As a result of these problems the wife continued to spend significant periods of time in New York. 

15. Both parties have now formed new relationships.  Each asserts that they have no intention of re-marrying or cohabiting.  The husband's girlfriend is not wealthy.  The man who the wife described as her friend and lover (Mr B) appears to be very wealthy and lives in the USA.   He has recently bought a home in New York for about US$ 30m and has embarked on considerable work and expenditure on that property, creating, for example, a gallery for his art collection.

My approach in law
16. At the heart of the legal arguments advanced in this case is the approach to be taken to inherited and gifted assets.  There was inevitably common ground that the source of the husband's shares in the Company and of some of the chattels provided a "good reason" for a departure from equality in the application of the sharing principle.

17. This case therefore raises points that I have addressed recently in R v R [2009] EWHC 1267 (Fam) and J v J [2009] EWHC 2654 (Fam).  Neither side argued that my analysis and approach in those cases was wrong.  Indeed, the wife through her Counsel adopted and invited me to follow my conclusions in paragraph 424 (i) to (xvii) in J v J.

18. I shall not repeat my lengthy discussions of the law in those cases.  I adopt and apply them and in particular the passages relating to (a) the "general starting point", (b) the relationship between the application of the need principle and the sharing principle, (c) the way in which the parties led and organised their lives together, (d) the analysis of how the court is to assess the departure from equality for good reason in the application of the sharing principle (and see Behzadi v Behzadi [2009] 2 FLR 649), (e) the impact of post separation events, (f) cohabitation and new relationships after the breakdown of the marriage (and see Grey v Grey [2009] EWCA Civ 1424), (g) the spring board based on pre-acquired or gifted assets, (h) budgets  and (g) clean break.

19. Having earlier adopted my approach in J v J, Counsel for the wife in his final submissions reminded me of, and placed weight on, (a) paragraphs 66 and 67 of the judgment in Charman (No 4), and (b) the point that, as acknowledged in R v R and J v J, the sharing principle applies to all the assets.  This reference to Charman (No 4) was in connection with the assessment of the departure from equality for good reason and the overall percentage division of all the relevant assets after an award. 

20. To the extent that the submission was to the effect that in applying the sharing principle and the departure from equality for good reason the court should look only at all the assets as a composite whole, I reject it.

21. I accept that as the sharing principle applies to all the assets a cross check falls to be made by reference to the assets as a whole and the percentage result on that calculation demonstrates the extent of the departure from equality by reference to all of the assets to which the sharing principle applies.  But, in my view, when a good reason for departing from equality within the sharing principle applies to some of the assets the court should consider the extent of that departure in respect of those particular assets.  The answers on that approach (a) will of course underlie the percentage calculated by reference to the whole, and (b) may be subject to adjustment by reference to that overall result, or the overlap in the application of the need and sharing principles, applying the terms of the  MCA.  But, in my view:

i) a part of the proper exercise of the sharing principle in respect of  assets where there is a good reason to depart from equality involves a consideration of how those assets should be shared, and

ii) this can be done without re-introducing a detailed consideration of what is or
is not the matrimonial acquest, and the extent and value of the assets in respect of which the "good reason" to depart from equality exists, because, as explained in paragraph 67 of Charman (No 4), this can be done with whatever degree of detail is apt in the given case.  

22. An example discussed in argument was of a Victoria Cross that had been handed down within the family of one of the parties and it was recognised that there was considerable force in the arguments (a) that it would not be fair to proceed on the basis that it should be sold or given a cash value, and (b) that it should not be shared.  As I say in J v J, in my view, in respect of some assets the departure from equality in applying the sharing principle can result in a 100% / 0% division. 

23. Leaving on one side the husband's earning capacity (as to which see again Charman (No 4) and H v H [2007] 2 FLR 548), in this case, as with the example of a Victoria Cross, the identification of the relevant gifted and inherited assets to which a good reason to depart from equality within the application of the sharing principle exists, is straightforward.  They are the gifted shareholding in REC and the inherited chattels.

24. The factors which found a good reason for a departure from equality in the application of the sharing principle also provide, or have the potential to provide, a good reason for basing an award on the premise that those assets should be retained and not sold to fund a clean break, or for any other purpose.  This is to my mind an important aspect of the overall approach to achieve a fair result in all the relevant circumstances (applying s. 25 and the principles or approach to doing so set out by the House of Lords).  It has regard to, amongst other things, the source of assets and how the parties have regarded and treated them.  If (and naturally it is an important, "if", because of the advantages of meeting relationship generated needs by a clean break award) those and other relevant circumstances lead to a conclusion that it would be unfair to sell an asset (or assets):

i) an analysis or comparison by reference to the sharing principle, or a cross check by reference to a conversion of all the assets to cash based on hypothetical sales, loses some of its force and relevance, and in my view the overall exercise should include

ii) a comparison of the respective positions of the parties post award by reference to that premise and therefore the likely reality.  Such a comparison will, for example, look at income and capital yields of relevant assets and the proposed award.

The Assets
25. The assets can be identified as follows:

i) The apartment in New York that has been transferred to the wife.  There are some uncertainties relating to the capital gains tax (if any) on the transfer to the wife and the knock on effect of that on capital gains tax (if any) on its sale by the wife.  During the hearing a solution to those uncertainties was arrived at, namely that the husband would indemnify the wife against the relevant tax (if any). 

ii) A property in South America owned by the wife and occupied by her mother. 

iii) There were small differences on the values put on these properties which were valued in US $ and converted.  I take their values at £1.6m and £36,000 respectively.

iv) A sum advanced by the parties to the wife's brother in connection with a purchase by him of a house in Australia.  There was a dispute as to whether this was a loan or a gift.  This too was solved during the hearing on the basis that any repayment would be shared equally between the parties and this possible asset (about £166,000) therefore fell out of account.  The order should of course reflect this agreement. As I understand it, the loan (if there is one) is to be treated on the basis that it was a joint loan and either of the parties could seek repayment on the basis that any recovery is to be divided 50/50.

v) Bank accounts.  There is a small difference in the competing schedules (£2,500) and I take the amounts as: husband £1.129m and wife £420,000 (of which approximately £378,000 represents her half share of joint accounts): total £1.549m.

vi) Other investments / insurance policies.  The husband: £233,000.

vii) Pensions.  Again there is a small difference on the schedules (£2,628) and I take these as having a value of £354,000.

viii) Bonuses.  The husband has accrued bonuses for 2009 and 2010, payable over the years 2010 to 2013, which, on assumptions as to tax rates and interest, were estimated at a total of £769,296 (net).  

ix) Chattels.  The difference between the schedules relates (save for £1,000) to a car that the husband says was sold, and I accept that it was.  The wife has jewellery valued at £13,775. It is agreed that she is to have a small number of items from the husband's home and all the contents of the property in New York.  No figures were put on those chattels and sensibly they were left out of account.  In my view, (a) the wife's jewellery, and (b) about £35,000 of the husband's chattels (household furniture, jewellery, sporting equipment, outside effects and cars) should also be left out account.  This leaves a significant quantity of chattels owned by the husband, described in his schedule of assets as inherited antiques.  These include furniture, paintings, a library, and other items, having a gross value of £968,002 (inherited chattels) and photograph albums (gross value £1,665,000).  There are small differences in the gross value figures for these items asserted by the wife.  Less capital gains tax I take these assets as having net values of respectively £900,000 and £1.4m.

x) The husband owns 49.46% of the issued shares in REC, the Company.  The most relevant, and certainly by far the largest, difference between the parties on the value to be put on assets relates to this shareholding.  The final difference was about £4.95m.

xi) The husband is also the tenant of S Hall.  His long tenancy was not valued.  Whether he could assign it was not looked into.  He intends to remain living there as the tenant.  As appears later, issues relating to marriage value arise in respect of any sale of S Hall.

26. The inherited chattels and the photograph albums.  As I have mentioned, these were given to the husband by his grandmother after he and the wife had moved to S Hall.  The inherited antiques are an important part of the character of S Hall and they were used and enjoyed by the parties as an aspect of their matrimonial home.

27. There is a dispute as to how these inherited chattels and the photograph albums were regarded and treated.   

28. The bonuses / the husband's income. A table showing the husband's recent level of earning from his employment with the Bank and from REC is as follows:

                    2005/6      2006/7      2007/8     2008/9

Bank net     £582,982   £881,654  £834,293  £162,510

REC net      £20,896    £36,642    £36,498    £17,043

REC div net £46,980    £36,642    £36,498    £234,900

Totals net    £650,858  £937,625  £887,603  £414,453


29. His salary from the Bank for the year 2009/10 is £141,176 net.  The 2008/9 figure shown in the table above as being from the Bank includes some income from his earlier employment in the USA which will not be repeated in 2009/10.  The bonus for 2007/8 relates to the year 2007 and therefore to the year of separation.  The dividend from REC in 2008/9 is an exceptional one and, so far as I am aware, no equivalent dividend had been paid before. 

30. The total for 2008/2009 does not include the deferred bonus of £900,000 gross  (declared in March 2009 for the year 2008).  This is payable in three tranches in the form of a Bank bond that the employee can keep or sell for cash.  There is also a provision that would allow the husband to receive 27% by way of a cash advance, subject to income tax, national insurance and interest charges.  The husband's estimate as to his likely bonus for the year 2009 (to be declared in March 2010) is £600,000 gross, payable over three years in the same way.  The figure of £769,296 included in the table is the total of all six net payments.  They are all subject to the risk of a clawback of up to 73% in defined circumstances and unless the husband is a "good leaver" any part not already released to him will be lost.  He is most likely to be a "good leaver" if he is made redundant or retires.

31. Very recently the husband, together with others, has been offered some options in the Bank's shares on the basis that he is still in that Bank's employment in April 2012.

32. I accept that the husband's present intention is to seek to negotiate terms on which he would leave his present employment as a "good leaver" in June 2010.  It was not suggested that if he remains of the view that he wants to stop working at the Bank, he would not be able to leave as a "good leaver".  But, on the assumption that he will be able to do this, the husband pointed out that the whole issue of the Bank's bonus payments has become an issue of political importance and public debate and that this has informed his estimate of the bonus for the year 2009.  In my view, those matters, and the terms relating to a 73% clawback, mean that there is a risk that the husband will not receive all of the deferred payments.  I therefore reject the unreasoned submission made on behalf of the wife that the court will have little difficulty in deciding on the balance of probability that the bonuses will not be clawed back.  That submission seems to me to fly in the face of the terms relating to the bonuses and the general discussions relating to bonuses after the "saving of the Bank" by the taxpayer.  It is, however, not possible to quantify either the risk, or amount of the clawback, or indeed the accuracy of the husband's estimate for the year 2009.

33. Additionally, these bonuses were earned post separation, which can provide a reason for departing from an equal sharing of that product of the husband's earning capacity and hard work.

34. The assets in respect of which there is good reason to depart from equality in the application of the sharing principle. These are (a) the salary and bonus for 2007/8, now effectively reflected in the cash held or debts paid by the parties from joint accounts, (b) the deferred bonuses for 2008/9 and 2009/10, (c) inherited chattels and photograph albums and (d) the gifted shareholding in REC.

The liabilities
35. The husband has a tax liability of about £48,000 and a liability for unpaid costs of £135,189.

36. The wife has a debt to Coutts of £60,717, part of which represents money borrowed by her to make up a reduction in funding provided by the husband pending this hearing.  There is a dispute as to the treatment of this part of the debt.  She has unpaid costs of £137,959.  The total costs are: husband: £349,472; wife: £279,753, total: £629,225.  The husband has paid £297,117 and the wife has paid £141,794.

37. The wife has funded the bulk of her costs from a sum which she took from a joint account.  The common position as to costs was that both parties have so far paid them from moneys earned by the husband during the marriage.

A Table
38. Leaving on one side the shares in REC, the value of the husband's lease of S Hall and the possibility of further bonuses, the assets and liabilities can be described in tabular form with sub-divisions as follows:

Asset                                                   H                     W                                Total   

 

New York Apartment                                                 £1.6m

South American house                                                £36,000

 

Property                                                                   £1.636m                      £1.636m

 

            Bank accounts                         £1.129           £420,000

            Investment                               £233,000        

 

Cash / investments                            £1.362m        £420,000                     £1.782m

 

            Declared bonuses                    £796,296                                            £796,296

 

            Pensions / insurance                 £354,000                                            £354,000

 

     Photograph albums                  £1.4m                                     

            Inherited chattels                     £900,000

 

Inherited chattels                                                                                           £2.3m

 

Totals                                                  £4.81m         £2.05m                           £6.86m

 

            Liabilities                                  £48,000        £60,717

            Unpaid costs                           £135,189       £137,959

 

            Liabilities/costs                     £183,189       £198,676                      £381,865

 

Net                                                     £4.63m                        £1.85m            £6.48m

 

If the photograph albums and the inherited chattels are removed the position becomes:

H                           W                    Total

£2.33                     £1.85               £4.18

 

If the bonuses are removed the position becomes:

H                           W                    Total

£1.56                     £1.85               £3.41

 


 

The evidence of the parties
39. They both gave their evidence clearly.  They both demonstrated that they understood many of the factors that the court was likely to take into account and they were both good advocates from the witness box of their respective cases.  In my view, they were both giving an account of past events and present circumstances as they now saw them. 
REC and S Hall

40. Issues relating to the Company are at the heart of this case but some of them received no, and others only scant, attention in the evidence presented.

41. The Company was incorporated, at the instigation of the husband's father, in 1946.  The accountant instructed by the wife to value the Company (Mr Walton) recorded that it was established to consolidate the ownership of properties that had been owned by the husband's family for several generations.  This was not challenged.  It is an unlimited private company and is principally an investment company which owns a portfolio of land and buildings.  It also owns shares in some other companies (its corporate assets).

42. Importantly, the Company owns a lovely property (S Hall), which was the home of the husband's grandparents, and Mr Walton reports that it was transferred to the Company to avoid inheritance tax (again this was not challenged).  The existence of this property within the assets of the Company provides a special feature which has knock on effects, in particular in the context of (a) the valuation of the Company, and (b) the fairness of an award that would involve its sale, or a sale of all of the assets of the Company.

43. Shareholdings. The present issued share capital in REC is 4,749 shares and the shareholders are:

i) The husband:  2349 shares, being 49.46%.

ii) A discretionary trust of which the husband is the settlor and the present class of beneficiaries is made up of the parties' children and the husband's brother (who was added in 2008) Trust A: 900 shares, being 18.96%.

iii) A discretionary trust of which the wife is the settlor (she having been given 900 shares by the husband for this purpose) and the present class of beneficiaries is made up of the parties' children, Trust B: 900 shares, being 18.96%.

iv) The oldest child, N: 600 shares, being 12.63%.

44. All of the husband's shares were given to him and in turn he has been the effective donor of the shares now owned by the other shareholders.  He received his first gift of shares in 1974 from his father (535 shares), his next in 1976 from his father (104 shares), his next in 1980 (1,156 shares) from his father and his last in 1987 (3,204 shares) from a trust set up by his father. 

45. So, the husband received most of his shares after the marriage.  But there was no suggestion that it was the intention of the donors that they were gifts to both of the parties, or that the shares were regarded by the parties as gifts to them both, rather than to the husband alone from his family.

46. In 1989, the husband gave 250 shares to his brother, who later sold all his shares to the Company.  Trust A and Trust B were established in 1997 by gifts of shares by the husband and in April 2005 he gave 600 shares to his eldest son.  He told me that the underlying intention is that each of the children will have 600 shares, which could be achieved through the two trusts.  This intention could change, or not be fulfilled.  For example, the shares held by the trusts may go to persons other than the children, or more may go to the child (if there is one) who lives at, or is to live at, S Hall when the husband vacates.  But to my mind this present intention of the husband is of relevance to the basis upon which (a) the husband's shares and (b) the other shares presently intended for his children (whether they are still held by the trusts or are individual holdings) should be valued.  This is because it goes to the expectation of what each family shareholder should receive if his shares were bought by another shareholder, or by the Company. 

47. In January 1980, the husband owned 9% of the shares (1750 out of 20,000).  His percentage shareholding has increased to its present 49.46% as a result of further gifts, and purchases by the Company of its own shares ("buy backs").  Major buy backs of shares from a number of family members took place in 1990, 1997 and 2002.  The last buy backs took place in 2007 and 2008.  In broad terms, 6,400 shares were bought back with a discount and 9,000 without.  The detail of the earlier buy backs was not gone into.

48. In 1997 when the trusts were created, the shareholders apart from the husband were his father, an aunt and a cousin (Mr G) who worked for, or with, the Company and one or more of the companies in which it holds shares.  I return to the buy back of the shares of these shareholders.

49. S Hall.  This substantial home was bought using insurance moneys paid in respect of a fire at another property that had been occupied by previous generations of the husband's family.  A number of items were brought from the old to the new property (e.g. the library, restored after water damage, fireplaces, statues, art (including many family portraits) and furniture).  It is not an asset of the Company that makes, or has ever made, a profit for the Company, rather it has been the home of the husband's grandparents and then of the husband and his family.  The husband is the tenant of S Hall under a 50 year lease granted in 1988 (so the term runs to 2038). 

50. The lease was granted to the husband alone.  Clearly, it significantly reduced the value of the Company's interest in S Hall and it was approved by all the then family shareholders.  The husband's mother was not keen to live there and it was against this background that the parties moved to live at S Hall and the husband was granted the long lease.  This is a clear indication that:

i) this property was regarded by the wider family shareholders as the family home,

ii) the wider family  respected the wish of the husband's grandparents that it should be occupied by one of the family, and indeed by the husband and his family, and

iii) the wider family shareholders (all of whom were later bought out by Company purchases of their shares) accepted this approach to the management of the  Company and its assets.

51. The rent payable under the lease is £1,200 per annum and under it the Company is responsible for "running repairs".  The husband has limited the amounts spent on capital improvements to no more than £75,000 a year, because if he was to expend more his "benefit in kind" from the use of the property would be treated differently.  I have not investigated, and the point was not raised, whether as the tenant the husband has any rights to buy in the freehold or to obtain an extension of the lease.  Any such rights may well have an effect on the attribution of the value of the property as between the husband and the Company and on the sharing of any marriage value on a sale with vacant possession.  

52. The Hall has 11 acres of land and there are about 150 acres of neighbouring farmland owned by the Company.  The valuations of S Hall are as follows:

i) S Hall plus 11 acres: (a) Vacant possession £4m, (b)  Tenanted  £2m, and

ii) S Hall plus 11 acres and neighbouring 150 acres: (a) Vacant possession £5.25m, (b) Tenanted £3m.

When the neighbouring 150 acres is added to the sale, the increased marriage value has three (rather than two) constituents namely the two freeholds and the leasehold interest of the land apart from the additional 150 acres.  There is possibly, a further ingredient if the husband has a right to acquire the freehold or a new lease of S Hall.

53. I suspect that the answer to the attribution of the marriage value between the relevant interests is essentially one of negotiation.  An indication from the values in sub-paragraph 52(i) is that as between freehold and leasehold of S Hall the marriage value should be shared 50/50.  The husband would have a weaker argument in respect of the uplift arising from the addition of the further freehold land in which he has no interest, but he has a negotiating position because to achieve that overall price he must surrender his lease.  So it seems likely that his marriage value would be over £1m.  This would be payable directly to the husband.

54. An approach that had regard to the marriage value from the obviously sensible starting point (accepted by the husband during the hearing) that the Company, and all its shareholders, would agree a vacant possession sale of S Hall and the 150 acres of farmland, leads to a conclusion that IF there was such a sale:

i) the husband would be paid his marriage value, and

ii) the Company would be paid the balance.

55. I raised the point that the existence of the lease and the marriage value if there was a sale with vacant possession have "knock on effects" on the valuation of the husband's shares in the Company, and the identification of the assets.  This was acknowledged to be correct by counsel for the wife and was not challenged by counsel for the husband.  But, notwithstanding this no account was taken of these knock on effects in the rival arguments relating to the valuations of the Company and the husband's shares in it, or in the identification of the assets.  Further no points in respect of them were put to the two accountants (e.g. concerning the tax that the husband would have to pay on his share of the proceeds of sale and whether he could claim relief on the basis that S Hall is his principal private residence). 

56. Rather, it remained common, but in my view incorrect, ground between the parties that the net assets value of the Company should be based on the vacant possession value of S Hall and the additional farmland (£5.25m), and thus on the incorrect basis that all of the proceeds of a sale with vacant possession would be paid to the Company and be taxable as the proceeds of Company assets.

57. Other property and assets.  Apart from a small point on whether there should be a discount on the value of REC's holding in a company no time was taken on REC's corporate assets.

58. The other assets are a mixed bag of properties, many of which were owned by the husband's family before the incorporation of the Company and some of which have been bought since then.  Mr Atkins (a chartered accountant who was engaged as the estate manager of the Company and who was instructed by the husband to give valuation and factual evidence relating to the Company) told me (and I accept that he is likely to be right) that so far as he knew no property that had been bought by the Company had been sold.  Properties had been sold to fund, or the fact of sales of properties had been the catalyst for, buy outs of the family.

59. The property portfolio includes residential and commercial properties and farming and other land.

60. The schedule of property valuations.  In his first report, dated 25 September 2008, Mr Walton inevitably and correctly says that because of the age and nature of the properties owned by the Company, and without expert property valuation knowledge, it is not possible to comment on the valuations placed on them (and in particular he identifies 6 having 25% of the value of the portfolio excluding S Hall).

61. The schedule used for the purposes of the valuation of the husband's shares (the 2007 schedule) was prepared in 2007 in connection with the Company's purchase of the shares of the husband's father and aunt, and a cousin, Mr G.  In the events that happened, Mr G was not bought out until 2008, but again the 2007 schedule was used.  It has also been used in connection with the valuation of the shareholdings of the two trusts in respect of the periodic charge to tax.

62. There was little evidence relating to the independent professional input to, and the bases and information on which, the valuations in the 2007 schedule were prepared.  Mr Atkins told me, and I accept, that Mr G was closely involved and he considered each property, but I was given no information of the detail of their discussions and how the valuations were arrived at. 

63. Mr G was at that time in a position of conflict as he was one of the persons selling his shares.  The 2007 schedule is not therefore a clear base supported by independent professional opinion.  However, I accept that it does have the advantage that it was used and accepted in the negotiating situations relating to the buy backs in 2007 and 2008 and with the Revenue.  Mr Atkins told me in his oral evidence, and I accept, that the Revenue had referred the underlying property values set out in the 2007 schedule to the District Valuer and they were not queried.  But the evidence of sales and valuations after the 2007 schedule was prepared, raises doubts as to its accuracy. 

64. It is of interest and relevance that in recent years the following two areas of land have been sold by the Company for development at prices way beyond their book values:

i) in 2007 the Company sold 4.5 acres of land in East London for £18.4m.  This provided the Company with very considerable liquidity in place of land that had been subject to long (around 30 year) leases and which had provided a rental income.  This sale resulted from an approach to the Company and the price was probably enhanced by the fact that the Olympics are soon to be in London.  It took place before the last round of buy outs and was a catalyst for them; and

ii) in the years to March 2008 and 2009 the Company sold land in Bromley in two tranches for residential development for a total of nearly £2m.  This resulted in a significant adjustment to the value placed on (I think) the second tranche of this land in the 2007 schedule.  (The adjustment was £1.547m (sale price) less £30,000 (valuation) and costs of sale and tax = £1.078m).

These two sales give rise to the question whether there are other pieces of land owned by the Company that have real prospects of being sold for development.  In particular, the second sale is a pointer to the conclusion that the development value of the land in Bromley was not assessed or assessed correctly in the 2007 schedule.

65. So far as I am aware, no reappraisal of the development potential of the assets was undertaken for the purpose of the hearing.  Certainly, no written evidence was directed to it.  In the first instance this reappraisal would not have entailed an independent professional revaluation.  At the end of the husband's evidence I asked him some general questions relating to his past and present strategy and thinking concerning the Company and its prospects.  He told me that the Company owns a pub that might be sold for development.  No figure or timing was put on this.  This evidence reinforces the point that notwithstanding the valuations in 2007, relating to the last round of buy backs by the Company of its shares, there may be other pieces of land with development potential that would warrant a revaluation now, or at least which would be relevant to a consideration of the likely yield of the Company (through salary and dividend and share buy backs) over the years.

66. I was referred to a letter in which the husband, for understandable cost reasons, resisted a full revaluation of all of the properties.  And, as I have said, the approach adopted by both sides was that the two accountants used the 2007 schedule as the starting point for their net assets valuations. However, the wife sought reassessment by  independent valuers of:

i) S Hall and the 150 acres of surrounding land referred to earlier, and

ii) two residential properties in London occupied respectively by the husband's parents and his aunt (and a friend), on the basis that those occupants are elderly and that when the relevant leases end the properties can be sold with vacant possession at values greatly in excess of the values put on them in the 2007 schedule.  The uplift was about £820,000, after tax on the gain at 28%.

Mr Atkins said in his oral evidence that the potential of those two residential properties was reflected in the valuation used.  This was not pursued with him and the amount of the uplift raises a query as to whether it was done appropriately.

67. Present asset base.  If S Hall and the 150 acres of surrounding farmland is excluded from, and the commercial property that has recently been bought is included in, the Company's assets then by reference to (a) the purchase price of that commercial property, (b) the property valuations contained in the 2007 valuation, and (c) its latest accounts, the Company has the following assets:

i) Properties with a gross value of about £16m,

ii) Investments with a gross value of about £700,000,

iii) A balance of creditors over debtors of about £400,000, and

iv) Cash of about £4m.

This gives a total of about £21m gross.

68. Subject to a further buy back of shares, this total and mix of assets is available as the base for the trading activities of the Company for the future.

69. To my mind it is (to say the least) unfortunate that the Court was not provided with evidence relating to the prospects of the Company and the present views and forecasts of its management both as to the chances and timing of sales of properties and generally.  This is particularly the case in light of the assertions made by the husband in his s. 25 statement as to his likely future income and return from the Company.  The only parts of the business plan that were so set out were views (a) that the recent investment in commercial land was to increase rental income, and (b) that the Company should make a further investment in such land for that purpose and to balance its portfolio.

70. The valuation of the Company.  As was pointed out by counsel for the wife, the approach of the courts is to include within the assessment of the amount and fairness of an award under s. 25 MCA, valuations based on (a) the realisation of assets, and thus (b) the hypothesis of a sale (see for example White v White [2001] 1 Ac 596 at 612 per Lord Nicholls).  Naturally, I agree.

71. I also agree that the hypothesis of a sale will often reflect an event that is unlikely to actually happen (e.g. the sale of a company, shares, a farm or inherited assets).  But the hypothesis of a sale is usually necessary even if it is not likely to happen because a valuation has to be based on a conversion of an asset to cash.

72. But to my mind this departure from the likely reality does not have the consequence that the methodology of the valuation (and thus the assessment of an unlikely conversion to cash) should be based on an approach that is unlikely to happen, or worse that effectively has no link to reality if the underlying hypothesis of sale was to take place.  Rather, the methodology should reflect the approach (or approaches) that a vendor and purchaser would be likely to adopt if the unlikely event of a sale was to take place.

73. The mixed bag of assets in the Company, and in particular the inclusion therein of S Hall, makes it highly unlikely that an outside purchaser would ever be found for all (or any) of the shares of the Company. So the likely purchasers are either the Company itself or other shareholders. When I raised these points, it was accepted by both sides that the link between the methodology used in the valuation of the Company as a whole and thus of the husband's shares (namely a sale of all the shares to a willing outside purchaser) and the likely reality of a conversion of all the shares to cash was tenuous.  It was accepted that, as it is most unlikely that a purchaser would be found for all the shares, any conversion of all the shares into cash would probably be based on the sale of the underlying properties and/or a division of the assets within a corporate structure and the sale of the individual companies.

74. In this respect the approach taken to the valuation does not fit easily with the position regularly taken by practitioners in this field that reality and pragmatism are important.  So I  repeat the general points that I have made in other cases (see for example (D v D and B Ltd [2007] 2 FLR 653) that in my view:

i) questions relating to the best and most practicably available methods of achieving the best value for assets (and in particular shares in a private company) should always be considered in the context of their valuation, and

ii) cases should not be prepared and presented by reference to a method of valuation that does not represent this.    

75. The need in this case to have regard to the underlying reality of the best method to realise cash for the shares (and the assets of the Company) is exemplified by the marriage values in respect of S Hall and the farmland surrounding it.

76. However, as the valuations provided were net asset valuations, the underlying material and reasoning informs an assessment of value by reference to the most likely method of realisation of all the shares and in any event it is (in my view correctly) common ground that a "snap shot" net assets valuation would (as in the past) be the most likely starting point for the negotiations relating to a buy back of some of the husband's shares by the Company.

77. Inherent tax liabilities. In their valuations both Mr Walton and Mr Atkins made a 100% deduction for inherent tax on the gains that would be realised if and when properties were sold.  I asked whether, applying their approach (i.e. a willing purchaser of all the shares), this was correct because in many net asset valuations on that hypothetical basis points are raised as to how this potential tax liability should be shared between the buyer and the seller. 

78. Mr Walton helpfully referred us to Goldstein v Levy Gee [2003] EWHC 1547 (Ch), in particular at paragraphs 97 to 113 (which could usefully be added to the armoury of cases that are familiar to specialists in ancillary relief claims). 

79. Also, and unsurprisingly, Mr Walton pointed out that if there was to be a sale of all the shares the approach to the inherent tax liabilities would form a part of the negotiations on price, and that the nature and use of the underlying assets would be important (e.g. a farm or a factory used for the business and thus a property that would probably not be sold as compared with properties held for re-sale).  He also agreed that it would be most unlikely that a purchaser would be found for all the shares of the Company.  The possibilities of (a) corporate restructuring and (b) flotation (a possibility raised by the husband for the first time in his oral evidence) were not put to him.  He agreed that lotting and sale of individual properties leading to share buy outs, dividends or a winding up were the most likely routes to conversion of all the shares to cash.

80. This means that the approach of deducting all the inherent tax on gains arising from property sales is likely to represent the actual consequence of such a conversion of the shares to cash.  Corporate restructuring might introduce arguments that the inherent tax would not be incurred and this would be most likely in connection with S Hall and neighbouring land; but as I have said this was not gone into.

81. The "snap shot" nature of the valuation.  The valuation, like a balance sheet, looks at the position at a set time.  Here, as I have said, both Mr Walton and Mr Atkins used the 2007 schedule of properties as their starting point. 

82. They have both updated that starting point to take account of events that have taken place since the 2007 schedule was prepared (e.g. the sale of some land in Bromley for development and the buy out of Mr G together with the repayment of a loan by Mr G).

83. Further adjustment to the values in the 2007 Schedule.  Mr Atkins seeks to introduce a revaluation of the assets in the 2007 schedule by reference to general movements in prices.  This was resisted by the wife.  This resistance was not on the basis that the percentages used did not reflect general market movements, but was because there had not been a full revaluation (and such a revaluation had been resisted by the husband in correspondence). 

84. In principle, Mr Atkins and the husband are right that valuations as at the "snap shot date" should be used, and this is reflected in the agreed adjustments to the 2007 schedule.  The problems relating to Mr Atkins' proposed further adjustment relate to (a) the use of general percentages, and (b) the lack of clear evidence as to the accuracy of the starting point figures in the 2007 schedule (exemplified by later events and valuations). 

85. The adjustment sought by the husband and Mr Atkins results in a decrease in the net value of the properties, and thus of the net assets, of approximately £560,000, and they point to the drop in the value of S Hall on its revaluation as support for the need for such an adjustment.  They acknowledge that some of the properties have, or may have, bucked the trend and increased in value and contend that others will have decreased more.  They also accept and have applied a percentage increase to agricultural land.

86. I accept that as, for understandable reasons, the parties did not opt for a complete revaluation the approach taken by Mr Atkins and the husband is reasonable in all the circumstances and is to be preferred to that taken by the wife.  But the problem and qualification relating to the accuracy of the valuations in the 2007 schedule, and thus the starting point for such an adjustment, remain.

87. The wife seeks to introduce a vacant possession value for two residential properties in sought after areas of London that have been re-valued.  She does so because of the age of the family tenants and thus the high likelihood that they will not be sold with vacant possession.  I agree that that is the reality.  But the suggested adjustment does not accord with the underlying premise of a snap shot valuation at a date when those properties remain tenanted.  In that snap shot methodology the prospect of gaining vacant possession should be taken into account in assessing current value.  There was no evidence as to how, or the extent to which, this prospect was taken into account in the values included in the 2007 schedule. 

88. The wife also resisted the introduction (and deduction) of a capitalised sum for the pension obligations of the Company to the husband's father and aunt on the basis that the pensions have always been, and are always likely to be, paid from income.  I do not disagree with that assertion as to the underlying reality if as expected all the shares are not sold.  But again in my view the wife's argument runs counter to the underlying hypothesis of the snap shot valuation used by both accountants, namely that the husband's shares are being converted to cash as part of the sale of all the shares (or a liquidation).  So in my judgment the capital provision for the pension obligation (about £1.1m) should be included in calculating the net assets.

89. In my judgment the points that (a) a vacant possession value of these properties is likely (if not inevitably) to be achieved some time in the future, and (b) the pensions will be paid from income whilst the Company remains a going concern are, like the point relating to the potential for development values, points that go to the utility of a snap shot net assets valuation and the weight that should be given to it, rather than points that trigger an adjustment to the valuation itself.  But, if one trespasses into that area, those points would have to be taken into account with other similar points that may arise relating to the future prospects of the Company, and their impact on the value of its shares, looked at from both sides of the relevant negotiation.  

90. Information on the prospects of the Company is also relevant to a comparison of the positions of the parties before and after an award if (as expected) a sale or realisation of all the shares does not take place and the Company continues as a going concern and the husband remains a shareholder of it and occupies S Hall as its tenant.

91. Discount for a minority shareholding.     In his first report dated 25 September 2008 Mr Walton correctly says that whether the Company is or is not a quasi partnership company is a matter for the court to decide.  In respect of the valuation exercise this is relevant to the question whether or not there should be a discount for a minority shareholding.  It was therefore a valuation point that was "flagged up" at an early stage and its central relevance was confirmed when Mr Atkins and the husband contended for such a discount.

92. Given the history of buy backs, the focus of the debate was on the possibility of a buy back by the Company and the price that the husband would get per share in such a sale.  To my mind, in addition to the question whether the Company was a quasi partnership company and its impact on the valuation exercise, this focus introduces the need to assess the negotiating position of the husband as against the other shareholders.  This is appropriate because even if a company should be classified as a quasi partnership, a refusal to agree to a buy back of shares would not be found to be unfairly prejudicial or the basis for a just and equitable winding up.  In any event, if there is a dispute between the shareholders as to the correct classification of the Company for the purposes of the valuation exercise, this could only be resolved by agreement or litigation to which they were parties.

93. The quasi partnership point is therefore an aspect of this court's assessment of the likely price per share that the husband could negotiate and agree with the other shareholders (i.e. the trustees and his eldest son). 

94. The quasi partnership point raises both legal and factual issues.  The legal tests were not addressed until closing submissions (when they were set out on behalf of the wife, by reference to relevant authorities, and in terms that were not challenged on behalf of the husband) and the evidence only just "clipped the target."  The evidence on this point would also have an impact on the "section 25 issues" relating to the choices made by the parties as to and how they ran their lives by reference to the husband's inherited or gifted family assets.

95. So the discount issue introduces:

i) the legal questions relating to aspects of company law (see, for example, the approach and discussion set out in  Re Bird Precison Bellows [1984] 3 AER 444, and Irvine v Irvine [2006] 4 AER 102, on quasi partnerships and a discount on the value of minority shareholdings, and see Gore Browne on Company Law Chapter 19 and O'Neill v Phillips [1999] 2 BCLC 2, on prejudicial conduct and just and equitable winding up), and

ii) the reality of the negotiating position between a shareholder who holds less that 75% of the shares and the other shareholders in connection with the passing of the relevant special resolution which in turn brings in the points (a) that shareholders can act in their own interests, (b) that trustee shareholders must act in accordance with their fiduciary duties and (c) that this court will look at what such shareholders and trustees are likely to do (e.g. Thomas v Thomas [1995] 2 FLR 668).

96. The husband resigned as a trustee of one of the trusts some time ago because the children were being encouraged to take an interest in the investment of a part of its assets and the terms of his employment would have caused problems with the making of the relevant investment decisions.  He resigned as a trustee of the other trust very shortly before the hearing and asserted that significant reasons for this were (a) a recognition of the potential conflict between him and the beneficiaries in respect of a purchase by the Company of his shares, and (b) to emphasise that point in the context of this litigation by bringing in an independent professional trustee.  To my mind this last minute step was not necessary for either purpose and, as could easily have been predicted, it gave rise to criticism.

97. That criticism is reinforced when the buy back of Mr G's shares at full value, and after the start of these proceedings, is taken into account.  He held 17.5% of the shares.  The husband's position in these proceedings was therefore that although he, his eldest son and the trustees had agreed to this buy back of Mr G's shares, the trustees and his eldest son would not agree to the same non-discounted approach to a sale of the husband's shares to the Company. 

98. An attempt was made to try to justify this stance and the transaction with Mr G, on the basis that the deal had been struck with him a year earlier (at the same time as and as a part of the agreement to buy back the last shares held by husband's father and aunt) and Mr G had asked for and been given an extension.   It was said that earlier buy backs of the shares of the father and aunt had been at a discount and that the non discounted price paid in 2007 was coupled with a reduction in their pensions.  The full value commitment in 2007 to Mr G was said to be based on a gentleman's agreement, but the price was finalised in 2008 at a slightly higher figure per share. 

99. To my mind, this attempted justification was ill advised and I do not accept that it was thought of at the time as a justification for a non discounted price being paid to Mr G.  To my mind correctly, it was not pursued in final argument. 

100. At that stage, the argument was based on the position and fiduciary duties of the trustees and thus it seemed on the basis that the trustees could and should have refused to support the buy back at a non-discounted figure of Mr G's shares (and the terms of the last buy back of the husband's father's and aunt's shares).

101. Naturally, a previous failure to comply with fiduciary duties does not found a conclusion that the breach will be repeated, and it seems to me that in any event a court has to assess the likely reaction of trustees by reference to a proper performance of their duties.

102. Mr Atkins had been a loyal supporter of the justification for paying Mr G a non-discounted price but, to my mind properly, he accepted in his oral evidence that it had no real force and that the only principled basis for paying Mr G such a price had to be founded on the view that the Company was a quasi partnership company.  I would add that an alternative might be that the relationship between Mr G and the other shareholders (as a class) was that of quasi partners.  But if that analysis applied to Mr G it seems likely that it would also apply to the husband.  

103. The longer term history of the Company is of relevance to the quasi partnership issue.  But, to my mind, of central importance to it are the agreements and understandings at the times when the trusts were created, the gift was made to the eldest child and the last buy outs were agreed, leaving the present shareholders.

104. The person in the best position to provide this information is the husband (and perhaps his father and aunt and Mr G) and it seems to me that, against the background of the last buy outs, it was incumbent on the husband to provide relevant information to support his contention that he would only be able to achieve a discounted price for his shares.  This would have involved him putting in evidence as to (amongst other things):

i) his and the family's strategies in respect of the Company buying in shares over the years,

ii) his intentions and strategy in creating the trusts and making the gift to his eldest son,

iii) the position of the existing members of the class of discretionary beneficiaries under the trusts (his children and brother) all of whom are adults,

iv) any discussions he has had with the new trustee, and

v) by reference to the above, and more generally, the information he would be providing to that trustee to enable him to understand the background to the proper exercise of his fiduciary duties.

105. The husband did not do this.  The only aspect of that relevant information covered by the parties in their statements and their questioning by counsel related to the intention to fund the purchase of houses for the children.  I asked the husband a few general questions about such strategies and his plans for the trusts and the Company at the end of his oral evidence.

106. As to the dispute relating to the purchase of houses for the children, I prefer the husband's evidence that the intention was to help them in respect of those purchases, rather than to provide all of the purchase price as the wife asserted.  This is because, in my view, the husband's case is more in line with what is likely to be practically affordable at each of the relevant times.  But I add the qualification that if there was to be a repeat of a large development profit that could fund the purchase of houses for the children it might well found a buy back that puts the trusts in funds to do this, coupled with appointments to those of the children who are then not ready to buy a house.  Indeed, it seems to me that in such circumstances the trustees would want to negotiate such a buy back at a non-discounted price to best promote the interests of the beneficiaries.

107. In the background, the position of the Revenue in respect of periodic and other tax charges on the trusts, and the point that discounted valuations have been agreed with the Revenue, are potentially relevant.  Also, there is the point that I was also told by the husband that the trusts are kept separate from each other.

108. I have very little information to go on.  But doing the best I can on what I have, I have concluded that the understanding and expectation at the times of the creation of the trusts, the gift to the eldest son and the last buy outs was that if:

i)  there were funds available, and

ii) a buy out would not have a detrimental impact on the respective percentages of the respective family interests, then
as and when each family interest wanted to raise cash from its shares it would be bought out at a non-discounted price.  In my view this founds an equitable expectation that underlies, or is equivalent to that which underlies, a quasi partnership if those qualifications are satisfied.

109. The first qualification introduces an assessment of the commercial and business consequences of a buy out and I record that, to my mind properly, the husband recognised and asserted that his discount argument was not based on affordability, or on any such business or commercial factors.

110. The second qualification would support a result in which (a) the husband retained the highest individual shareholding until he ceased working for the Company or ceased to rely on it for his income in retirement, and (b) the trusts each held below 25% of the shares (and together less than 50%).  The husband's offer was based on him selling 600 shares, which would accord with this. 

111. In respect of the negotiating position, I indicated during the hearing, and I remain of the view, that it seems to me that the interests of the beneficiaries for the medium to long term would be best served by the trustees agreeing to a buy back of the husband's shares at a non-discounted price, on the basis that, as and when the opportunity for the trusts to sell shares to the Company (or another shareholder) arises in the future, the understanding is that the same approach will be taken.  I am of this view notwithstanding the potential for it creating problems in agreeing values with the Revenue, not least because the underlying approach requires both consensus and the existence of appropriate circumstances, and this leaves open the non-discounted approach to valuations for periodic charges to tax because those appropriate circumstances may well only arise from time to time.

112. If the husband is not entitled in equity to expect such a non-discounted approach then it seems to me that the trusts certainly would not be.  Rather, absent such an underlying understanding, the strength of their negotiating position would be that if all the shareholders other than the husband combined their votes they would hold a majority and could use that to pass ordinary resolutions.  If they did so against the wishes of the husband the prospect of litigation in the Chancery Division would be high and the prospect of family disruption and upset even higher.

113. This non-discounted approach:

i) looks at the position purely from the perspective of the financial interests and position of the beneficiaries, which coincides with the approach to be taken by trustees, and

ii) it ignores the likely view of the present adult members of the class towards their parents.

As to (ii), the evidence was to the effect that they all had a good relationship with both of their parents, and would wish to help and support them, whilst (on advice and in any event) having an eye to their own interests.  As it is likely that only one of the children will ever "take over" S Hall, and it is not known who that child might be, their present financial interests are to maximise their "cash benefits" from the trusts in the medium term.

114. This conclusion means that I do not have to adjourn to consider:

i) the possibility of varying the trusts as post nuptial settlements, or

ii) adding the wife as an ex spouse or widow to the trust created by the husband (Trust A).

Both possibilities were raised on behalf of the wife for the first time during the hearing, but were not pursued.

A home for the wife
115. As I have indicated the husband has already transferred his interest in the New York apartment to the wife.  I accept that she has now decided to make her main home in London.  She has identified a conversion in Notting Hill that she would like to buy.  It has a studio and substantial living space, and is on the market for £2.5m.  She would like to live there or in North Kensington and seeks a housing fund of £2.5m, which is £900,000 over the value of the New York apartment (on the basis of the indemnity in respect of the uncertain tax liabilities).

116. The husband argues that she could obtain a perfectly acceptable home in other areas at a lower price (around £1 to £1.5m).  That is undoubtedly true, but it does not make the wife's claim unreasonable or unfair.

117. To my mind, by reference to (a) the lifestyle of the parties, (b) their homes in New York and England and (c) the wife's interests particularly in art that have developed, particularly since the children and the running of a home for them and the husband have taken up less time (and which have been supported, funded and encouraged by the husband) make the wife's claim for a housing fund of £2.5m fair and reasonable (subject to affordability and a cross check with other factors) and thus a building block for her award.

118. The quantification of the housing fund that the wife seeks excludes moving and fitting out costs if the price paid for her home is £2.5m.  As matter of timing, she may have to buy before the apartment in New York is sold, but if she does the proceeds of that sale would replenish the balance of her award.  The possibility of her trading down and releasing a capital sum at some time in the future would also exist if she applies £2.5m towards the purchase of a home in England.

The wife's relationship with, and intention relating to, Mr B
119. In her oral evidence the wife told me that Mr B had asked her to marry him and she had refused.  In my judgment she greatly downplayed the importance to her, and to Mr B, of their relationship but I accept that at present she does not intend to marry or to live with Mr B or to be dependent upon him in any way financially.  In my view her intention is to continue to see Mr B regularly, both in the USA and on holidays, and to continue the relationship she described.  An important aspect of that is that, as she says in her statement, she seeks independence from the control of any man, as a divorced woman who (as was not disputed) showed absolute devotion, loyalty and support for the husband in all orders of their life together, during which consideration for his well-being, his career, his family, and his choices of places to live always mastered her own and during which she took responsibility for the day-to-day care of the four children.  

120. I accept the wife's evidence that unless she was to marry Mr B she would have very great difficulty in obtaining a visa to live in the USA.  She has investigated that possibility and taken advice on it, and the advice is to that effect.  Clearly, the prospect of living in the USA has had and has its attractions for the wife, based on her friendships and the enjoyment of her life there, her relationship with Mr B and the fact that her oldest child plans to live there.  The wife has however now decided for a combination of reasons that she wants to make her home in London and to travel regularly to the USA.  She asserted that the most central reason for her wish to undertake such travel was to see her son.  I accept that that is a reason for that wish, but in my judgment more important reasons for it are her love of her lifestyle there and, so long as it lasts, her relationship with Mr B.

The wife's budget and her case on need
121. The wife's budget, on the basis that she will have her main home in England, is £177,707.24 per annum.  She told me that she had worked this out very carefully but did not give any details of her calculations.  As to that, I acknowledge that some judges do not encourage the provision of any such detail, whereas I do.

122. However the lack of particulars as to the assessment of the budget is of little relevance because (a) the husband accepted that this level of expenditure would be commensurate with their lifestyle in the later years of the marriage when his earnings were very high, and (b) in my view correctly counsel for the wife asserted that this was the basis of, and the justification for an award based on, this budget.

123. There is a sum of £30,000 per annum included for holidays and flights.  It was asserted on the wife's behalf by counsel that this was "standard" in cases of this type.  I do not know whether that is the case, but the assertion does not fit easily with the basis on which the wife presented her budget namely that she had prepared it carefully by reference to her plans and past expenditure.  Those plans, and thus her budget as she presented it, were based on frequent trips to the USA.  I have found that a significant reason for these trips is her present relationship with Mr B, and in my view it follows that the whole of these travel costs cannot fairly be said to be a need generated by the relationship between the wife and the husband.  So, in my view the husband is right to assert that he should not have to fund it.  I would therefore reduce the budget the wife put forward by £15,000 to £163,000.        

124. The wife's position is therefore that she should have a lump sum calculated on an amortised basis that will provide her with a standard of living that matches the standard enjoyed by the parties during the years when the husband's earnings were at their height.  She quantifies that at £4.35m, and she would pay her outstanding costs and indebtedness from that figure as well as consequential costs of the purchase of a home in London, leaving approximately £4m.  This equates to a Duxbury sum for an income of £178,000 per annum for a woman of 54.  For an income of £163,000 she would need a Duxbury sum of about £3.6m.

125. Therefore, on the basis of the indemnity relating to tax on the New York Apartment, the wife seeks a lump sum made up of £900,000 in respect of housing and a Duxbury sum to meet her income need.   This would be £5.25m (if the income is £178,000), or £4.85m (if her income need is £163,000).  It is clear that such an award cannot be met from the assets in respect of which there is no good reason for departing from equality in the application of the sharing principle.

126. The wife maintains that the award she seeks is fair and affordable on an application of the sharing principle because, on her assertions as to the value of the husband's shares and the total value of the assets, it would leave her with about 40% of the total assets.  Inherent in this position is the correct acceptance that there is good reason to depart from an equal sharing of all those assets.  However, it seems to me that a claim based on the proposition that it would be fair for the wife to receive a lump sum that on an amortised basis would enable her to lead a lifestyle equivalent to that enjoyed by the parties when the husband was a high earner irrespective of what (a) the husband may be earning in the future (before and after retirement), (b) the husband's capital position and (c) the plans, and expectations of the parties concerning retirement were, is flawed.   

127. Looking to security in retirement (as was, for example done by me in McFarlane v McFarlane [2009] 2 FLR 1322) an income considerably less that £178,000 net a year would provide the wife with complete security and a very comfortable lifestyle, commensurate with the standard of living during the years of plenty.

128. There are a number of items in the wife's budget that are only justifiable on the view that it would be fair for her to have an income that took no account of any reduction in spending on retirement and in retirement.  As in McFarlane, her level of income during that period needs to be assessed by reference to the choices and plans made by the parties.  This has a close link to the way in which they viewed the inherited and gifted assets.

The wife's argument on sharing
129. Her counsel produced a calculation which assessed the percentage split on the basis of the award sought by the wife as Husband 58% / Wife  42%.  He also provided a helpful computer programme that recalculated the percentages on changing only two figures (namely the gross value of the husband's shares and the lump sum award to the wife).  This is a helpful tool but I do not pretend to understand how it works.

130. This approach by the wife to the application of the sharing principle assessed the departure from equality, because of the accepted good reasons relating to gifted and inherited property, by taking the award sought by reference to the application of the need principle, and then calculating the percentages of the total value of all of the assets that each party would have after that award had been paid.  The second stage was based on the valuations put in evidence (and thus their methodology).

131. An important element of the calculation at that second stage was the net asset valuation of the Company.  It was accepted that my views on the further adjustments (if any) that should be made to the adjusted net assets figure agreed by Mr Walton and Mr Atkins (namely £23,331,845) would have an impact on that valuation.  So the computer programme enabled changes to be made to that net asset valuation of the Company to reflect the adjustments I made. The net asset value of £23,331,845 was based on an approach that included within the assets of the Company the whole of the value placed on S Hall and the neighbouring 150 acres of land with vacant possession.  It therefore ignored the husband's lease and marriage value.  As mentioned, in my view that is a flawed approach but I shall adopt it in considering the wife's argument on sharing because: (a) it enables me to use the helpful programme provided to recalculate the percentages, (b) the calculation has a spurious accuracy because of the underlying uncertainties in respect of some of the valuations, and (c) I suspect that, if the lease and marriage value are taken out of the Company and included separately, that adjustment would not make a significant difference for present purposes (see later when I approach the valuation and sharing of the assets on this basis).

132. The calculation and computer programme also proceed on the basis that, in assessing the net value of the husband's shares, a deduction of 25% should be made from the gross proceeds of a sale of 955 shares to the Company, and a deduction of 18% should be made from the balance of the retained shares.  This approach is based on assumptions that (a) 955 shares will be sold to the Company and the proceeds taxed as a dividend, and (b) the balance will be subject to capital gains tax.  The assumptions recognise the reality of a sale to the Company this tax year rather than a fiction of a sale of all the shares and a liability to capital gains tax arising this year, which would accord with the methodology of the valuation (i.e. a sale of all the shares or a winding up now).  There is inevitably some uncertainty as to the tax that will be payable on the retained shares and as to future tax rates.  The split of 955 shares sold and 1394 shares retained does not change on the input of different figures for the gross value of the husband's shares and the lump sum.  But, as this fixture in the computer programme only relates to the tax deducted at 25% from the gross value of the husband's shares, I doubt that the absence of any such change has a significant impact on the overall percentage division.

133. To my mind a difficult issue arises in respect of the treatment of the inherent corporation tax, which is complicated by the exclusion from the calculation and computer programme of any recognition of the lease and the marriage value point.  If there was no lease, it seems to me that the hypothesis of the valuation lends itself to an assumption that a purchaser might want to keep S Hall (and the surrounding 150 acres) in the Company and, if so, there would be a basis for arguing in negotiations that the inherent corporation tax relating to it should not be deducted.  Alternatively, the purchaser may want to own S Hall (and the surrounding land) personally, or through a different company, in which event the corporation tax in respect of it would be triggered and the negotiation on inherent tax would focus on the other assets.  In my view, the likelihood would be that the vendors would not be in as good a bargaining position as the hypothetical purchaser on both aspects of these negotiating positions.  Also, I suspect that it is unlikely that a purchaser would want to keep S Hall within the existing Company, and even more unlikely that any such purchaser would want to keep many of its other assets.

134. The wife sought to add back 25% of all the inherent corporation tax on a valuation based on a sale of S Hall and the neighbouring 150 acres of land with vacant possession.  This was calculated by adding the increase in inherent tax arising from the increases in value (£594,641) to the inherent tax total of £2,463,000 in Mr Walton's earlier report, giving a total of £3,057,641, 25% of which is £764,410.  (By coincidence, this equates to Mr Walton's calculation of the inherent corporation tax on a sale of S Hall with vacant possession, but without the additional land, at a valuation of £4m, in respect of which the figure for inherent corporation tax was £781,200.  As appears later, this is relevant when considering the value of the Company on the basis that the husband has a long lease of S Hall and marriage value).  In my view, the better argument for adding back a sum in respect of such tax, is by reference to either the inherent tax on S Hall or on the other assets (see paragraph 133 above), and the generalised 25% approach taken by the wife has little force, albeit that it equates to the sum that might be negotiated on those bases.  I therefore proceed on the basis that there is a negotiating position in favour of (and there is thus an arguable case for) an add back of £750,000 (which equates to a small discount on the inherent tax on S Hall and about 33% of the inherent tax on the other properties) should be made in respect of inherent tax. 

135. As appears earlier in my view, in accordance with the methodology used in the valuation of the Company:

i) the deductions from the net assets figure of £23,331,845 that should be made are (a) a capital provision for pension (£1,127,000), and (b) a general percentage adjustment for changes in property values since 2007 (£567,000), 

ii) no addition should be made for the revaluation of the two London houses occupied by elderly family tenants,

iii) it is arguable / negotiable that an addition of about £750,000 should be made to the net assets in respect of inherent corporation tax.  This is a round figure and alterations to it by plus or minus £50,000 will have only  a small impact on the resultant percentage division, and

iv) the husband's shares should be valued at 49.46% of the resultant net assets figure without any discount because it is a minority interest.

That gives a net assets figure, of £23,331,845 minus £1,694,000 (£1,127,000 + £567,000) = £21,637,845, or £22,387,845 if the inherent tax (at £750,000) is added, and results in values for the husband's shares of £10,702,078 or £11,073,028.

136. If those values are introduced into the computer programme provided by the wife's counsel, her percentage share is 46% or 45%.
A different approach to sharing – the inherited and gifted assets – the bonuses and post separation earnings

137. A mathematical approach to sharing by reference to valuations has a spurious accuracy.  This is because underlying the bare figurers and simple maths based on them, there are a number of "moving parts", including assumptions, unlikely hypotheses, uncertainties, and issues of "art rather than science".  Other approaches can be said to suffer from equivalent underlying assumptions and/or can be said to lead to arbitrary, or generally and broadly based, decisions.

138. It seems to me that an approach that is only based on percentages based on valuations will in many cases fail to have proper regard to all the circumstances, and therefore the court should consider the application of the sharing principle in additional ways. 

139. In my judgment the relevant additional ways in this case are:

i) an approach by reference to the circumstances of the case (e.g. the input during the marriage and the source of the asset as it now is) to assess the extent of the departure for good reason from equality in respect of assets to which such a departure may be applicable, and

ii) an approach that compares the respective positions of the parties against the likely reality of their respective positions after the award (and thus, here on the bases that not all of the assets will be sold, and that the husband will retain shares in the Company and live at S Hall as its tenant).

I shall return later to (ii).

140. As to (i), it is not practical to apply it out by reference to a formula or mathematically.  It is an approach that has to be carried out by standing back and making a general assessment of the impact of the relevant factors.

141. This is a long marriage with four children in which both parties in their respective ways have contributed fully. The length of the marriage and the point that S Hall (and its contents) was the matrimonial home are factors which go to reducing the impact of their gifted source.

142. It is, however, clear that S Hall, the inherited chattels and the shares in the Company represent the products of wealth created by the husband's family since the end of the 18th century that has been handed down.  It is, in my view correctly, common ground that on an application of the sharing principle this needs to be recognised and reflected in the award in this case.

143. The difficulties relate to how this should be done.  To my mind, those difficulties are compounded by (a) the points I have made on the valuation, and thus the conversion, for the purposes of comparison, of all the assets to a cash value, and (b) the lack of information concerning the business plans and expectations for the Company during the husband's retirement.

144. Standing back from the calculations and the table of assets, it can be seen that of the net assets of around £16m (varying with the value of the shares) around £12m (and so around 75%) represent assets in respect of which there is good reason to depart from equality.  To mind, although this is long marriage and part of the assets are the matrimonial home, this divide of the assets supports a preliminary view that (subject to meeting need) an overall result that gave the wife 40% of the total on a "sale and valuation" basis would be surprising.  This therefore supports or triggers a need to look at the assets individually in the way suggested in paragraph 139(i) hereof. 

145. There are a number of disputes as to the approach to be taken to the inherited and gifted assets contained in well drafted s. 25 statements.  Both parties confirmed and advocated their respective written assertions in their oral evidence.

146. It is clear, and common ground (or effectively common ground), that:

i) over the years the Company has been a source of financial help to members of the husband's family, through salary (to those working for the Company), dividend, the provision of housing through tenancies and some loan finance (e.g. to the parties for their earlier matrimonial home), and

ii) the move to live at S Hall was always a source of tension and division between the parties, because the wife was never happy living there, whereas the husband loved the house and very much wanted to live there.  Indeed, a common theme of the history was that the husband was very keen to take over S Hall as the person in his generation who loved and lived at his family home and enjoyed its contents, whereas the wife would not have chosen that life and would have remained living in London.  Her objections, unlike those of her mother in law, did not however, to her credit, lead her to refuse to move to and to make S Hall her matrimonial home and the home of the children.

147. The wife asserts in her statement that since the separation of the parties there has been a shift in language used to describe the matrimonial home (S Hall) and its contents (in which she includes the photograph albums) and that it is very strange for her to find that what had always been designated as "ours" should now be described as "his".  This assertion and the underlying difference it represents was not investigated in any detail in oral evidence. 

148. In this context, it was not suggested that any of (a) the shares in REC gifted after the marriage, (b) the lease of S Hall, or (c) the inherited chattels and photograph albums were given or granted to the parties as a couple.  The closest one gets to this is the wife's assertion to the effect that the parties regarded them as such, whatever the donors or grantors thought (e.g. that S Hall was to be our family home, and REC our family's company). But the overall effect of the evidence is (and I find that) they were gifts and a grant of a lease to the husband alone, as a member of his family.

149. As already mentioned, I prefer the husband's recollection and account of the thinking in respect of the use of trust moneys to buy houses for all the children. I also prefer his account concerning the proposed sale of the photograph albums following the death of his grandmother.  At that time the husband was not earning at anything like the rate he did later (following his move to the banking sector), the parties had embarked on the expense of living at S Hall and they wanted to educate their children privately.  To my mind, a natural and sensible course was to investigate generally the value of what could be sold to meet the tax payable in respect of the gifts made by his grandmother and their other existing and prospective outgoings. I accept the husband's evidence that agents (and potential buyers) became very interested in the photograph albums and that this was a product of that general investigation (which covered the albums and loose photographs together and separately), rather than a wish or plan to realise them at that time to raise funds which would have greatly exceeded the tax due (which in the events that happened was effectively met by a sale of some loose photographs).

150. In line with his desire to live at S Hall, because it is his family home and he loves it and his heritage, I have concluded and find that the husband (a) never wanted to sell, and does not want to sell, the photograph albums, and (b) fairly, has regarded them and still regards them as a family heirloom.  In my judgment, they are akin to my example of a Victoria Cross won by an ancestor and they have received no "value added" from the marriage partnership and they do not remain as an asset of the husband's because the wife persuaded him not to sell them following the death of his grandmother in 1990. 

151. In my view, on a discrete application of the sharing principle the good reason to depart from equality in respect of the photograph albums results in them being attributed 100% to the husband.

152. That is not to say (a) that the husband (and the wife) have not been aware of their value as an investment and the possibility that they could be sold as a source of finance for a (very) rainy day, or (b) that the wife has not enjoyed the content and artistic merit of the photograph albums. 

153. Also, applying the authorities as to inherited or gifted assets that attribution of the photograph albums, on an application of the sharing principle, does not remove the possibility that they might have to be sold to meet the wife's claim based on need (generously assessed).

154. It is, of course, natural to refer to a matrimonial home, however grand, that is owned by one spouse and to its contents as "ours" and, as the authorities indicate, the matrimonial home may fall to be treated differently to other gifted assets.  A complication in this case is that the husband only ever had a long lease of the property. This splits the overall ownership and value between the Company and the husband and means that the leasehold and the inherited chattels were all owned by the husband personally.

155. It was common ground that the wife put a great deal of work and effort into S Hall after she had, using her words, accepted that the husband's wish that it should be their home should master her own.

156. Many of the chattels were the "fittings and furniture" of the matrimonial home and as such they were used and enjoyed by the family.  Other chattels (e.g. the library saved from the previous property and family portraits) perhaps have a different character that links them more closely to their heritage than to the matrimonial partnership.

157. But, in my view, on a discrete application of the sharing principle to the lease and the inherited chattels, both the length of the marriage and the respective commitments of the parties to S Hall, as their matrimonial home, support a 50/50 sharing of the leasehold interest and those chattels.  If anything, this is generous to the wife because some of the chattels (like the photograph albums) can be said to have the characteristics of family heirlooms.  But the approach has to be a broad one, both by reference to the identification and valuation of such chattels and because of the impossibility of taking a mathematical or formulaic approach to this analysis of sharing.

158. In my judgment, (a) the wife in her statement overplayed the part played in the business of the Company by the husband, and (b) his account (and that of Mr Atkins) of his role as one of oversight is a far more accurate description.  In my view, this conclusion follows from, and is supported by, (a) the time and energy that the husband has had to put into his other work, which resulted in what the wife correctly refers to as his meteoric rise in the Banking sector, (b) the nature of the Company's business, and (c) the employment of agents (the husband being instrumental in a change of such agents) and the work done Mr Atkins and Mr G.

159. I accept that there were some sales of properties, to fund "buy backs" by the Company of its shares.  But there is no evidence of purchases and sales for this purpose.  Rather, the properties that were sold seem to have been owned by the Company since its inception, and the very significant sum received from the sale of the land in East London (a) was for land that had been so owned, and (b) was not the product of any active management or trading.  Some properties were refurbished and the wife assisted with this, but the general picture is of a company that on its inception became the owner of a land bank (comprising a variety of properties) which generally it retained and let.  From its letting income it paid dividends and salary to benefit family members.

160. An example of this underlying purpose to assist members of the husband's family from this income yield is, in my view, the help given, or the potential for giving help, in that way to the husband's brother.  He was a shareholder (his percentage being enhanced by a gift from the husband) and after he was bought out he was added as a beneficiary to Trust A.  I accept the husband's evidence that the present intention is that the capital of the trusts (i.e. the shares) is to go to the parties' children and, although this was not gone into in the evidence in any detail, it seems to me that the purpose of the addition of his brother as a discretionary beneficiary was to make it possible for some dividend income to be paid to him from the family company.

161. There were a number of company "buy backs" which the wife asserts were planned and orchestrated by the husband so as to gain control of the Company for the benefit of  "our family" (i.e. the parties and their children).  Some of these were at a discount.  The history of, and thus the negotiations relating to, and the feelings engendered by, the earlier "buy backs" were not investigated in any detail, but I accept the assertion of the wife that some of them caused bad feeling. 

162. A strategy or plan to increase the percentage holding of the husband and his children in the Company clearly makes sense and is a natural progression from the decision to grant the husband a long lease of S Hall, and the gifts made to him by his grandmother. Equally, those family decisions provide a background against which it made sense for other family shareholders to sell their minority interests to the Company.  The result has been that the husband, the trusts and his oldest child and thus effectively the husband and his children (although there is at present one additional beneficiary (the husband's brother) and others could be added) are the persons beneficially entitled to the shares.  How much of this result was planned and orchestrated and how much of it was the result of advantage being taken on both sides of a buy back of beneficial realisations of properties is not something I can decide on the evidence.

163. In any event, this result (i.e. the husband, the trusts and N having larger percentage holdings of a smaller whole) was essentially reached by the use of the proceeds of the sales of property transferred to the Company on its inception.  It was therefore a product of the use of the proceeds of properties representing wealth created over the years by the husband's family, rather than the use of profits created by the work and business decisions of the Company's management and the input of the husband into that, matched by the domestic and home building support given to him by the wife and thus the marital partnership.

164. In my view, on a discrete application of the sharing principle to the Company (and thus to the husband's 49.46% interest in it) the maximum that could be attributed to the marriage is 50%, which would lead to a 75/25 division.

165. The bonuses.  These were earned after separation and, in my view, a discreet application of the sharing principle leads to a 70/30 division of them.

166. Carrying forward these views on sharing.  I do this on the following bases:

i) The net assets value of the Company, on the basis of a sale, has to be adjusted by subtracting (a) a value to be attributed to the husband's lease, (b) the capitalised pension £1.127m, and (c) the general percentage adjustment to the 2007 schedule (£567,000).  I have taken £1.25m as the value to be attributed to the husband's long lease, which gives a vacant possession value of £4m for S Hall and the additional neighbouring land.  Coincidentally (but helpfully for assessing the net asset value of the Company) this is one of the values used in the alternatives contained in Mr Walton's last report. The net value of property included in Mr Walton's last report, on the basis that S Hall (without the additional land) had a value of £4m, is £3,098,800.  In his earlier report the net value included for S Hall (and the neighbouring land) was £2,520,671.  This results in an increase in the net assets of £577,329 to approximately £22.6m (based on the net assets in the earlier report £22,018,000 + £577,329).  Deducting (£1.27m for pension + £567,000 for property value adjustment) gives a net assets value of £20.9m, (49.46% of that being approx £10.34m gross).

ii) I have then added back the negotiable figure of £750,000 in respect of the inherent tax (see paragraphs 133 and 134 above).  On this basis I have arrived at a net asset value of about £21.65m for the Company.  This gives a gross value for the husband's shares of £10.71m and a net value, after deducting capital gains tax at 18%, of £8.78m (say £8.8m).  (In this calculation, it seems to me that it is not appropriate to adopt the approach taken on behalf of the wife, which was to allocate a 25% tax rate to some of the shares, because the husband is likely to sell them to the Company.  This is because I am only carrying forward into figures my views on sharing set out above.)

iii) I have not deducted any tax from the £1.25m that I have attributed to the husband's lease (whether this assumption is sound probably does not matter for this purpose, because this value is shared 50/50 in the calculation).

iv) I have taken the declared bonuses at a non discounted figure, which in my view is optimistic.  A discount in the amount received will not however have a major impact on the percentage division of all the assets.

167. That leads to the following result:

Asset                                                   H                     W                                Total   

 

New York Apartment                                                 £1.6m

South American house                                                £36,000

 

Property                                                                   £1.636m                      £1.636m

 

            Bank accounts                       £1.129m          £420,000

            Investment                             £233,000        

 

Cash / investments                         £1.362m          £420,000                      £1.782m

 

            Declared bonuses                 £557,407         £238,889                      £796,296                                            

 

            Pensions / insurance              £354,000                                              £354,000

 

 

Photograph album                      £1.4m                                     

       Inherited chattels                        £450,000         £450,000

 

Inherited chattels                                                                                           £2.3m

 

Lease                                                  £625,000         £625,000                     £1.25m

 

REC shares                                        £6.6                 £2.2                             £8.8

 

Totals                                                  £11.348           £5.57m                        £16.918m

 

 

            Liabilities                                 £48,000           £60,717

            Unpaid costs                           £135,189         £137,959

 

            Liabilities/costs                     £183,189         £198,676                     £381,865

 

Net                                                    £11.16m           £5.37                           £16.53

                                                                       67.5%              32.5%

I naturally accept that this result is based on rounded figures, and a calculation could be done excluding the add back for inherent tax, or including less than £750,000 for it.  Also, my estimate of the value of the husband's lease (and marriage value) is not based on direct evidence but is an extrapolation from the valuations.  But in my view, on the information that I have, for the purpose of carrying forward into a percentage of the whole my views set out above on the sharing of individual assets, this approach is appropriate. To my mind, this percentage division of all the assets fits much more easily than the split urged by the wife (somewhere between 60/40 and 50/50) with the divide of the net assets between those in respect of which there is good reason for departing from equality and those where there is not.

The award sought by the husband and his budget and his case on future income requirements
168. The husband's budgets, set out in his Form E, based on (a) expenditure for, as I understand it, the calendar year 2007 (the year in which the parties separated), and (b) an estimate of post retirement annual expenditure, were respectively (a) £297,990 and (b) £144,900 (divided as between S Hall and living expenses £63,000 / £81,900).  The first figure supports his acceptance of the wife's budget by reference to the level of expenditure in the years leading up to separation.

169. His suggested award would provide the wife with a total fund of about £4.5m (deducting, in accordance with the position reached at the hearing, the "loan" to her brother and an unidentified figure for her outstanding costs as at 18 December 2009).  The indemnity offered in respect of the relevant tax liabilities (if any) on the New York Apartment is a further potential liability and I accept, as pointed out on behalf of the husband, that:

i) in a sense the wife has, through the trusts, had the benefit or pleasure of setting up trusts for the children, and

ii) the proposed capital award exhausts the assets representing the marital acquest, in the sense of the assets as to which no good reason exists to depart from equality in the application of the sharing principle.

170. In argument the husband did not express, or seek to justify the award he invited me to make, in percentage terms.  Rather, he asserted and urged its fairness by reference primarily to (a) the ways in which the wife could utilise the capital available to her as between the provision of housing and an income, and (b) his proposals as to how he would raise the funds to meet the award and why, for the reasons given in his s. 25 affidavit, he said that he could not reasonably raise further funds (which incorporated his arguments that the Company would buy back his shares at a discount, and as to his future income from the Company, which I comment on elsewhere).

171. As the husband points out, the wife can choose the amount of her total resources that she uses to buy a house and that choice will affect her Duxbury fund.  If she spent £1.5m on housing, the balance of the fund he suggests on an amortised Duxbury basis would provide her with an annual income of over £140,000 for her lifetime (equivalent to £232,000 gross), which the husband asserts is well above her reasonable need, given that she would have no mortgage, rent or school fees to meet.  If she was to spend £2.5m on housing, he points out that the balance would provide her with an income approaching £100,000, which he asserts would be more than generous and she would be able to downsize or move to a less expensive home to release capital.

172. The award that the husband suggests and argues for therefore envisages a spendable income during his retirement for the wife of between £95,000 and £140,000, depending on the home she buys.  This correlates to his own budget after his retirement, particularly when the point that expenditure on S Hall will be likely to exceed by a significant margin the expenditure on any house the wife may buy is taken into account; and I accept that it should be.

What award  would provide the wife with complete financial security during the remainder of her life and be fair, having regard to the lifestyle enjoyed during the marriage and the plans of the parties relating to their retirement? 
173. These issues give rise to the need to examine the way in which the parties treated the Company and the intentions of the parties in respect of their retirement, and how they fit with the intention of the husband as to the funding of the award.

174. In the light of the history of the buy backs of shares, the underlying approach of both parties was understandably that the award, or a significant part of it, would be funded by the husband selling some of his shares to the Company and that it would continue as a going concern. To my mind this common ground means that the comparison referred to in paragraph 139(ii) should be carried out on the basis that it reflects the respective positions of the parties after an award is made and paid.

175. In advancing the argument that he would sell some of his shares at a discount the husband did not seek to argue that there should not be a clean break on the basis of affordability, but indicated that the balance would be funded by his other assets.

176. For the reasons I have given, I am against the husband on the "discount point". But, even if I am wrong about this, and the husband has therefore to fund more of the award from different sources, the likely situation after the payment of the award will be that the Company will continue to operate as a going concern and it will be a major source of the husband's income in retirement, through salary and dividend.

177. The parties' plans and expectations for the period after the husband's retirement.  Although the husband's retirement was in prospect before the decision was made to return to London and to continue working in the Banking sector (and was not a long term prospect after that return), the evidence did not expressly address the understanding and plans of the parties as to how their lives would be funded when the husband stopped working in the Banking sector and thus ceased to earn very substantial remuneration.

178. There are assets and savings that effectively represent the years of plenty so far as the husband's salary is concerned, and the New York apartment was largely bought from such earnings.  However, it is plain that the husband's pension and the assets that represent those past earnings would not fund a lifestyle that approached that which was enjoyed in the later years of the marriage. 

179. In my view, a part of the strategy, plans and understanding of the parties concerning the Company, both before and after the enormous rise in the husband's remuneration, must have been (and I find was) that they would look to it to fund their retirement.  The history also indicates clearly that it was the husband's intention that after he retired he and the wife would return to live at S Hall.  The wife must have been aware of this and the husband must have been aware that this would not have been her choice.  However, it seems to me that because the wife, to her credit, had in the past agreed to the move to S Hall to fall in with the husband's great desire to live there, the common understanding, by choice and acceptance, was that after the husband retired their matrimonial home would be S Hall and the Company would provide a significant amount of their income in retirement.  The prospect of the move back to S Hall was also acknowledged as a factor behind the breakdown of the marriage.

180. In my view, the common ground and focus that the wife's award would be funded by a buy back by the Company of some of the husband's shares provided strong support for the conclusion that I have reached as to their plans and expectations after the husband retired from his work in the Banking sector.

181. Further, in my view, that common ground and that conclusion provide strong support for the view that it would be unfair if the award meant that the husband would have to sell all his shares and/or could not continue to live at S Hall and run the Company, because such an outcome would run contrary to the plans and expectations of the parties, and their approach to the Company and the occupation of S Hall.

182. The prospects of the Company.  Unfortunately, there is little evidence on the prospects and business plan for the Company.  This lack of evidence causes difficulties in respect of (a) a comparison that is based on the most likely reality for the future, and (b) the common ground as to how the award would be funded.

183. Such a comparison involves an assessment of the likely income streams and capital resources of the parties. The husband has made some assertions concerning the future performance and income yield of the Company, but the lack of supporting reasoning and material greatly reduces the weight to be given to those views.  Indeed, in my view, as the relevant information is in his hands, or is easily obtainable by him, and is relevant to the s. 25 exercise (e.g. to the future income of the husband), the lack of such supported reasoning can found inferences being made against the husband (see D v D [2010] EWHC 138 (Fam) at paragraph 225).

184. But, in one respect the lack of material relating to the future prospects of the Company supports the conclusion, which I have reached, that the common understanding of the parties was that after the husband's retirement they would look to the Company as a going concern for income and would not have the same spending power or disposable income.  I am of this view because if there had been discussions to the effect that, or the wife had thought that, post retirement the Company would produce a similar income to that earned by the husband in the Banking sector (or would be sold to produce a capital fund), her failure to say so would be quite remarkable.  The conclusion is also in line with the salaries paid, and the dividend yield, in earlier years (including the exceptional dividend in 2008/9) and the nature of the assets and business of the Company.

185. The husband's intentions as to retirement.  I accept that the husband wants to retire in June 2010 and in any event it seems to me that on a sharing basis any income he earns from the banking sector over and above the income and accrued bonuses included or reflected in the table of assets should be regarded as his.

186. The impact of these factors on the assessment of a fair award.  In my view, these factors mean that an important or magnetic factor in assessing the award, and thus the departure from equality in an application of the sharing principle, is the creation of a result that gives the wife lifelong security against the background of the lifestyle of the parties during their marriage and their understanding (and indeed the financial facts of life given their financial position) that they would not be likely to enjoy such significant income after the husband retired. 

187. To my mind, this is a strong factor against an underlying premise of the award sought by the wife, namely that, for her lifetime, she should have a spending power equivalent to that enjoyed by the parties during the husband's years of plenty in the banking sector and therefore even after the husband ceases to earn such significant sums.

188. The non discounted price that the husband is likely to be able to agree for his shares, and thus the capital he could raise on such a sale.  If the Company buys back the husband's shares before the end of this tax year the proceeds will be taxed at 25%, whereas after 6 April 2010 they will be taxed at 36.1%.  This is an incentive to sell as many shares as possible, or to declare dividends this year, albeit that the trusts are taxed at different rates.  Dividends can be declared and not paid out, leaving them as loans to the Company (as perhaps could the purchase price payable for some of the shares owned by the Trusts or the husband or N).

189. So, in my view, there are a number of alternative courses of action open to the Company and its shareholders (which could involve appointments by the trusts).  None were mentioned by the parties, who focused on a sale by the husband of some of his shares to the Company.

190. The point that tax rates are going to rise (and are likely to stay higher in the future) also has an impact on the income yield in the future from the Company and on what net sums can be realised on disposals of shares on sales to the Company, or other shareholders (the only likely purchasers), or on a winding up. 

191. Without entering into any borrowing, the Company could spend £4m on buying back some of the husband's shares.  If it did, that would give him £3m net.

192. For understandable commercial reasons, the husband and Mr A both assert that the Company would like to invest some of its cash in commercial property to increase its letting income.  But, absent any business plan or particularised explanation of the future planned for the Company, it seems to me that I can and should look to that cash as being available to fund a buy back of shares, whilst reminding myself that, having regard to the assets of the Company (and its distributable profits), a large number of possibilities to fund a buy back and alternative commercial decisions are available, including a loan by the husband to the Company of his available £1m to £1.5m cash and investments (if he retains the money in the joint accounts).

193. The valuation of the husband's shares on a buy back should in my view take account of the fact that he has a lease of S Hall, of the marriage value points and of the adjustments that I have concluded should be made.  That involves (a) a valuation of S Hall and the neighbouring 150 acres with vacant possession and thus a marriage value, and (b) a division of the price (and thus the marriage value) between what is owned by the husband and what is owned by the Company. 

194. In the context of the underlying negotiations in respect of such a sale and purchase, I am of the view that the issues relating to an add back of a sum for inherent corporation tax (discussed earlier) provide the most negotiable points. But, in broad terms, when the increase in value for S Hall (and surrounding land) is factored in, the value of the shares on a net assets basis has not decreased since the Company bought Mr G's shares.  As (a) in my view that non discounted purchase was justified, and (b) I have rejected the husband's arguments relating to a discounted price, I would expect the husband to be able to agree a price in excess of £4,400 per share.  I have calculated that price by using the net assets figures in paragraphs 166 (i) and (ii), which result in a range of gross values for the husband's shares of between £10.34m and £10.71m, and thus a gross price per share of between £4,400 and £4,560. 

195. For the reasons I have given earlier, in my view the underlying plan, strategy and understanding as to the appropriate balance of shareholdings would mean that, unless other shareholders sell some shares, the husband could sell up to 1,000 shares (leaving him with 36%, each of the trusts with 24% and N with 16%).  At prices per share of £4,400 and £4,500, the £4m cash in the Company would fund the purchase of 909 and 889 shares. 

196. Future income and prospects of the Company.  If the £4m cash is taken out of the Company (and S Hall is left out of account) the Company would have (using the information before the Court) assets with an approximate gross value of about £17m (see paragraph 67 above).  Some of those assets are properties that are likely to increase significantly in value (e.g. the two properties in London occupied by elderly family tenants, and the pub referred to by the husband in his oral evidence).  Other land should be retained to maintain the best marriage value for S Hall, and some of the land is unlikely to achieve a high rent or have any development value.

197. On the basis that the husband would fund the award from his available free capital and a sale of 600 shares, at a discounted price, the husband and Mr Atkins estimated that thereafter the husband would receive a salary of about £60,000 per annum (the total of the present salaries paid to him and the wife), and a dividend of £30 per share.  The number of shares he would retain was not specified (albeit that Mr Atkins' approach was that the husband would then be paid a gross income of £70,000 which would reduce if he sold shares and the maths can be carried out) and the number might vary by reference to the amount of the award.

198. This estimate was not linked to, or supported by, any projections of the profitability of the Company, or a business plan that had to have regard to the asset base of the Company, its past and present performance and the plans for its future. On the approach taken by the husband and Mr Atkins, the asset base of the Company would be properties having a value of about £17m (excluding S Hall and the neighbouring 150 acres), and about £1.5m to £2m cash to invest in commercial property to enhance the rental income.

199. In his evidence Mr Atkins referred to a gross return of 5% on funds in the Company, when making the point that the extraction of every £1m to "buy back" shares from the Company would reduce its income by £50,000.  This is mathematically correct, and a fair point to make on income.  But nowhere does the husband (who refers to a 4% yield on his outstanding bonuses), or Mr Atkins in projecting future income and profits of the Company do so by reference either (a) to a yield, or (b) to an informed estimate of rental and other income from sales and other investments. 

200. On an assumption that the £4m cash is used to buy back shares, based on my estimate of the price the husband would be left with a little over 36% of the Company, which would, as I have indicated earlier, have assets of between £16m and £17m.  Returns of 5% and 4% on £16m are £800,000 and £640,000 (3% and 2% yields would produce £480,000 and £320,000).  This starting point makes the unparticularised estimates of the husband and Mr Atkins both as to salary and dividend from the Company, seem very cautious and I do not accept them.

201. On the information that I have, it is not possible for me to make a properly informed estimate or projection of the husband's likely future income from the Company by way of salary and dividend.  This is because in large measure this income will depend on the plans for the Company, as to which I have very limited information, and any projection I might try to make from past performance would not be soundly based.

202. General points are that:

i) in my view the failure of the husband to provide projections and properly supported estimates of future income means that he cannot complain if I find, as I do, that his estimates (and those of Mr Atkins) are very cautious and are therefore significant under estimates,

ii) as to salary, the more work the husband does the less would need to be paid to others to do the work that he would take over, and therefore it seems to me that a salary of more than £60,000 would be justified, and

iii) there is a balance to be struck between salary and dividend, that takes account of the amount and value of the work done, and the interests of the shareholders as a whole.

203. The husband's pension entitlement is small (about £6,600 per annum), but his estimate of his future income takes no account of:

i)  income he could earn by utilising his considerable expertise as a consultant, or non executive director, following retirement from his present full time and very time consuming job at the Bank,

ii) his ability, if he does not use his available cash to meet the wife's award, to look to that cash on an amortised or unamortised basis to supplement his income, and to look to the photograph albums to provide capital (on a very rainy day),

iii) in the early years, his accrued bonuses which are (subject to the risk I have acknowledged of claw back) for the 2009 bonus the net sums of £152,512, £153,700 and £158,040 (payable in June 2010, 2011 and 2012), and for the 2010 bonus £101,675 (payable in June 2011, 2012 and 2013), and

iv) the possibility in the early years, that he might continue in his present job beyond June 2010. 

204. As to the early years, I acknowledge that the husband is likely to continue to incur expenditure on the children (e.g. on education and some living expenses).

205. In this comparison of the respective positions of the parties after an award, the husband's gross income is to be compared to the wife's income on an amortised Duxbury basis.  So at present tax rates, to match Duxbury income returns of (a) £178,522 (equivalent to the income sought by the wife) requires a gross income of £300,000, (b) £149,922 requires a gross income of £250,000, (c) £121,322 requires a gross income of £200,000, and (d) £110,000 requires a gross income of £180,207. I have taken these figures from "At a Glance".  When tax rates rise, a higher gross income will be required to meet such Duxbury returns.

206. Estimates of:

i) what the husband will be likely to be able to earn gross in retirement, 

ii) his ability in the future to release capital, and

iii) his ability in the future (a) to set the position as to occupation of S Hall for the rest of his life, and during the next generation, and also (b) to put in place a fair distribution amongst the children (including, if this is one of the them, the next occupier of S Hall),

would involve a number of uncertainties and crystal ball gazing.  A wish to achieve the possibly conflicting results referred to in point (iii) may inhibit or prevent further buy backs of shares, or capital extraction, following the award to the wife.  It may therefore mean that, although the husband will retain capital and the wife will have a decreasing capital fund, the husband's access to his capital (if S Hall and family assets are to be passed on) will be inhibited.  But these possibly conflicting results concerning the next generation flow from the nature of the gifted assets and the expectations of the parties in respect of their retirement.  Also, I record that the possibility that the wish to bring them about might have this effect on the use of capital does not in my view detract from the arguments set out earlier in respect of the interests of the beneficiaries and the approach of the trustees to the issue whether there should be a discount in respect of the husband's shares. 

207. The balance of net income return and gross income.  Having regard to the factors and conclusions discussed and reached under the main heading of this section of this judgment I have concluded that:

i) an income on an amortised basis in the range of £110,000 to £125,000 per annum, and an ability to raise capital in later years on a sale of her home, would provide the wife with complete financial security and a fair and appropriate lifestyle assessed by reference to the lifestyle enjoyed during the marriage and the expectations of the parties on retirement, and

ii) it is likely that, from a combination of sources, the husband's gross income in retirement would match the range identified in (i) if the £4m cash that is held by the Company is used to buy back a percentage of his shares (which would provide him with £3m net).

208. Further, as I have mentioned, the range of income identified in paragraph 207(i) correlates to an income based on the husband's budgets, and to the consequences of the award he asked me to make by reference to the way in which he sought to justify it.  Also, it reflects a reasonable and fair reduction from the wife's budget, having regard to the expectations of the parties and the general point that it is common for the income of a person or a couple to reduce on retirement.

209. As to (ii), I remind myself, and acknowledge that the husband may take a different course to the funding of the award, which could have an impact on the sources of his income and his available capital.  But, that is his choice and this possibility does not alter my view.

Conclusions
210. To provide the wife with the housing fund that I have found to be reasonable (£2.5m), a sum to cover her costs and other liabilities (£198,676) and moving and related expenses (say £200,000), the wife needs, in round figures, £2.9m.  A fund of £2.4m would, on a Duxbury basis, provide her with an income in the range I have mentioned.  This produces a total of £5.3m.

211. On the bases of (a) the indemnity offered, and (b) the husband retaining the sums in the joint accounts, the total of £5.3m requires the payment of a lump sum of £3.62m (calculated as follows: £5.3m less £1.68m (being the total of £1.636m (in respect of the net values of the American Apartment and Buenos Aires property) + £42,000 (in her bank accounts)).

212. By reference to the valuations in paragraph 167 this award equates to 32% of the total assets and, on an application of the computer programme provided by the wife's counsel, it equates to 33.6% and 34.2% using the net asset figures set out in paragraph 135.  In my view neither of these bases of calculation can be said to produce an accurate result that on its own sets the amount of an award, or a minimum level for it.  Rather, in my view, both bases support the conclusion I have reached that such an award represents a fair departure from equality for good reason on a discrete application of the sharing principle.

213. Put another way, in my view it cannot be said that the award based on the above application of the need principle is too low because it represents too big  a departure for good reason from equality in the application of the sharing principle.

214. This award (£5.3m) could be funded as to £3m on a buy back of what I regard to be a fair percentage of the husband's shares and from his bank accounts and investments (or in other ways chosen by the husband), leaving him, in my view on the information provided, with an ability to match the income over the years that such an award would provide for the wife.

215. Both are likely to have an ability to supplement their income in their later years, in the wife's case by buying a less expensive home, and in the husband's case by releasing and/or utilising capital.

216. These comments on amount, and on the respective positions of the parties and on affordability, reflect the main building blocks of the reasoning that I have set out earlier and applied in reaching the conclusion that the award I am making represents a fair award on the application of the s. 25 criteria in the light of the need and sharing principles.  These building blocks appear from the headings and sub headings in this judgment.  Of particular importance are:

i) my approach in law to the facts found,

ii) the strength of the argument that it would be unfair to make an award that was likely to result in a sale of all the shares in the Company and of S Hall,

iii) the expectations of the parties in respect of their lives together after the husband retired from full time employment in the Banking sector,

iv) the reflection of that argument and those expectations in the premise underlying the award (and thus the common approach) that a significant part of the award would be funded by a buy back of shares,

v) the nature of the gifted assets and their value when compared with all of the assets, and

vi) the strength of the argument that an application of the need principle should not be based on an income need of the amount urged on behalf of the wife.

217. Miscellaneous.  My reasoning and conclusion have the result that, in my view, I do not have to consider the disputes relating to the interim provision made by the husband and the borrowing of the wife after he reduced it.  Whatever the rights and wrongs of those arguments, in my view the wife should have an award that includes a sum that enables her to pay off that indebtedness and her outstanding costs.