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Home > Judgments > 2011 archive

AR v AR [2011] EWHC 2717 (Fam)

Judgment in “ancillary relief” proceedings in which the vast majority of the assets had been inherited by the husband.

The parties had been married for 25 years at the date of separation. The husband was aged 66 and the wife 54. They had one child of their marriage, now aged 18, although the husband had three children from his first marriage. The total wealth of the parties was some £21m-£24m, the source of which was almost entirely by gift or inheritance from the husband's father (who had owned a successful manufacturing business), largely during the marriage. The husband was a farmer by trade, earning £100,000 p.a. in addition to investment income of £300,000. He put his needs at £140,000. The wife had no earning capacity and at final trial put her needs at £136,000 p.a.

The wife argued that the sharing principle should apply, particularly taking into account the length of the marriage and the fact that the inheritances were used by the parties during the marriage. Consequently, she sought £7m, or 30% of the assets, going beyond her asserted needs of £1.5m for housing and £140,000 as income.

The husband argued that in light of the source of the assets the sharing principle should not apply: non-matrimonial assets were only to be invaded where needs require it, or where one of the exceptions identified by Wilson LJ (as he then was) in K v L applied. The husband asserted that the wife's needs should be determined by reference to her housing need and a capitalised Duxbury fund, rendering a total award of £2.3m.

Moylan J found that the parties enjoyed a very good standard of living and that each had contributed equally during the marriage, setting the wife's housing need at £1.1m (including expenses and furnishings) and her income need at £115,000 pa. On the facts of this case, particularly given the wife's age and the length of the marriage, the Duxbury tables would not provide a sufficient capitalised figure; the court was not bound by the tables and the "objective is fairness and not certainty". A capitalised award of £3.2m was a proper reflection of all the circumstances of the case, giving the wife a total (including her own assets) of £4.3m.

In relation to the source of the wealth, Moylan J considered the recent authorities, including Robson v Robson [2011] and K v L [2011]. His Lordship considered that the husband's approach was overly rigid, and that fairness required a broader approach to the application of the sharing principle to non-matrimonial property. However, on the facts of this case, the sharing principle did not justify any additional or enhanced award above the wife's needs. The length of the marriage, the wife's contributions and the standard of living were all relevant to need but did not justify any additional award.

Summary by Stephen Jarmain, barrister, 1 Garden Court Family Law Chambers

_______________

IN THE HIGH COURT OF JUSTICE Ref: HG09D00367

2011 EWHC 2717 (Fam)
Royal Courts of Justice
Strand
London

11th August 2011

Before

THE HONOURABLE MR. JUSTICE MOYLAN

__________

AR
(Applicant)

-v-

AR
(Respondent)

__________

JUDGMENT
__________


APPEARANCES:

For the Applicant: MISS BANGAY QC and MISS SAXTON
(instructed by Lake Legal LLP)

For the Respondent: MISS STONE QC and MR ISAACS
(instructed by Mills & Reeve LLP)

 _______________

 

 From the audio transcription of
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 Official Court Reporters and Tape Transcribers
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11th August 2011
APPROVED JUDGMENT

MR JUSTICE MOYLAN: 
1. This judgment follows the hearing of the wife's ancillary relief application.  The wife is represented by Miss Bangay QC and Miss Saxton and the husband by Miss Stone QC and Mr Isaacs.

2. This case raises the issue of the manner in which the court should exercise its discretionary jurisdiction when determining an application by a wife when most of the wealth consists of or reflects resources received by the husband by way of gift and inheritance.  The total wealth is in the region, very broadly, of £21 to £24 million of which all but approximately £1 million is in the husband's name.

3. The wife seeks a lump sum of £6 million, giving her total resources of approximately £7 million.  The husband proposes that the wife should receive a lump sum of £1.3 million, giving her total resources of approximately £2.4 million.

4. To summarise the parties' respective cases very briefly, Miss Bangay submits that the wife's needs are just one component of her claims and that she is entitled to an additional award determined by reference to the sharing principle.  In respect of the wife's needs, Miss Bangay also submits that the wife's income needs should not be confined to the award of a Duxbury sum but that, in fairness, she should receive a substantially greater sum, in particular so as to give her a greater level of income security.

5. Miss Stone contends that the sharing principle has no application in the circumstances of this case.  She also contends that the wife's award should be calculated by adding her housing need and her income need capitalised by reference to a Duxbury calculation.  She accepts that Duxbury is a guide and not a tool, but submits that the court should be "extremely cautious" before departing from Duxbury.

History
6. The parties met in 1981 and commenced living in about 1984.  The wife believes it was 1983 and the husband believes it was in 1985/1986, but this difference is not material.  They married in 1990.  The husband is now aged 66 and the wife is aged 54.  They have one child, who is aged 18.  The husband has three children by his first marriage.  The parties separated in late 2009 - after a relationship of approximately 25 years - and the wife commenced divorce proceedings.  Decree Nisi was pronounced in October 2010.

7. The source of the husband's worth is a business which his father bought shortly after the end of the Second World War and which was developed under his father's and then his eldest brother's stewardship into a large and successful manufacturer.  The company was floated in the 1950s and sold in the late 1980s.  From his father, the husband received property and shares in the company.
 
8. The husband's current resources comprise: (a) T Farm, a property transferred to the husband by his father in 1976 and added to by the husband with the purchase of additional land on various dates since then; (b) land at K purchased by the husband in about 1969; (c) P Farm purchased by the husband in 1993/94 using the proceeds of shares inherited from or given to the husband by his father; (d) a 25% interest in a family property company inherited by the husband on the death of his father in 1992. It owns, principally, two farms and a fishing estate; (e) a share portfolio purchased with inherited gifted assets, originally shares in the company created by the husband's father; (f) some other more modest investments.

9. T Farm was purchased by the husband's father in the 1950's.  It has 482 acres consisting, according to the valuation obtained for these proceedings, of 325 acres of arable land and 72 acres of park and grassland.  The husband has farmed this property since 1966 and it was given to him by his father, as I have said, in 1976.

10. Throughout their relationship, the parties lived at the house on T Farm, a property which the husband built in the late 1970's and which lies within the farm estate.  The nature of the property has been the subject of some dispute during the course of the hearing and a number of photographs were produced of its interior/exterior and general setting.  As set out in the valuation obtain from Savills, it is a "modern five bedroom detached dwelling in an elevated woodland setting, having views over parkland and lake".  It has a tennis court and swimming pool and has a gross internal area of approximately 3,400 square feet.  The house is said to be in good general repair.  The decoration is described as dated and some of the rooms are said to be disappointing in terms of layout.  The valuer also describes the property, somewhat disparagingly, as "not particularly attractive".

11. The house lies within what is described by the valuer as "a beautifully situated mixed residential farming and amenity estate extending to approximately 482 acres, of which 432 lie within a ring fence and enjoy a large degree of privacy", the whole being described as an extremely rare and valuable property.  The evidence establishes that the parkland referred to in the valuation is about 12 acres which lead down to a lake.  Crops have occasionally been grown on this land, but it has mainly been grass and was used for stock in the years up to 2000, when the husband sold his cattle herd.

12. It is clear to me that the setting of the matrimonial home, surrounded as it is by land in the same ownership, is a significant benefit which is not directly reflected in the valuation which has been obtained.  The valuation will obviously reflect the setting of the property, but there is no indication that it takes into account the added benefit which derives from the fact that the surrounding land is in the same ownership.

13. The house and garden of about four acres had been valued at £675,000, whilst the house with 50 acres of land including the lake has been valued at £1.138 million.  Both of these valuations are to some extent artificial.  The house is surrounded by more woodland than is included within the four acres which have been selected by the valuer as representing "a family sized garden in order to protect the value of the property".  Looking at the photographs, it is clear that the rest of the woodland owned by the husband, and indeed as I have described the overall setting of the property, form part of its character and attraction.  As to the latter valuation, the 50 acres included within it consists in part of agricultural land.
 
14. The land at K was purchased by the husband in 1969 with the proceeds of sale of some of the shares received from his father.  It consists of 184 acres of arable land.  P Farm is an arable farm of nearly 1,300 acres and was purchased by the husband in 1993/94 again using the proceeds of sale of some of the shares received from his late father.

15. The husband's interest in the family property company was inherited by him on the death of his father in 1992.  The husband's investment portfolio was originally acquired with the proceeds of sale of his interest in his father's company, by then held in the form of loan notes.  These assets comprise most of the husband's current resources, the other more modest investments being acquired largely it appears from investment returns.

16. The husband has worked throughout the marriage as a farmer.  The wife worked in paid employment in two local hotels until 1988.  She has not worked in paid employment since then.  In or about 2007, the husband gave the wife ,1 million and also purchased a small investment property for her.  These assets are the origin of her current resources.

17. When the parties separated, the wife left the formal matrimonial home and moved to a property purchased for her by the husband.  The wife still lives at this property.  It cannot sensibly be and has not been suggested that this very modest property represents reasonable long-term housing for the wife.

The Proceedings
18. The wife's application for ancillary relief was initiated in November 2009.  There have been a number of orders made during the course of the proceedings, but I do not need to refer to any of them for the purposes of this judgment. 

19. Both parties have filed Form Es sworn on 25th January 2010.  They have also each provided statements dealing with Section 25.

20. I have heard oral evidence from the wife and the husband.  I propose only to refer to some elements of the evidence during the course of this judgment, but I have taken it all into account when determining the issues in this case and how to exercise my distributive powers under the Matrimonial Causes Act 1973. 

21. A number of minor issues were also raised during the hearing, but I do not propose to deal with them as they are too peripheral to the issues in this case.

Section 25 Factors
22. Financial resources: (a) Capital:  As referred to earlier in this judgment, the resources in this case total between £21 million and £24 million.  Of this total, the assets in the wife's name total approximately £1 million.  There is some modest dispute about whether the wife's assets are worth £1 million or just over this sum.  For the purposes of this judgment, I propose to take her resources as having a net value of £1 million.
 
23. Having regard to the circumstances of this case, the difference in the estimated value of the husband's wealth, of between £20 million and £23 million, although substantial would have no impact on my determination.  Although Miss Bangay's final written submissions refer to the extent of the resources as being a core issue, both parties have sensibly recognised that it has not been necessary to explore the reasons for this difference during the course of the hearing.  The two main reasons for the difference are a dispute about whether a sum loaned by the husband to one of his older children is likely to be repaid and the amount of tax which might be payable if a tax savings scheme is not effective.  As I have already made clear, the resolution of these issues would have no material effect on my determination in this case.

24. (b)Income and earning capacity:  A schedule of the husband's income has been produced for the tax years 2000/2001 to 2009/2010.  This shows that the husband's earned income through farming has been at a gross annual average during this period of approximately £100,000, with very significant fluctuations.  His average gross annual investment income during the same period has been £300,000.  The husband intends to continue farming.

25. The wife has no earned income.  It has not been suggested, rightly, that she has an earning capacity which impacts on her income needs.

26. (c)Standard of Living: The standard of living during the marriage has been a significant focus of the forensic exercise, the purpose being of course to seek to use the evidence advanced by each of the parties as part of their respective platforms to support or to assail the wife's asserted income need.

27. In her Form E, the wife describes the parties' standard of living as "extremely high" with "no money worries" and "no constraints on our spending."  A projected expenditure budget is annexed which totals approximately £77,000 per year.  In her oral evidence, the wife said that this budget was prepared by her Solicitor and herself and was based on her anticipated expenditure at her current property.  The wife gives considerably more detail in her Section 25 statement of the standard of living enjoyed by the parties during their relationship.  Her statement exhibits a revised budget totalling £136,000 per annum.  The wife was cross-examined extensively about her written evidence and about the level of her expenditure in the year 2009/10.
 
28. In his Form E, the husband gives little detail beyond saying that the main extravagance was taking family holidays.  His income needs are put at £140,000 per year, of which ,70,000 is for horses, shooting and fishing.  In his Section 25 statement, the husband says that the family lived "comfortably and were able to spend as we wished, but neither of us was extravagant."  He asserts that the wife has exaggerated their standard of living.  The husband says that his interest in horses has waned and that the large sums he has spent on horse racing in recent years has been largely self-funding.

29. Schedules have also been produced of the expenditure incurred by the parties in the year to November 2010.  The wife's totals £56,000 excluding tax, or in Miss Stone's schedule £52,000.  These are not very helpful schedules as they exclude significant elements of expenditure and are based on the wife's expenditure in her current home.  As a result, they reflect neither the standard of living during the marriage nor the wife's likely future income needs.
 
30. The husband's schedule, as prepared by the wife, totals £107,000, including periodical payments of £12,000.  A number of items are missing from the husband's schedule as it was drawn up solely by reference to his bank statements and does not include items paid or services supplied through the farm.  It therefore excludes, for example, council tax and house and car insurance.  If these items were included, the total would be in the region of £140,000, including £21,000 for the cost of a holiday described by the husband as a one-off and additional amounts spent on horse racing.

31. I do not accept the deductions from this schedule as proposed on behalf of the husband in Miss Stone's closing submissions which would reduce the total to £72,000.  For example, the fact that sums have been spent on the parties' son or that it is asserted that spending on horses was substantially reduced or ceased does not justify such expenditure being excluded from the schedule as they reflect a pattern of expenditure.  The schedule also excludes items such as car depreciation and house maintenance and the above total does not include the amount spent by the husband on IHT insurance of £60,000.

32. It is clear to me that the parties enjoyed a very good standard of living.  The amounts spent in individual years no doubt fluctuated, but in my judgment the husband's expenditure in the year to November 2010 gives a broad guide to the annual level of expenditure incurred by the family in the later years of the marriage.

33. (d)Financial Needs, and first housing need.  The wife seeks the sum of ,1.5 million to meet her housing need, including the cost of purchasing furniture. The wife's evidential case in respect of her future housing need has been somewhat confused.  It became clear during the course of her oral evidence that her views on where she proposes to live have changed during the course of the proceedings and have probably not even now crystallised.  It has also become clear that the properties which were initially put forward at the hearing as being appropriate for her future occupation were not in fact properties that she might want to live in.  Accordingly, the wife's case on this issue has developed in an unhelpful manner, although I fully accept that the wife's health (which I deal with briefly later in this judgment) is such that she has found it very difficult to address this issue.

34. In her Section 25 statement, the wife said that she wanted to live in one particular area.  She exhibited particulars, not of properties which she would want to live in, but to give an indication of the likely cost of a "property akin to the former matrimonial home".  In her oral evidence, the wife said that she has changed her mind about this area, but still has not really fixed on where she would like to live.  More property particulars were produced for the hearing before me.  As I have said, during the course of her oral evidence it became clear that the wife had little knowledge of these properties and they were not, save for one, properties which the wife might want to purchase.  The one property which she likes is on the market for just under ,1.25 million.  It is significantly larger than the former matrimonial home and in a more expensive area, although it is on a road and according to the particulars in a residential area.  The wife has not been inside that property.

35. A significant part of the hearing was devoted to addressing the issue of the wife's housing need.  Miss Stone was able to point to the confused nature of the wife's case and to the wife's own rejection of the properties which had been put forward as being suitable.  The particulars produced on behalf of the husband ranged from just over £500,000 to just under £800,000.  It would cost in the region of £60,000 to £80,000 to install a swimming pool depending on whether it included an in-ground automatic cover.
 
36. I deal with my determination of the wife's housing need later in this judgment after setting out the parties' submissions.

37. (e)Income Need.  The wife's Form E budget was clearly an imprecise and limited attempt to estimate her future income needs.  With her later statement, the wife has produced a revised budget which totals £136,000 per annum.  It soon became clear during the wife's oral evidence that this budget is also flawed in that some of the items are clearly too high - car depreciation, petrol, clothes and accessories and, on an annual basis, holidays.  However, the bulk of the items in my view provide a fair estimate of the wife's future income needs.  I do not accept Miss Stone's specific assault on some of the other figures, such as cleaner and gardener; the figures in the proposed budget in my view better reflect what the wife's future expenses are likely to be.

38. An alternative budget totalling £77,000 was put to the wife during the course of her cross-examination.  I am satisfied that such a budget would not meet the wife's future income needs as a reasonable level and also would not provide a proper foundation for the capitalisation of those income needs.  I reject the assertion that expenditure at this level reflects the marital standard of living.  The husband's own budget and expenditure and the wife's oral evidence satisfy me that the family's expenditure was at a significantly higher level.  I am also satisfied that the wife's expenditure in the year to November 2010 does not reflect her reasonable future income needs.  There are many items missing from her expenses during this year. 

39. I have already referred to the income needs set out by the husband in his Form E and to the schedule of his expenditure in the year to November 2010.

40. I will deal later in this judgment with my conclusions as to the wife's future income needs after I have dealt with the parties' submissions, including on issues of law.

41. (f)Contributions:  I treat the parties as having made equal contributions during the course of their relationship, save that the husband has also made a significant financial contribution through his inherited wealth.  I return to this issue later in this judgment.

42. (g)Health:  The wife has struggled in recent years from depression and alcohol abuse.  She gave oral evidence of her problems with alcohol and of the difficulties she has found in dealing with matters following the separation.  She has been receiving counselling and taking some form of medication.  She has found things, she said, very hard.  I mention these matters because they provide some explanation for the manner in which the wife's evidential case has been presented at this hearing.

Submissions
43. Turning now the parties' submissions.  Counsel have made very extensive written and oral submissions.  I have taken all the matters raised by them into account when reaching my decision, but I propose only to summarise their submissions in this judgment.
 
44. Miss Bangay submits that the wife's claims should not be determined solely by reference to her financial needs, but should reflect also her entitlement to a share of the husband's wealth.  She submits that a number of factors justify the wife being awarded a share of the wealth in excess of that justified by reference solely to her needs.  She points to the use made by the parties during the marriage of the wealth inherited by the husband. It was, "...lived in, added to, improved upon, used to provide and earn income...", and invested by the husband.

45. Miss Bangay accepts that the source of the wealth - and the consequence that the bulk of it is non-matrimonial - is an important factor but, she submits "of much greater significance in the exercise of the court's discretion under Section 25 are the length of the parties' relationship, the quality of the wife's contributions and the standard of living".  In particular she relies on the length of the parties' relationship.  In support of her submission that the wife is entitled to an award determined by application, in part, of the sharing principle, Miss Bangay has referred me to White v White [2001] 1 AC 596; Miller and McFarlane [2006] 2 AC 618; Charman v Charman [2007] 1 FLR 1246; and the more recent decisions in the Court of Appeal of Jones v Jones [2011] 1 FLR 1723 and Robson v Robson [2011] 1 FLR 751.

46. In the last of these cases, Ward LJ said:

"[43] How then does the court approach the 'big money' case where the wealth is inherited?  At the risk of oversimplification, I would proffer this guidance:

(1) Concentrate on Section 25 of the Matrimonial Causes Act 1973 as amended because this imposes a duty on the court to have regard to all the circumstances of the case, the first consideration being given to the welfare while a minor of any child of the family who has not attained the age of 18 and then requires that regard must be had to the specific matters listed in Section 25(2).  Confusion will be avoided if resort is had to the precise language of the statute, not any judicial gloss placed upon the words, for example by the introduction of 'reasonable requirements' nor, dare I say it, upon need always having to be 'generously interpreted'.

(2) The statute does not list those factors in any hierological order or in order of importance.  The weight to be given to each factor depends on the particular facts and circumstances of each case, but where it is relevant that factor (or circumstance of the case) must be placed in the scales and given its due weight.

(3) In that way, flexibility is built into the exercise of discretion and flexibility is necessary to find the right answer to suit the circumstances of the case.

(4) Like every exercise of judicial discretion, the objective must be to reach a just result and justice is attained when the result is fair as between the parties.

(5) Need, compensation and sharing will always inform and will usually guide the search for fairness.

(6) Since inherited wealth forms part of the property and financial resources which a party has, it must be taken into account pursuant to sub-section 2(a).
 
(7) But so must the other relevant factors.  The fact that wealth is inherited and not earned justifies it being treated differently from wealth accruing as the so-called 'marital acquest' from the joint efforts (often by one in the workplace and the other at home).  It is not only the source of the wealth which is relevant, but the nature of the inheritance.  Thus the ancestral castle may (note that I say may not must) deserve different treatment from a farm inherited from the party's father who had acquired it in his lifetime, just as a valuable heirloom intended to be retained in specie is of a different character from an inherited portfolio of stocks and shares.  The nature and source of the asset may well be a good reason for departing from equality within the sharing principle.

(8) The duration of the marriage and the duration of the time the wealth has been enjoyed by the parties would also be relevant.  So too their standard of living and the extent to which it has been afforded by and enhanced by drawing down on the added wealth.  The way the property was preserved, enhanced or depleted are factors to take into account.  When property is acquired before the marriage or when inherited property is acquired during the marriage, thus coming from a source external to the marriage, then it may be said that the spouse to whom it is given should in fairness to be allowed to keep it.  On the other hand, the more and the longer that wealth has been enjoyed, the less fair it is that it should be ring-fenced and excluded from distribution in such a way as to render it unavailable to meet the claimant's financial needs generated by the relationship.

(9) It does not add much to exhort judges to be 'cautious' and not to invade the inherited property 'unnecessarily' for the circumstances of the case may often starkly call for such an approach.  The fact is that no formula and no resort to percentages would provide the right answer.  Weighing the various factors and striking the balance of fairness is after all an art not a science."

47. Accordingly, Miss Bangay submits that weighing the factors in this case and striking the balance of fairness, the wife is entitled to an award that equals approximately 30% of the family's wealth.  In respect of the wife's future income needs, Miss Bangay submits that I should accept the wife's revised annual budget of £140,000.  She submits that this better reflects the standard of living enjoyed by the parties during the marriage than the budget provided with the wife's Form E and the level of expenditure incurred by the wife over the past year.

48. In respect of housing, Miss Bangay submits that the wife needs £1.5 million if she is to be able to purchase accommodation which is comparable to the former matrimonial home in terms of size, position, privacy and amenity.  She relies on the valuation of just under ,1.14 million given for the property with 50 acres of land and the lake.  She submits that this provides a better guide to the likely cost of reasonable housing for the wife, in particular given the amenities enjoyed by the former matrimonial home as a result of its position within an estate which she submits extend significantly beyond the scope of the garden and wood notionally ascribed by the valuer to the house in the valuation of £675,000.
 
49. Miss Bangay also submits that, in this case, the wife's income needs should not be capitalised by a simple Duxbury calculation.  She points to references to Duxbury being a tool or guide, not a rule or rigid formula.  She has referred me to F v F [1996] 1 FLR 833; McCartney v Mills McCartney [2008] 1 FLR 1508; and my own decision of B v B [2010] 2 FLR 1214.  She submits that the authorities relied on by Miss Stone which address variation and capitalisation under Section 31(7B), such as Pearce v Pearce [2003] 2 FLR 144 and Vaughan v Vaughan [2010] 2 FLR 242, do not provide guidance as to the manner in which the court should exercise its discretion when first determining claims under the Matrimonial Causes Act 1973.

50. In addition, Miss Bangay submits that the wife is entitled to a level of financial security above that which would be provided by a Duxbury sum.  She relies on purchased life annuity figures from Prudential which, for example, show that the cost of purchasing a net annuity of £135,000 per annum increasing by an assumed rate of inflation of 3.7% would be £6.8 million, whilst the equivalent Duxbury sum would be just under £3 million.

51. Miss Bangay submits that the bottom end of the wife's claims is £4.5 million, being £1.5 million for housing and £3 million as an income fund and that, as referred to above, having regard to her entitlement to a share of the wealth, the wife should receive a lump sum of £6 million.  This would provide the wife with resources totalling £7 million, being approximately 30% of the capital in this case.

52. Miss Stone on behalf of the husband submits that given the source of the wealth in this case, the wife's award should be determined, "...principally on a needs basis..."  She submits that the principle of sharing has no significant application to this case because the bulk of the wealth is non-matrimonial property.  Miss Stone submits, therefore, that my determination of the wife's award should be very largely confined to adding her housing need to the Duxbury sum required to meet the wife's annual income need. 

53.  Miss Stone submits that the wife's housing need would be met with the sum of £850,000.  She criticises the wife's evidential case in respect of her housing need, describing it effectively as a shambles.  Miss Stone also, fairly, criticises the lack of clarity about the source of the comments made about the properties, namely that they were very largely if not entirely not comments made by the wife.  Based on an annual income need of £75,000, Miss Stone submits that the wife's income needs would be met with the Duxbury sum of £1.52 million.  Deducting the wife's resources, put by Miss Stone at just over £1 million, the wife's needs would require a lump sum payment of approximately £1.3 million.

54. Miss Stone has referred me to a number of authorities in support of her submission (a) that the wife in this case has no entitlement to an award determined by application of the sharing principle and (b) that although Duxbury does not provide an "inevitable ceiling" I should be "extremely cautious" in departing from determining the wife's income needs other than by awarding her a capital sum calculated in accordance with Duxbury.  Among other authorities Miss Stone has referred me to White v White; Charman v Charman; Robson v Robson; Jones v Jones; and K v L [2011] EWCA Civ 550.
 
55. In support of the former submission, Miss Stone relies in particular on passages in the judgment of Wilson LJ (as he then was) in K v L, submitting that the factual situation in that case is similar or sufficiently similar to this case in respect of the husband's inherited wealth and the manner in which it was treated.  In K v L, Bodey J had awarded an applicant husband the sum proposed by the wife.  This was a sum which exceeded the husband's financial needs if calculated by reference to his housing need and the net income which would be produced from his remaining capital on a 'Duxbury basis' (namely, in respect of the latter, a stated income need of £105,000 pa as against a net annual income according to the Duxbury tables of £130,000).  The husband contended that the award should not have been limited to the sum required to meet his needs and that he should have been awarded a greater share of the wife's wealth.  The appeal was dismissed.  The Court of Appeal rejected the submission that Bodey J had erred in principle in deciding that the husband's award should be limited to a generous assessment of his needs.

56. In paragraph 2, Wilson LJ said:

"The facts of the case, which are extreme, raise an issue about the application to non-matrimonial property of the sharing principle and the modern law of ancillary relief following divorce.  We know that matrimonial property belonging to one spouse can be awarded to the other to the extent that the other needs it.  In the present case, the judge found that the wife's assets, which are entirely non-matrimonial, had a value of almost ,57 million, and his order for payment out of them to the husband of ,5 million was very largely based on his assessment of the husband's needs."

57. Wilson LJ later dealt with the effect of the elapse of time on the weight to be given to the source of the assets.  In paragraph 18 he identifies the "true proposition is that the importance of the source of the assets may diminish over time".  He refers to three potential situations:

"(a) Over time matrimonial property of such value has been acquired as to diminish the significance of the initial contribution by one spouse of non-matrimonial property;

(b) Over time the non-matrimonial property initially contributed has been mixed with matrimonial property in circumstances in which the contributor may be said to have accepted that it should be treated as matrimonial property or in which, at any rate, the task of identifying its current value is too difficult;

(c) The contributor of non-matrimonial property has chosen to invest it in the purchase of a matrimonial home, which although vested in his or her sole name has - as in most cases one would expect - come over time to be treated by the parties as a central item of matrimonial property.

The situations described in (a) and (b) above were both present in White.  By contrast, there is nothing in the facts of the present case which logically justifies a conclusion that, as the long marriage proceeded, there was a diminution in the importance of the source for the parties' entire wealth, at all times ring-fenced by share certificates in the wife's sole name which to a large extent were just kept safely and left to reproduce themselves and to grow in value."

58. At paragraph 21, after referring to the potential effect of a special contribution on the division of matrimonial property, Wilson LJ says:

"By contrast, although non-matrimonial property also falls within the sharing principle, equal division is not the ordinary consequence of its application.  The consequences of the application to non-matrimonial property of the two other principles of need and compensation are likely to be very different, but the ordinary consequence of the application to it of the sharing principle is extensive departure from equal division, often (so it would appear) to 100% - 0%."

59. In paragraph 22, Wilson LJ rejects the husband's submission that Bodey J's decision resulted in the husband receiving such a small percentage of the worth that it was "appealably disproportionate".  He said,

"What was much more interesting was the moment during the hearing when we asked Mr Pointer to show us a reported decision in which the assets were entirely non-matrimonial and in which by reference to the sharing principle the applicant secured an award in excess of his or her needs.  He confessed to be unable to do so.  Such a decision will no doubt be made - but not in this court today."

60. Miss Stone also relies on Jones v Jones in support of her submission that the non-matrimonial wealth in this case includes at least the passive growth in the value of the husband's inherited resources.  She contends that the increase in the value of the husband's assets during the course of the marriage largely reflects passive growth rather than the product of the husband's endeavours.

61. Accordingly, Miss Stone submits that the wife in this case has no claim to any specific share of the husband's wealth based on the length of the relationship and/or the wife's contributions and/or any other factors relied on by Miss Bangay.  Her claim, she submits, is confined to an assessment of the sum required to meet her financial needs, non-matrimonial property being invaded "only to the extent required to meet such needs".

62. In support of her submissions on the capitalisation of the wife's income needs, Miss Stone has referred me to Preston v Preston [1981] 2 FLR 331; F v F (Duxbury Calculation: Rate of Return) [1996] 1 FLR 833; Wells v Wells [1997] 1 All ER 673; Dharamshi v Dharamshi [2001] 1 FLR 736; Pearce v Pearce; Vaughan v Vaughan; and, again, K v L.

63. Miss Stone submits that Duxbury "with all its accepted shortcomings has been the model for capitalising income since before the eponymous case in 1987".  Miss Stone accepts that Duxbury does not produce "an inevitable ceiling" but she submits that I should be "extremely cautious" before departing from Duxbury.  In support of this submission, she has referred me to a number of passages in the above authorities, some of which I will deal with later in this judgment.  Miss Stone submits that these authorities demonstrate that the courts do not arbitrarily decide, case by case, whether Duxbury provides the appropriate method of capitalising an income stream and that Duxbury is the method used in ancillary relief cases.  She further submits there is nothing in the present case which demonstrates that the wife's award should be fixed otherwise than by the Duxbury model or to suggest that the wife is entitled to a guaranteed or risk free award.
 
64. Miss Stone points, for example, to Thorpe LJ in Dharamshi endorsing Holman J's description of Duxbury as "the industry standard" and to Wilson LJ saying in Vaughan (at paragraph 42), when dealing with the issue of amortisation, that "when, at arm's length following divorce, the husband agrees or is ordered to pay ... a needs-based capital sum, such will ... have been calculated by reference to the Duxbury formula...".

Conclusions
65. I deal first with my determination of the wife's housing and annual income needs.  The question I have to decide, in respect of both housing and income needs, is what constitutes a fair and just assessment of the wife's long-term needs for the purposes of determining my award.

66. In the circumstances of this case, I agree with the submissions made on behalf of both parties that the wife is entitled to be provided with housing of an equivalent standard to that provided by the former matrimonial home.  The difficulty presented by the evidence in this case, and the fact that, as Miss Stone submitted, the former matrimonial home is a difficult house to replicate, is in assessing the likely cost of such a property.

67. By the end of the evidence, I was satisfied that almost all of the properties put forward both by the wife and by the husband during the course of these proceedings would not provide accommodation of an equivalent standard to the former matrimonial home.  The photographs which have been produced clearly demonstrate that those relied on by the husband have neither the facilities (notably a swimming pool) nor the setting of the former matrimonial home.  They are not properties which provide the setting enjoyed by the former matrimonial home which, in my view as I have already made clear, adds significantly to its qualities as a home.  Of the properties produced by the parties, the closest comparable, although it was said to be remote, is the property on the market for ,795,000, but without a swimming pool, which would make a total cost of approximately £870,000.

68. Whilst not accepting Miss Stone's description of the wife's evidence in respect of housing, I agree that the evidence has not been as helpful as it should have been in enabling me to assess the likely cost of suitable alternative accommodation.  I accept that the wife herself has found it very difficult to address this issue and has changed her mind more than once.  However, this could have been dealt with by, for example, the transparent instruction of an agent or by some other means.  It was also not appropriate to put forward comments or other evidence in respect of properties without making clear the source of such evidence.

69. Having regard to all the evidence I have heard, in my judgment the average of the valuations given for the former matrimonial home (a) with four acres and (b) including the land and the lake, provides a good guide to the likely cost of housing of an equivalent standard to the former matrimonial home in a similar area.  The average is approximately £900,000.  To this must be added the costs of purchase and the cost of furnishing such a property, giving a total capital need of ,1.1 million, consisting of approximately £900,000 for the property, £40,000 for the costs of purchase and £110,000 for furnishings and other expenses, such as moving costs.  As for the figure for furnishings, I consider that the schedule produced on behalf of the wife overstates the sum fairly required to meet this need and I have reduced it accordingly.
 
70. Next, turning to the issue of the wife's future income needs.  It is trite to state that the nature and composition of these needs are likely to fluctuate significantly in the future.  In assessing the wife's income needs, in particular for the purposes of determining what income fund she should be awarded, the analysis, as has been said on many occasions, is a broad one as the court is considering what income it would be fair for the wife to have available to her, in this case, for the next 30 or so years.

71. To repeat what I have said in previous cases, in my judgment the court's task when addressing this factor is not to arrive at a mathematically exact calculation of what constitutes an applicant's future income needs.  It is to determine the notional annual income which, in the circumstances of the case, it would be fair for the wife to receive.  Further, in a case such as the present, in my judgment the wife is entitled to have sufficient resources to enable her to spend money on additional, discretionary, items which will vary from year to year and which are not reflected in her annual budget.  The husband has provided examples of this, such as the (very substantial) loan to one of his children, the inheritance tax policy he has recently taken out, and treating others, including the parties' son, to a very expensive holiday.  There is also the example from the marriage of £60,000 to £80,000 being spent on a new kitchen in about 2006.  I am not suggesting that the wife should be placed in an equivalent position, but it is reasonable for the wife to have the ability to incur expenditure which is not allowed for as part of her regular annual income needs as set out in the budget.

72. As referred to earlier in this judgment, the level of expenditure incurred by the family during the latter years of the marriage, the husband's own Form E budget and the level of the husband's expenditure since the separation, are significantly greater than the budget proposed by the husband for the wife.  As also referred to earlier in this judgment, the wife's proposed budget is too high in some respects.

73. Taking all the evidence into account, in my judgment a reasonable annual income need for the wife is £115,000.  This would meet her regular annual income needs, but does not encompass what I have described as discretionary expenditure, being individual items not included as part of her regular expenditure.

74. The next issue I address is whether the sharing principle has any application in the circumstances of this case.  Within this, I also consider Miss Bangay's submission that the wife's contributions are one of the factors which entitle her to a share of the husband's wealth.

75. This case teetered on the brink of falling into a dispute about the nature and extent of the parties' respective contributions during their relationship.  Evidence on this issue was said to be required to deal with the parties' standard of living and in part to seek to meet the wife's case that her contributions, among other factors, supported her entitlement to a share of the husband's wealth.  In my view, this evidence was not required for either of these purposes.  I appreciate that the specific reference to contributions in Section 25 might suggest that an analysis or account of each party's contributions is necessary to enable the court properly to exercise its powers.  This is not so.  Absent reliance on exceptional contribution and/or on conduct, evidence is not required about the nature of each party's contributions during the marriage beyond a broad history of the marriage.
 
76. Absent these factors, the parties are treated as having made contributions of equal weight in the Section 25 discretionary exercise.  If more detailed evidence is given, it too easily falls into an attempt to persuade the court to evaluate the quality of a spouse's contributions and encourages allegation and counter-allegation.  None of this assists the court in achieving justice, while it adds unnecessarily to the cost, financial and emotional, of the proceedings: as referred to by Coleridge J in G v G (Financial Provision: Equal Division) [2002] 2 FLR 1143.

77. In my judgment, Miss Stone's submissions seek unduly to fetter the exercise by the court of its discretionary powers.  Her submissions covered a broad canvas as to the approach which the court should adopt in cases where the wealth is non-matrimonial.  She submits, it seemed to me as a matter of principle, that matrimonial assets were only to be "invaded" to the extent justified to meet the wife's needs unless one of the exceptions identified by Wilson LJ in K v L applies.  In my view, this submission seeks to impose too rigid a framework.

78. In Charman, the Court of Appeal makes it clear that the sharing principle applies to all the parties' property.  To repeat what Ward LJ said in Robson, "No formula and no resort to percentages would provide the right answer.  Weighing the various factors and striking the balance of fairness is after all an art not a science".  In addition in that case, Hughes LJ said at paragraph 95:

"That the origin of assets is a relevant factor in no sense means that the approach to inherited assets ought always to be the same.  What is fair will depend on all the circumstances; those cannot be exhaustively stated but will often include the nature of the assets, the time of the inheritance, the use made of them by the parties and the needs of the parties at the time of trial."

79. In N v F [2011] EWHC 586, Mostyn J said, "the treatment of pre-marital wealth is highly fact specific and very discretionary".  In K v L itself, Wilson LJ said, I repeat, that, "non-matrimonial property also falls within the sharing principle."

80. These brief extracts are sufficient to demonstrate that the sharing principle can apply to non-matrimonial property if such an approach is justified by the circumstances of the case.  In my view, the court should not apply the guidelines identified by the House of Lords in Miller and McFarlane with undue rigidity.  Fairness requires a broader approach.  Further, if the courts were to limit the exercise of the discretion in the manner proposed by Miss Stone, this would in my view risk re-imposing the ceiling identified as resulting in unfairness in White and Miller and McFarlane.  The question in the present case is, therefore, whether the application of the sharing principle would enhance the wife's claim as submitted by Miss Bangay or whether, as in the case of K v L, my award, "should be limited to a generous assessment of needs."

81. Turning then to the facts of this case, Miss Bangay submits that, in particular, the length of the relationship and the wife's contributions justify her being awarded a sum that includes an "element of sharing".  It is clear to me that the bulk of the wealth in this case is accurately described as non-matrimonial, in other words, it is not the product of the parties' endeavours during the marriage.  The form of the wealth has in some respects changed, in particular following the realisation by the husband of his interests in the family company.  The former matrimonial home has been lived in and the family have clearly in part used the invested income generated from the husband's inherited wealth.  But, nothing has happened to the bulk of the wealth which has changed it into matrimonial property or diminished the weight to be attached to it as a factor in this case.
 
82. In my judgment, the principle which, in this case, best guides me in the exercise of my discretion under Section 25 to the determination of a fair award is that of need.  I do not consider that the sharing principle justifies any additional or enhanced award as submitted by Miss Bangay.  The bulk of the wealth is easily identifiable as non-matrimonial and there are no factors present which substantively undermine the weight to be attributed to this factor or which merit the wife receiving a greater share of the wealth than that which she will receive by application of the principle of need.

83. I do not consider that the sharing principle would guide me to make any greater award as I am satisfied that the result "suggested by the needs principle" (to adopt the words from Charman paragraph 73) is sufficient to eclipse any award that might notionally be justified by application of the sharing principle.  The principal matters relied upon by Miss Bangay, namely the length of the marriage, the wife's contributions and the standard of living, are all factors which can be given appropriate and sufficient weight within the principle of need.  They do not justify the award to the wife of any additional sum by application of the principle of sharing.

84. The next issue which follows is the manner in which I should apply the principle of need in this case to achieve a fair and just award which gives proper weight to all the Section 25 factors.

85. To summarise, again, the parties' respective submissions - Miss Stone submits that I should provide the wife with resources equal to her housing and income needs, the latter calculated by application of the Duxbury tables.  Miss Bangay submits, (a) that Duxbury is a guide only, and (b) that the wife in this case is entitled to a greater level of financial security than provided by Duxbury.

86. Dealing first with the court's approach to the application of the Duxbury tables to the determination of an applicant's award.  The phrase often used is that Duxbury is "a tool, not a rule".  This clearly means what it says.  This is not to seek to challenge the assumptions made for the purposes of the Duxbury tables.  As Holman J said in F v F, "it is not desirable that in case after case time should be taken out and expenses incurred in having ... experts give evidence about an appropriate assumed real rate of return."  However, that is very different from the manner in which the court takes the Duxbury sum into account, as part of the discretionary exercise, when determining an application for ancillary relief by means of a clean break.

87. As Holman J said in F v F, at page 846, "I cannot stress too strongly that I regard a Duxbury calculation as a starting point or guide and in no way as determinative of an appropriate capital award in lieu of maintenance.  In particular, it is well-known the Duxbury approach can have a very distorting effect both in the case of a relatively young wife after a relatively short marriage and in the case of a relatively old wife after a long marriage.  In the former case, it produces too high a figure in proportion to the length of the marriage.  In the latter case, it may well produce a rather low figure which fails adequately to reflect a long marriage.  It happens that in this case the age of the wife and hence her assumed life expectancy and the length of the marriage are each such that the Duxbury approach does produce a reasonably proportionate figure."
 
88. And then, at page 849, "I stress that there may from time to time be cases whose particular facts justify a higher or lower assumed real rate of return and expert evidence in support thereof.  An obvious example would be if a wife was going to live abroad and might accordingly reasonably be expected to invest there.  Another example might be that the wife was so old or incapacitated that she could not reasonably be expected to give any management at all to her income-producing fund.  Another example might be if the wealth and security of the husband was so great that the wife could be expected to be free from all risk ...".

89. After the passage I have quoted in paragraph 86 above, Holman J adds, " ... This is all the more so when, as cannot be stressed too strongly, a Duxbury calculation is merely a starting point or guide to one component of an overall lump sum award upon which all the Section 25 considerations impact."

90. In White v White, Holman J's reference at first instance to, "the well-known paradox that the longer the marriage and hence the older the wife, the less the capital sum required for a Duxbury type fund", was picked up in the speech of Lord Nicholls.  He said (page 993):

"A Duxbury calculation is no doubt useful as a guide in assessing the amount of money required to provide for a person's financial needs.  It is a means of capitalising an income requirement, but that is all.  As I have been at pains to emphasise, financial needs are only one of the factors to be taken into account in arriving at the amount of an award.  The amount of capital required to provide for an older wife's financial needs may well be less than the amount required to provide for a younger wife's financial needs.  It by no means follows that in a case where resources exceed the parties' financial needs, the older wife's award would be less than the younger wife's, indeed the older wife's award may be substantially larger."

91. That there is no dichotomy can be seen from Dharamshi v Dharamshi, in which Thorpe LJ, at the same time as endorsing Holman J's description of Duxbury as the "industry standard" and referring to the use of tables as having had "this court's approval for many years", also said: "Their limited utility was recognised by Lord Nicholls of Birkenhead in his speech in his speech in White ...".

92. In the course of her submissions, Miss Stone referred me to a number of authorities in which the courts have considered the capitalisation of an order for periodical payments.  The key difference between such cases and the present case is that I am determining all the wife's claims and not simply seeking to capitalise an existing periodical payments order.  In the latter situation, as Thorpe LJ said in Pearce (paragraph 38), the court has a narrower discretion "in departing from the mathematics of the Duxbury tables".  The reasons for this are set out in paragraph 39. 

"I believe that this discipline is necessary as a safeguard against the temptation to further adjust the capital division between the parties to reflect the factors which were not foreseen or which did not pertain at the date of the original division.  This abstinence is required not only by authority, but also as a matter of policy.  Families with not inconsiderable assets are obliged to achieve division by one means or another once the marriage has floundered.  They are entitled to know that that obligation once completed does not revive.  In cases where a complete clean break cannot be achieved at the date of redistribution of the family assets, it is important that the parties should not be encouraged to take advantage of any subsequent developments that permit the dismissal of the outstanding periodical payments order.  The court has its duty under Section 31(7A).  Therefore, a relatively simple, certain and predictable method for the calculation of the capital sum that can fairly be substituted for the periodical payments order is of great importance. It enables parties to see where they stand and to weigh the relative advantages and disadvantages of finality. It contributes to the compromise of the issue and thus to a reduction in contested cases."

93. This approach was endorsed in Vaughan, in which Wilson LJ emphasised the advantages of this approach, including in particular the court's "narrow discretion to arrive at a capital sum otherwise than by application of the Duxbury formula."

94. Miss Stone argues that the same approach should be applied, albeit with a lighter touch, to the determination of a wife's substantive financial claims when the guiding principle is that of need.  In my judgment, the circumstances are different and the discretion afforded to me is wider than the narrow discretion which applies when the court is exercising its powers under Section 31(7B) of the Matrimonial Causes Act.  The exercise is a different one and the court's discretion is undoubtedly broader when determining what overall award should be made in favour of an applicant spouse given that the framework for the assessment has not been set by an earlier order.  It would be surprising in my view given the developments in the law since 2000 if the discretion identified in Dharamshi as being available to a Judge on the authorities as they stood before the decision in White was to be applied more restrictively now.

95. In that case, Thorpe LJ (paragraph 9) after referring to the capitalisation of income need by reference to the Duxbury tables, identifies the judge's final task as being, "...to stand back and decide whether to uplift or depress the mathematical calculation to give proper reflection to the other statutory criteria, and finally all the circumstances of the case."

96. Miss Stone is, of course, right to point to the need for the application of the discretionary exercise to be sufficiently certain to enable the likely outcome or at least the likely bracket of outcomes to be reasonably predictable.  However, the court's objective is fairness and not certainty.  In my judgment, when justified by the circumstances of the case, a flexible application of Duxbury in the manner, for example, identified by Thorpe LJ in Dharamshi will better achieve justice, with sufficient predictability, than the narrow approach which Miss Stone appears to me to be advocating.

97. As Bennett J said in McCartney (paragraph 313), "It must always be remembered that the models of capitalisation referred to in the authorities are guides to reaching a fair capitalised figure.  They are not to be taken as rigid formulae.  They are useful tools in the search for fairness."

98. To adopt what Wilson LJ said in K v L, there may well be circumstances in which the assets are entirely non-matrimonial but which are such as to justify, in fairness, an award in excess of the applicant's needs by reference to the sharing principle.  However, as I have explained, I do not consider this case is such a case.  In my judgment, an award based on the application of the principle of need is fair if my award sufficiently reflects the fact that Duxbury is a guide and also importantly that, in my view, the wife is entitled to be able to incur additional expenditure as referred to in paragraph 71 above.
 
99. Further, in order to give proper weight to all the Section 25 factors, I consider that, as submitted by Miss Bangay, the wife should have a measure of financial security above that which would be offered by a simple Duxbury calculation in respect of her income needs.  I do not accept Miss Bangay's submission that the wife's income fund should be calculated by reference to the capital sum which a purchased life annuity would cost.  This would provide the wife with an undue level of financial security.  As will be clear, I also do not accept Miss Stone's submission that the wife's award must be fixed by application, effectively, of the Duxbury model.  This would be to apply Duxbury as a rule and not as a tool and would be to ignore the factors identified by Holman J in F v F.

100. The wife's housing need as described above is in the sum of ,1.1 million.  A simple Duxbury sum for an annual income of ,115,000 would be ,2.5 million.  To enable the wife to spend additional sums as described above and to give her an additional measure of financial security, I propose to increase the latter sum to ,3.2 million.  This, in my view, and to adopt the words of Thorpe LJ, would give proper reflection to the statutory criteria and all the circumstances of the case.  The wife therefore needs resources totalling ,4.3 million.  Deducting her own assets of ,1 million, this requires an award of ,3.3 million. 

101. An award at this level in my judgment represents a fair award under Section 25 and one which represents a just application of the principle of need.  As was stated in Charman, my task is to determine "the division of property which best achieves the fair overall outcome."  In my judgment, my award achieves such an outcome and gives proper weight to all the Section 25 factors.