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K v L [2010] EWHC 1234

Ancillary Relief case concerning treatment of a pre-marital inheritance (£57.4 million). All the assets had been inherited by the wife before the parties meet, were later brought into the marriage, and then used as the only financial support during the marriage. Bodey J ordered a lump sum of £5 million to be paid to husband.

In 1973 the wife inherited shares in company R from her grandfather.  In 1976 R merged with S to become S Ltd.

In 1986 the parties met and the wife's shares in S Ltd were worth £290,000.
By May 2010, at the time of the final hearing, the same shares were valued at £57.4 million. The total combined assets in the case were £59 million. The husband had made no financial contribution to the marriage; the share value had grown not through anyone's skilful management but by passive growth; and the family had enjoyed a modest standard of living given their great wealth.

The focus of the husband's argument was on the principle of sharing: it was a 20 year marriage with 3 children (currently aging from 8 to 15); he had played his part as a husband and father; and the assets had increased in value nearly 200-fold since the marriage. Husband argued the court should consider starting around equality, with a reduction to take account of the fact that all of the wealth was the wife's before the marriage. He advanced an analogy between this situation and what the Court of Appeal said in Charman  concerning a breadwinner's exceptional contribution, namely that it should be regarded as most unlikely for the 'non-exceptionally contributing party' to receive less than about one third of the total. His open position was for a lump sum payment to him of £18 million.

The Wife argued it was a case for meeting the husband's needs fully and generously assessed, but no more. Her open position was for a lump sum of £5 million.

Bodey J labelled the inherited assets as a factor of 'central relevance' (adopting the words of Baron J in NA v MA [2006] EWHC 2900 (Fam) This was the plain good reason for departing in the wife's favour from the yardstick of equality, but the issue was by how much?

A 'key feature' was the modest standard of living of the parties during the marriage, in the same way the high standard of living had been in Miller. The wife's offer of £5 million very generously met the husband's reasonable requirements, and more. To this end it did include the element of sharing as it was actually more generous than necessary.

Although the marriage was long, the wife's pre-marriage inherited shareholding had remained her own discrete asset throughout and never became intermingled with any of the husband's assets, nor was there any suggestion between the parties about putting the shares into joint names.
The Charman analogy was not particularly useful in the circumstances of inherited wealth.

Bodey J ordered in the wife's favour.

Two sub-issues were dealt with: treatment of latent CGT and the date for computing the size of the 'kitty'.  Bodey J took a discretionary and speculative approach to deducting latent CGT given the unusual facts, and held that the date of trial was the appropriate date for computation.

Summary by Alfred Procter, barrister, 1 Garden Court

________________________

[2010] EWHC 1234 (FAM)
No.FD07D01254

IN THE HIGH COURT OF JUSTICE FAMILY DIVISION
Royal Courts of Justice
Thursday, 13th May 2010

Before:

MR. JUSTICE BODEY

B E T W E E N :

K Applicant

-  and  -

L Respondent

 
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MR. M. POINTER QC and MR. G. KINGSCOTE (instructed by Family Law in Partnership LLP) appeared on behalf of the Applicant.

MISS L. STONE QC and MR. D. BROOKS (instructed by Kingsley Napley LLP) appeared on behalf of the Respondent.
_________

J U D G M E N T
(As approved)

MR. JUSTICE BODEY:
A:   INTRODUCTORY
1 This is an application for ancillary relief made by a husband (whom I will call 'the husband') against a wife (whom I will call 'the wife').  It raises issues about the appropriate treatment of inherited wealth, the wife being very wealthy by virtue of pre-marriage inheritances.  This Judgment is anonomysed so as to minimize identification of the family.

2 The wife is aged 51, having been born in 1958 to Israeli parents.  She was born in England, but her parents took her to Israel in 1959 when she was aged one and she was brought up there.  In 1967, on the death her mother, the wife (then aged 11) went to live on a kibbutz until she was adult.  She is now a housewife and mother and is non-domiciled for UK tax purposes.  She has never had to work in the commercial sense by reason of her wealth, but has devoted herself to the home and family.  This has involved a relatively modest standard of living, but with an emphasis on bringing up the children (as per her Form E) '...with decent values, unrelated to material wealth, as we ourselves were [brought up]...'. 

3 The wife lives with the three children at a property purchased by her at the time of the breakdown of the marriage in 2007.  As I am anonomysing this Judgment, I shall simply say that it is in a quite modest area of a county adjoining London.  The property itself (which I will call "the wife's home") is a pleasant but relatively modest four-bedroom, semi-detached house.  The children's ages range from 15 to down to 8.  All have attended local State schools until recently when the middle child moved to a local private school, for which the fees are £4,000 a term, paid for by the wife.  As I say, they live with the wife but see the husband effectively as and when they wish to do so, since the parties live around the corner from each other. 

4 The husband is aged just 48, having been born in 1962.  He continues to live at the former matrimonial home, just round the corner from the wife's home.  He now lives on his own there.  He is a practising Muslim.  He has Degrees in Business Administration and Sociology.  He does not work and has never done so because the wife's wealth made it unnecessary for him to do so.  He asserts that he was able to contribute significantly to the welfare of the family by being an available father in the way that working fathers often are not. 

5 At this hearing, the husband has been represented by Mr. Pointer QC and Mr. Kingscote; the wife by Miss Stone QC and Mr. Brooks.  I am grateful to counsel for their characteristically helpful written presentations, Schedules and oral submissions.

B:   BACKGROUND 
6 Each side has placed before me a Chronology, namely at pp.18 to 23 of the husband's opening presentation and at pp.34 to 42 of the wife's.  There are no differences of significance and I therefore adopt them.  Reference may be made to them if more detail is required than the much-pruned version which I propose to set out here. 

7 The parties met in Israel in early 1986 when the wife was 28 and the husband 24.  By that stage the wife was already possessed of substantial means.  Her grandfather had been a scientist who owned founder shares in a company, R.  In 1973, following the death of his widow, the wife's grandmother, the wife (then aged 15) and her brother inherited those shares.  Later, in 1976, R merged with S to become S Ltd..  It is described in the papers as one of Israel's largest companies, being quoted on the Israeli Stock Exchange and the NASDAQ.  Those S Ltd shares, which are dollar shares, were in the wife's and her brother's ownership when the parties met in 1986, and were then worth in total about £580,000, the wife's half of them being worth about £290,000.  In addition, she had a joint interest with her brother in two properties which they had inherited from family members long before the parties met in 1986, namely a house in France, and a house in Israel.  These two properties still remain in the joint names of the wife and her brother, although neither is of significant value in the context of this case. 

8 There has been some dissent about when the parties started to cohabit.  I am satisfied on the evidence which I have seen that this was in June 1986.  From then on, the parties lived together (initially in Israel, in a flat bought by the wife using her inherited wealth) until they separated in April 2007.  In November 1987 the parties went through an Islamic ceremony of marriage in Israel.  However, the law there did not then recognise marriage between couples of mixed religion, the wife being Jewish and the husband Muslim; and so they decided to move to England to marry legally.  They came here in October 1991, and on 21st November 1991 were married at a Register Office in south London.  At that time the wife's half of the S Ltd shares was worth about £680,000.  Thereafter there occurred various relatively modest dealings in her shares and there were various rights or bonus issues, as a consequence of which the value of her holding has massively increased over the years. 

9 Upon arrival in this country in 1991 and for the first three years of their married life here, the parties lived in rented accommodation.  The wife worked for a few months at the outset, as a nursery assistant.  The husband tried to get work too, but without success.  He started a course as a student nurse, for which he was paid, but that only continued for four months, whereupon he started an English course.  He says that he had a place available at the LSE but let it go when the wife became pregnant with their first child. 

10 In August 1994 the parties purchased their matrimonial home just outside London for £91,000 (per the wife's Form E) which was raised initially through a loan from a family friend.  That friend was later paid back by monies representing the proceeds of some of the wife's S Ltd shares.  The matrimonial home is a three-bedroomed, semi-detached property now valued at about £225,000.  The parties lived there with the three children throughout the remainder of their married life together until their separation in April 2007. 

11 In 1996 the wife and her brother separated out their shareholdings in S Ltd, with the exception of a small number of shares later separated out in 1999.  By virtue of these transactions, the wife became the sole owner of the S Ltd shares which now stand to her name.  In October 2000 the wife sold a number of them for the sterling equivalent of something over £1 million.  Those proceeds were used for the purchase of two properties (see below); for investment in a policy here (since cashed); and for living expenses.  In 2000, 2002 and 2004 respectively, the wife was the recipient of 100% bonus issues in respect of her S Ltd shares, thereby hugely augmenting their quantity.  Mr. Pointer makes the point that neither party contributed to these increases, they just happened.  It was from about 2002 or 2003 that the income produced by the shares began to pick up.  The average income received by the wife from 1993 to 2001 (allowing an estimated £50,000 for the year 1994/1995, for which we have no figure) was at the rate of about £38,000 per annum, and from 2002 to 2008 the average was about £180,000 per annum, if my maths is correct. 

12 In April 2005 the wife bought in her sole name a property near to the matrimonial home for £157,000.  I will call it "Station Close".  It is currently occupied by the parties' former housekeeper who, having started her own family, now no longer works for the wife but does pay her a rent. 

13 On 16th October 2006 the wife purchased her present home (that is, "the wife's home", as defined above) for £320,000.  She spent some £75,000 refurbishing it, and it is now valued at £345,000.  On 27th April 2007 she moved out of the matrimonial home with the children and into the wife's home.  At that time the value of her S Ltd shareholding was about £28.3 million gross. 

14 In April 2007 the wife started divorce proceedings.  This led to a decree nisi on 23rd July 2008, which has not yet been made absolute.  On 18th July 2007 the husband's solicitors wrote to the wife's solicitors enclosing a budget for the husband at £3,505 per month, or £42,000 per annum, which contained a sum of £1,035 per month for the three children.  Stripping that out, the proposal from the husband for his personal support was of £2,470 per month, or £29,640 per annum.  In the event, the amount which came to be agreed between the parties was one of £1,000 per month on the basis that the husband would take over responsibility for payment of the household utilities, agreed to have been in the sum of about £300 per month.  That represented £700 per month, about £10,800 per annum, for the actual support of the husband himself.  He told me in evidence that this was not a representative figure since he was at that time depressed, hoping for a reconciliation and was only looking at things on a very temporary basis. 

15 On 9th October 2007 the parties started counselling, and the solicitors agreed that the divorce would therefore be put on hold.  In December 2007 that counselling broke down.  This was followed in February 2008 by a letter from the husband's solicitors expressing the hope that interim maintenance could be agreed.  However, it was agreed by the solicitors further to postpone this until after voluntary financial disclosure had taken place.  That in turn took a little while, being delayed in part by the wife having to regularise her UK tax position which was not, in the event, finally achieved until June 2009. 

16 On 7th October 2008 the husband's solicitors wrote saying that the delay in financial disclosure was making the husband's interim financial position 'rather difficult'.  They proposed an increase in his maintenance to £4,000 per month (£48,000 per annum) explaining that he had not pressed interim maintenance over the last year because he 'had not wanted to rock the boat'. 

17 The wife's solicitors' response was to enclose a Schedule (referred to further below) setting out the family's pre-separation expenditure in the sum of £6,563 per month or £78,756 per annum, excluding the cost of running the car.  The wife's proposal for interim maintenance for the husband was at the rate of £2,500 per month, £30,000 per annum. 

18 Further exchanges followed between the solicitors and in the result it was agreed that the wife would pay the husband a lump sum, on account of his overall claim, of £100,000.  Of this it appears he had to pay £45,000 for outstanding legal costs, leaving him £55,000 on which to live.  In the meantime, on 20th October 2008 he had issued his application for ancillary relief in respect of which this is the final hearing. 

19 On 27th January 2009 the husband served his Form E which annexed a proposed budget for himself.  This was at the rate of £130,000 per annum, which included £25,000 per annum for the children.  Stripping that figure out, it represented a budget of £105,000 for the husband himself, a very considerable increase on all that had gone before, bearing (as Miss Stone submits) no relation to the standard of living which the whole family had enjoyed during the marriage: paragraph 17 above. 

20 On 8th December 2009 the FDR was heard but was (obviously) unsuccessful.  At that time the husband still had £43,000 out of the effectively £55,000 paid to him by the wife earlier that year.  He had thus spent only some £12,000 between about February 2009 and December 2009.  He says that he was having to be cautious in respect of his resources because of his concern about funding the legal costs of this case. 

21 On 22nd January 2010 the husband's solicitors wrote requesting £350,000 on account of the husband's claims, to cover both his living expenses and legal fees up to this hearing.  The wife's counter-proposal was to offer (a) to make payments at the rate of £4,500 per month, or £54,000 per annum, for his living expenses and (b) to pay his reasonable legal fees incurred in connection with this ancillary relief application.  That is what the parties agreed.  In fact the husband has only spent some £9,000 since the FDR in December 2009.  When Miss Stone put this point to him as part of her case that he is temperamentally a very frugal person, he explained it by saying that he has been dealing with this litigation 'on a daily basis' and has 'not been able to plan'.  He told me "… when this case is over, I will start a new life".

C:   THE COMPETING OFFERS 
22 At the end of April 2010 open offers were exchanged, by which it is agreed that the wife will pay the husband a lump sum in full and final settlement of his financial claims.  This lump sum will be paid offshore and will not be brought into this jurisdiction by the husband until after decree absolute.  The parties' accountants advise that this will mean that no CGT will need to be paid by either party, whether in Israel on the realisation of a sufficient number of the wife's S Ltd shares, or in the UK.  Nevertheless, the wife is going to undertake to meet any tax liabilities which might be incurred by the husband, with his cross-undertaking to take all lawful and reasonable steps to mitigate any such liabilities.  It is agreed that the wife will pay the private school fees.  There is to be a mirror order in Israel.  The wife agrees to pay the husband's reasonable costs of his ancillary relief application up to and including this hearing. 

23 The issue then is as to the quantum of the lump sum.  The husband seeks £18 million, whereas the wife offers £5 million or else a reduced sum if, by the date of actual payment, the net value of her S Ltd shareholding has reduced significantly compared with its present value.  The parties believe they can come up with a formula for this.  I will set out in part E below the competing arguments which give rise to this aspirational gulf of £13 million.  I am not confined to either party's offer.  I could in theory go above or below, and I have certainly of course considered the possibility of an award in between. 

D:   THE SECTION 25 EXERCISE
24 I am required by section 25 of the Matrimonial Causes Act 1973 to have regard to all the circumstances of the case in reaching my conclusion, first consideration being given to the welfare of the three children whilst respectively minors.  Having done so, I must then in particular have regard to the following matters (the headings of which I shall abbreviate):

25 (a) The income, earning, capacity, property and other financial resources of each party now and in the foreseeable future.  Neither party has ever earned income, nor realistically has any earning capacity now, at least not in the context of the wealth in this case.  The wife has, and will have, income by way of the dividends on her S Ltd shares which have supported the family throughout the marriage.  Clearly this will vary from year to year according to the success or otherwise of S Ltd's trading and the exchange rate between the dollar and the pound.  But in essence her income represents a return on some £57.4 million worth of investment, that being the present approximate value of the shares, although naturally they fluctuate in value.  The dividend for the year to April 2010 is not presently known; but for the year to 5th April 2009 it was about £460,000, gross of UK tax due on its being remitted to this country.  The husband will, on any view, have an investment income on howsoever much of at least £5 million he does not put into a home or homes for himself. 

26 As to the assets in the case, these are set out in the usual Schedules helpfully prepared by counsel.  There are few differences between them and reference can be made to them for any further details than I set out here.  I shall round up or down the various figures, which will mean that the maths in the next three paragraphs will appear imperfect. 

27 In terms of real property, the husband has his interest in the former matrimonial home, which has already been transferred from joint names into his sole name.  He also has a half interest in some land and buildings in Israel, occupied by members of his family.  Together these two items of property (the matrimonial home and the property in Israel) are worth about £280,000 net.  He also has cash investments of £40,000, making him worth about £320,000 net. 

28 The wife has her interest in her home at and in "Station Close", and her half interest with her brother in their properties in France and Israel.  These four interests in property total about £600,000 net.  Her cash and investments are worth about £1.1 million.  Her 1,458,112 S Ltd shares are worth about £57.4 million after notional costs of sale.  She has liabilities of between about £250,000 and £280,000.  So her total net wealth pre-CGT is about £58.8 million. 

29 On consideration of counsel's Schedules and on discussion with them during submissions, I propose to take a ball-park figure of £59 million for the total combined assets, reducing to £48.7 million with the incidence of latent CGT.  That CGT is included in counsel's Schedules on the hypothetical basis that all the wife's assets were to be realised and turned into cash simultaneously, although there is an issue about this, i.e. about the correct treatment of CGT, to which I shall revert in part F below. 

30 (b) The financial needs, obligations and responsibilities of each party now and in the foreseeable future.  In his Form E the husband puts his capital needs thus:  £2 million for a house, which he would like to be situated in Regent's Park near to the mosque; £450,000 for a second home in Israel; and £60,000 for a car:  total, £2,510,000.  He states an income requirement of £105,000 per annum for himself as per paragraph 19 above.  In her Form E the wife does not advance any capital needs, expressing contentment with her present home, present value £345,000.  She puts her own income requirement at £99,000 per annum, plus £25,000 per annum for the three children a total of £117,000 per annum.  In absolute terms each party, I suppose, has the same needs:  to be appropriately housed and to have a decent income.  These objectives will be achieved for both of them whatever decision I reach.  The wife will have the responsibility and make the contribution of continuing to care for the children as their primary carer until they are respectively adult, although it is to be hoped that they will continue to see the husband from time to time as they have done in the past. 

31 (c) The standard of living enjoyed before the breakdown of the marriage.  Although there have been some disputes of fact in the papers and oral evidence about standard of living (and the reason for its being as it was), it strikes me that the points of dissension are more forensic than real.  There can be no doubt that the standard of living of the parties was relatively modest in the context of the wife's wealth, and Mr. Pointer realistically opened the case to me in just that way. 

32 The wife has agreed with the husband's view that their lifestyle was 'adequate, not lavish'.  This is self-evident when one looks at the plain fact that, notwithstanding the wife's wealth, they chose:  (i) to live throughout in a three-bedroomed, semi-detached property; (ii) to run a 1994 car, now worth only £1,000; (iii) to send the three children to state schools; (iv) to enjoy only very modest holidays; and (v) to amass no chattels worth more than £500, except for the car. 

33 As I said at paragraph 17, the wife has submitted a Schedule showing that the family's expenditure prior to the separation (i.e. over the latter years of the marriage) was running at just under £79,000 per annum, excluding the car.  The husband told me that that would have been right for some years but that others probably would have been more.  However, there is no analysis to support that, nor otherwise to gainsay the broad accuracy of the wife's Schedule.  It covers housing, housekeeping, transport, clothes and personal expenditure, holidays, entertainment, sports and hobbies, the children's expenses and miscellaneous financial charges.  I do not mean to suggest that a figure around or perhaps rather above £79,000 per annum is not a perfectly comfortable rate of income and consequential expenditure for a couple with three children at state schools.  Grossed up, it is well over £100,000 per annum.  However, all agree that it is not living to the sort of high standard generally encountered in cases involving this level of wealth.

34 In this respect, the husband has stated his perception that the wife was financially controlling and would not spend money, which the wife denies.  She says it was in reality the other way about, that he did not agree with spending.  In response to that, he says that he wanted to move to a bigger house, but that the wife would not do so.  The wife accepts that they did go to look at more expensive properties but says that the husband wanted to move away from the area of the matrimonial home, whereas, having been moved around so much as a child in Israel, she was anxious not to move the children from their schools.  The possibility of buying a bigger property therefore came to nothing.  Apart from that example, the husband has not given any other examples of when he used to press the wife to spend more money, and I do not consider he has made out a case that she was in any selfish way financially controlling.  Clearly she did effectively 'hold the purse strings' and I do not doubt that, as the marriage started to go wrong (the wife was thinking of leaving the husband in 2000, but became pregnant with their third child), he did begin to resent that fact.  Given his modest spending in the more recent past and the fact that the wife has loosened up her spending since the separation, for example on holidays (£80,000 for herself and the three children between December 2007 and April 2009), I am inclined to prefer her evidence that by temperament the husband tended on occasions to put the brakes on family spending.  This is not, however, to imply that she wanted to spend lavishly; for it is perfectly clear that she did not.  That is why I consider this dispute about the reason for the restrained spending to be more forensic than real.  In my judgment, the parties simply chose to live and were content to live in an adequate but by no means lavish or self-indulgent manner. 

35 For completeness, I add this.  Counsel have pointed out, and have very briefly cross-examined on the basis, that each of the husband and wife has been inaccurate in his or her Form E (the husband by claiming to have 'managed the wife's finances', and the wife by deflating her income in the earlier years of the marriage).  I do not regard these points as showing any real lack of credibility either way, since I am sure that both parties were doing their best to give fair and proper disclosure and to explain the financial arrangements as they now perceive them to have been.  In any event, such relatively minor inaccuracies as have been revealed effectively cancel each other out. 

36 (d) The age of each party and the duration of the marriage.  The wife is 51 and the husband is only just 48.  The marriage lasted, with cohabitation, in effect from 1986 to 2007, a period of 21 years.  This is a long marriage these days, although clearly not one of the greatest length; witness the fact that both parties are able to look forward to a number of decades of 'new life' with these proceedings behind them.  Indeed, the husband says in his Form E:  '... in accordance with my religious views, I shall in all probability re-marry and may well have a second family'. 

37 (e) Any physical or mental disabilities.  The husband has suffered from depression both during and after the marriage, although this has not been such as to lead him to obtain medical help, and his health is not a factor requiring special attention as regards the financial outcome.  There are no other matters arising under this heading. 

38 (f) Contributions made or likely to be made to the welfare of the family.  As regards non-financial contributions, it does not seem that there is anything to choose between the parties save, as already stated, that the wife will in practice have the ongoing primary responsibility of caring for and supporting the children through into adulthood.  There has been a suggestion by the wife that the husband's contribution to the welfare of the family was deficient and 'nothing more than a function of the length of the marriage'; but he was on any view around and about as a father and husband in lieu of going out to work commercially.  He used to drive the wife and the children everywhere, as the wife does not drive.  It is clear that he assisted with the family finances (I am not talking about the management of the wife's wealth) and with other practical things about the house, even though not always to the wife's satisfaction.  It would not be appropriate for me to seek to discriminate between the roles played in that sense by the husband and the wife as regards the welfare of the family and I shall not do so. 

39 There was, however, one substantial particular contribution to the welfare of the family, namely the wife's contribution of her S Ltd shares and (to a much lesser extent) the other properties in which she had inherited an interest many years before the parties met.  It is a fact that the husband made no financial contribution to the marriage.  It was the income on the S Ltd shares which supported the family throughout, together with very occasional share realisations enabling capital outlay to be made as required for the benefit of the family.  Such financial contribution by the wife clearly goes into the melting-pot as a very important factor in deciding the outcome of the case. 

40 (g) Conduct.  Neither party raises the other's conduct. 

41 (h) Any benefits lost by reason of the divorce.  There are none here.

E:   NEEDS, SHARING AND ACHIEVING FAIRNESS.
42 It was in Miller and McFarlane [2006] 3 All ER 1 that the House of Lords identified the 'element' or 'strands' which go to make up fairness, see e.g. per Lord Nicholls at paras.4 to 20.  These are:  needs, compensation and sharing.  Only the first and third of these components of fairness are in play here, since Mr. Pointer realistically does not submit that this is a case where compensation is a consideration.  The concept of a person's needs is self-explanatory and appears as an express consideration in section 25 above.  As regards the concept of sharing, Lord Nicholls said at para.16 of Miller and McFarlane:

"...  [The] ' equal sharing' principle derives from the basic concept of equality permeating a marriage as understood today.  Marriage, it is often said, is a partnership of equals...  The parties commit themselves to sharing their lives.  They live and work together.  When their partnership ends each is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary.  Fairness requires no less.  But I emphasise the qualifying phrase 'unless there is good reason to the contrary'.  The yardstick of equality is to be applied as an aid, not a rule."

43 It is self-evident that the concept of 'sharing' requires special thought and reflection in respect of assets not the product of the direct or indirect efforts of the parties jointly, i.e. as Lady Hale put it in Miller, not the 'fruits of the matrimonial partnership'.  Hence, to go back in time, Lord Nicholls said in White v. White [2000] 2 FLR 981:

"...  Plainly, when present, this factor [the existence of property acquired before marriage or inherited property acquired during marriage] is one of the circumstances of the case.  It represents a contribution made to the welfare of the family by one of the parties to the marriage.  The judge should take it into account.  He should decide how important it is in the particular case.  The nature and value of the property, and the time when and circumstances in which the property was acquired, are among the relevant matters to be considered." 

44 Lord Nicholls reverted to this theme in Miller and McFarlane itself, when he said at para.21:

"...  By section 25(2)(a) the court is bidden to have regard, quite generally, to the property and financial resources each of the parties to the marriage has or is likely to have in the foreseeable future.  This does not mean that, when exercising his discretion, a judge in this country must treat all property in the same way.  The statute requires the court to have regard to all the circumstances of the case.  One of the circumstances is that there is a real difference, a difference of source, between (1) property acquired during the marriage otherwise than by inheritance or gift, sometimes called the marital acquest but more usually the matrimonial property, and (2) other property.  The former is the financial product of the parties' common endeavour, the latter is not." 

Having then gone on to talk about the matrimonial home, Lord Nicholls continued at para.23:

"The matter stands differently regarding property ('non-matrimonial property') the parties bring with them into the marriage or acquire by inheritance or gift during the marriage.  Then the duration of the marriage will be highly relevant. ...in the case of a short marriage fairness may well require that the claimant should not be entitled to a share of the other's non-matrimonial property.  The source of the asset may be a good reason for departing from equality.  This reflects the instinctive feeling that parties will generally have less call upon each other on the breakdown of a short marriage.  With longer marriages the position is not so straightforward.  Non-matrimonial property represents a contribution made to the marriage by one of the parties.  Sometimes, as the years pass, the weight fairly to be attributed to this contribution will diminish, sometimes it will not.  After many years of marriage the continuing weight to be attributed to modest savings introduced by one party at the outset of the marriage may well be different from the weight attributable to a valuable heirloom intended to be retained in specie.  ....  To this non-exhaustive list should be added, as a relevant matter, the way the parties organised their financial affairs." 

45 Lord Nicholls went on to stress at para.29 that there can be 'no invariable rule' in these respects and that 'it all depends on the circumstances'. 

46 Lady Hale spoke as follows in Miller and McFarlane about the source of the assets and the length of the marriage (para.148):

"... In White, it was also recognised that the importance of the source of the assets will diminish over time...  As the family's personal and financial inter-dependence grows, it becomes harder and harder to disentangle what came from where." 

She continued at para.153 that:

"... in a matrimonial property regime which still starts with the premise of separate property, there is still some scope for one party to acquire and retain separate property which is not automatically to be shared equally between them.  The nature and the source of the property and the way the couple have run their lives may be taken into account in deciding how it should be shared." 

47 In Charman (No.4) [2007] 1 FLR 124, the Court of Appeal considered the guidance laid down by the House of Lords in White and in Miller, saying at para.64:

"... The yardstick [of equality, proposed in White as a check against discrimination] reflected a modern, non-discriminatory conclusion that the proper evaluation under s.25(2)(f) of the parties' different contributions to the welfare of the family should generally lead to an equal division of their property unless there was good reason for the division to be unequal.  It also tallied with the overarching objective: a fair result ….  To what property does the sharing principle apply? ... We consider …. the answer to be that, subject to the exceptions identified in Miller to which we turn in paragraphs 83 to 86 below, the principle applies to all the parties' property but, to the extent that their property is non-matrimonial, there is likely to be better reason for departure from equality." 

Later on in Charman, at para.73, the Court of Appeal said:

"...  It is clear that, when the result suggested by the needs principle is an award of property greater than the result suggested by the sharing principle, the former result should in principle prevail...  It is also clear that, when the result suggested by the needs principle is an award of property less than the result suggested by the sharing principle, the latter result should in principle prevail..." 

48 I have been referred to several other reported decisions, a total of 11, and I have considered them all.  But in terms of authoritative guidance, as distinct from examples of its application, the above citations should suffice. 

49 Mr. Pointer submits that this was a long marriage in which the husband played his part as husband and father, although not acting as conventional breadwinner as a consequence of the wife's wealth.  Sharing, he argues, means what it says.  So the court should consider starting around equality, with a reduction to take account of the fact that all the wealth was the wife's before the marriage.  The reasons the court '... cannot ignore sharing' appear at para.56 of Mr. Pointer's opening presentation: (a) that this was a 20 year marriage; (b) that there are three children; and (c) that the assets have increased nearly 200-fold since the marriage, with significant recent increases particularly since the year 2000.  Mr. Pointer also maintains that there is a good analogy between this situation and what was said by the Court of Appeal in Charman concerning a breadwinner's exceptional contribution, namely that it should be regarded as most unlikely for the 'non-exceptionally contributing party' to receive less than about one third of the total.  That is or may be how he gets to his figure of £18 million, which is about that proportion.  He submits that for the husband to come away with a mere 10% or less, as per the wife's offer, 'just is not fair'; and he supports that proposition with a Schedule headed 'Cases involving extra-matrimonial property', showing (by reference to 10 such reported cases) a range of outcomes for the 'non-contributing party' from 15.6% to 40%. 

50 Miss Stone, on the other hand, submits that this is clearly a case for meeting the husband's needs fully and generously assessed, but no more.  She says that nothing in para.56 of Mr. Pointer's opening presentation mentioned in paragraph 49 above constitutes a basis for 'sharing' over and above those needs and requirements.  She strongly disputes the husband's asserted reasonable need for a property worth £2 million in or around Regent's Park, when compared with the matrimonial home outside London now worth some £225,000 (£2 million being nearly nine times as much) or with the wife's home in the same quite modest area now worth some £345,000.  She points out that the family's centre of gravity has always been in the area of the matrimonial home.  Further, she says (as is the case) that there is absolutely no evidence of what can be purchased for £2 million in the Regents Park area of London, nor what can be bought for £450,000 in the city in Israel where the husband would like to buy a second home.  Common knowledge dictates that there would be a wide range of possibilities in each city.  Nonetheless, she says that even allowing the full £2 million sought for the husband's main housing would still leave £3 million investment capital out of the £5 million offered (ignoring the husband's own £320,000) which would produce on a 'Duxbury basis' about £130,000 per annum net for him for life.  She also emphasises that the parties have never had a second home. 

51 It is clear that a factor here of 'central relevance' (to use the words of Baron J. in NA v MA [2007] 1 FLR 176) is that all the assets were inherited by the wife 13 years before the parties met, were later brought into the marriage by her and were used as the family's only financial support during the marriage.  The S Ltd shares are still identifiable to this day and very little recourse was made to them in terms of capital over the years.  Their value grew not through anyone's skilful management of them, but by passive growth.  These are plainly good reasons for departing in the wife's favour from the yardstick of equality, as the husband's own case accepts, and the only real question is by how much?  Should there be any sharing beyond that required to meet the husband's reasonable requirements fully and generously assessed?  A second factor of very considerable relevance is that the generosity or otherwise of the wife's proposal of £5 million clearly falls to be considered in the context of the way in which the parties chose to live during their time spent together, i.e. relatively modestly: with an inexpensive property, an old car, an absence of any expensive possessions, no second home, modest holidays, state schooling and so on.  Just as in Miller the high standard of living was described as 'a key feature', so too in my judgment is that modest standard of living here. 

52 I do not attach too much weight to the husband's very modest earlier aspirations as to income for himself nor to his very modest recent expenditure (see paragraphs 14 to 21 above), because I take Mr. Pointer's point that spending after marital breakdown and in the run-up to a divorce or finance hearing may be atypical.  Nevertheless, it cannot be wholly disregarded that the husband originally proposed a budget for himself of only some £29,640 per annum (paragraph 14 above), as compared with the wife's current offer which would allow him to be in receipt of an annual income (£130,000 net per annum) in excess of four times as much.  I must also pay considerable regard to the fact that that Duxbury income, even if the husband really were to buy a property in Central London at the full £2 million sought, would even so be about two thirds more than the amount upon which the entire family was living prior to the break up of the marriage, as per paragraph 33 above. 

53 There is no doubt in the context of these various considerations that the wife's current offer very generously meets the husband's reasonable requirements, and more.  In such circumstances, I have not been persuaded that the pursuit of fairness requires the court, in attempted recognition of the abstract concept of sharing, to take further money from the wife's pre-marriage inheritance so as further to enhance the husband's post-divorce financial circumstances.  Although the marriage was long, her shareholding has remained her own discrete asset throughout and never became intermingled with any of the other party's assets (indeed, there were more or less none).  Nor, on the wife's evidence, which I accept, was there ever any suggestion or discussion between the parties about putting her shares or any of them into joint names.  They lived their lives and ordered their affairs the way they chose to.  In my judgment, therefore, fairness does not here call for an order redistributing the resources by any amount greater than the wife's offer of £5 million.  It can in any event be regarded as including an element of 'sharing' since, as demonstrated above, it is actually more generous than necessary to meet the husband's reasonable requirements. 

54 I do not accept that there is a particularly useful analogy, as suggested by Mr. Pointer, between a breadwinner's 'special contribution' in creating 'exceptional wealth' and the situation here, where the wife's contribution was to bring her pre-existing wealth to the marriage.  In the former case both spouses would have been giving of their best in their separate roles within the family, but in circumstances where the husband's freedom to go out to work, coupled with his own skill and acumen, would have enabled him to create wealth to such an extent as to justify a departure from equality in his favour (but probably not, per Charman, so as to leave the 'homemaker' with less than about a 33% share).  That is not the same as the situation here where, as I have found, both parties gave of their best in the non-financial sense to the welfare of the family; but where the wife in addition brought to the marriage her inherited wealth, being a distinct source of contribution, distinct from the parties' complementary contributions made during the marriage. 

55 In circumstance such as those pertaining here, suggested guidance as to maximum and minimum likely outcomes does little to assist.  Each case simply has to be looked at on its own particulars facts and fairness achieved by the exercise of judicial discretion based on those facts, informed by the S25 exercise and by the authoritative guidance referred to at paragraph 42 to 47 above.  It is for this reason that the Schedule of 'Cases involving extra-matrimonial property' referred to at paragraph 49 above is only of limited informative value and not in the end compelling as regards determination of the actual outcome. 

F:   THE TWO SUB-ISSUES:  THE TREATMENT OF LATENT CGT AND THE DATE FOR COMPUTING THE 'KITTY'
56 These two sub-issues raised by Mr. Pointer and Miss Stone respectively, go in different ways to the computation of the top-line figure for the assets.  That top line figure would be highly relevant if I were proposing to select some particular percentage around or discounted from the yardstick of equality, as there would then have to be a starting-point.  It is far less relevant where, as is the case, the decision is that fairness can properly be achieved through meeting one party's reasonable requirements fully and generously assessed.

The treatment of latent CGT 
57 Mr. Pointer's submission is that latent CGT (estimated at over £10 million, mostly in respect of the S Ltd shares) should not be taken off the gross value of the assets.  This is because the shares are held offshore and as he (rightly) submits they need never be brought onshore, thus attracting CGT.  The wife accepted this in cross-examination.  She can readily meet her claimed outgoings as per paragraph 30 above out of the S Ltd dividends remitted into this country and subjected to tax here, without touching the capital.  Further, the wife told me in terms of her wish and intention to leave the shares to the children, just as they originally came to her.  She has no significant capital needs, as she is completely content with her present home, which has quite recently been fully renovated. 

58 Miss Stone submits that CGT should clearly be taken off, as is the entirely conventional practice in these cases.  This is because the wife should be entitled to access her resources how she likes, as and when she might wish to do so.  That includes remitting the proceeds to this jurisdiction, in which case she would have to pay CGT.  So the only way to compare like with like is by the use of 'after CGT' figures across the board. 

59 Clearly it is forensically advantageous to the wife for the gross value of the assets to be reduced by the incidence of the latent CGT (and by taking the date of separation to value the shares) because the husband's award would represent a greater proportion of the whole.  Conversely, it is forensically advantageous for the husband for latent CGT not to be taken into account (and for the shares to be taken at today's value) as his award would then represent a correspondingly smaller proportion.  Lord Nicholls dealt with the CGT point in White v. White above, when he said:

"Counsel submitted that the use of net values in this situation should be discontinued.  I do not agree.  As with so much else in this field, there can be no hard and fast rule, either way.  When making a comparison it is important to compare like with like, so far as this may be possible in the particular case." 

60 Given the wife's clear evidence about her wishes and intentions regarding the S Ltd shares, coupled with the modest way in which she has lived for her entire life, I agree with Mr. Pointer that the likelihood of her ever actually having to pay out significant amounts of CGT on them is a very modest one.  It would require a volte-face in respect of both her stated intentions and her historic lifestyle.  Accordingly, if this issue were an important one (which I do not think it is) I would not be inclined to deduct CGT on the entirety of the wife's holding.  Equally, however, in the fullness of time and as things turn out, she may wish to bring some of her fortune into this jurisdiction, as she has done on some occasions in the past, thus attracting CGT on the proportion remitted.  There is no way of anticipating this in any informed way.  So taking a broad brush, I would deduct latent CGT on an arbitrary £10 million worth of her shareholding, but would not deduct it from the balance of the share holding.  I consider that this discretionary although speculative approach is open to me, as there is 'no hard and fast rule' and because I think it is the best way to produce a fair and realistic determination on the issue, given the unusual facts of this particular case.  The gross kitty therefore reduces in size accordingly.

The date for computing the 'kitty' 
61 Miss Stone submits that the date for assessing the quantum of the overall kitty should be the date of separation in 2007.  At that time, the wife's shares were worth 'only' about £28.3 million gross, as compared with about £57 million now.  Obviously, the date used significantly affects the proportion which £5 million bears to the total.  Miss Stone argues that the growth has been 'passive growth', not contributed to by the husband in any way.  She encapsulates her case thus:

"... it cannot be right that the husband in the circumstances of this case can seek an order greater than that to which he would have been entitled when the parties separated.  This increase is post separation, passive growth, pure and simple, to which he has made no conceivable contribution.  The wife has not had the benefit of the husband's undivided share, for he has not been entitled to a share." 

62 Mr. Pointer characterises this submission as 'nonsense'.  He submits that the husband has had an unquantified claim over the resources in the case since the separation, and that Miss Stone's argument is wholly contrary to the accepted practice.  He relies on two authorities on the issue, the first in time being N v. N [2001] 2 FLR 69 where Coleridge J said:

"... Mr. Mostyn rightly points out [that] traditionally these applications have always been approached on the basis of the values existing at the date when the hearing takes place.  I am quite sure that even now in most cases that is the correct date when valuation should be applied.  But I think the court must have an eye to the valuation at the date of separation where there has been a very significant change accounted for by more than just inflation or deflation; natural inflationary pressures on particular assets, for instance the value of a house moving up or down in the housing market."  [Emphasis added].

Later the same year, in Cowan v. Cowan [2001] 2 FLR 192, Thorpe LJ said at para.70:

"... the third [of Mr. Pointer's submissions], namely that much of the husband's fortune was generated in the six years post separation, receives no reflection because in my opinion it is inherently fallacious.  The assessment of assets must be at the date of trial or appeal.  The language of the statute requires that.  Exceptions to that rule are rare and probably confined to cases where one party has deliberately or recklessly wasted assets in anticipation of trial.  In this case the reality is that the husband has traded his wife's unascertained share as well as his own between separation and trial...  The wife's share went on risk and she is plainly entitled to what in the event has proved to be a substantial profit." 

63 It seems to me therefore that the authorities tend to support Mr. Pointer's submission rather than that of Miss Stone.  Although section 25 refers to 'all the circumstances of the case', the more focused wording of section 25(2)(a) directs the court to consider the financial resources which each party 'has or is likely to have in the foreseeable future'.  It is true that the wife's shares have nearly doubled in value since 2007 and that, as Miss Stone submits, the husband made no contribution to this phenomenon; but then neither did the wife; it was good fortune.  The effect of my taking the date of trial as the date to value the kitty, compared to Miss Stone's preferred approach, is arithmetically to diminish the proportion of the assets with which the husband will go out of the marriage, such that (as Mr Pointer complains on his behalf) he will receive around or possibly rather less than 10%.  Even so, I do not consider, on the particular facts of this case, that this superficially low percentage share shows a need for an award to achieve fairness greater than one which would meet his reasonable needs and requirements very generously assessed. 

G:   OUTCOME 
64 Standing back and asking the simple question, "in the round, does the proposed outcome seem fair, leaving the husband worth £5.3 million?", I consider the answer to be, "Yes".  It follows that the order will be for a lump sum payment by the wife to the husband of £5 million, or such other sum as is produced by the formula which the parties are agreeing.  It will leave the husband worth £5.3 million, with all his costs paid by the wife.  It should be paid as soon as ever possible to avoid possible complications through share value volatility and/or exchange-rate fluctuations.  It will be accompanied by appropriate orders giving effect to the other matters agreed between the parties as per part C above.