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Home > Judgments > 2011 archive

GS v L [2011] EWHC 1759 (Fam)

Financial remedies case final judgment in a case in which the husband had argued that £1.49 m of assets were ring-fenced having either been pre-acquired or subject to a community of property agreement.

W was aged 41 and H was aged 43. The parties had two children, 10 and 9, and had been married for 10 years. H was the breadwinner in the relationship and W, although highly trained, had been the homemaker. An unusual aspect of the case was that by the time of the final hearing the family were all living in Spain.

The assets in the case were about £4m.  H sought to ringfence £1.49m of pre-acquired assets, relying on the nature of the assets as well as a community of property agreement signed by the parties in Spain in 2002.

Although accepting the jurisdiction of the English court, H had argued that W was guilty of forum shopping and therefore that the court in it's discretion should approach the case as if it were being heard in Spain and make orders in the same terms as would be made under Spanish law. Evidence from 4 experts on Spanish law was relied upon and the costs at trial were in excess of £300,000.  However when he came to give evidence, H accepted that such an approach would not be fair and consequently significantly increased his open position. W sought costs or an add-back against H, arguing that his approach to the litigation was misguided.

King J in giving judgment reminded herself of the recent guidance of the Court of Appeal in Robson v Robson [2010] EWCA Civ 1171. Her Ladyship considered that it was H, rather than W, who had been guilty of attempting to forum shop. In relation to the community of property agreement, King J found that neither party had a full appreciation of the implications of the agreement, but that their primary intention had been to give W financial security in the event of H's death. Furthermore, even the experts could not agree as to how a Spanish court might deal with the agreement, the legal consequences in Spain of which were unknown and likely to be controversial.  As such, the agreement provided the court with little or no assistance in the s.25 exercise.

In relation to H's pre-acquired wealth, her Ladyship took the view that save for H's pension, which should be ring-fenced; the pre-acquired assets were necessary for meeting the needs of the family and could not therefore be excluded as non-matrimonial.  The assets would therefore be divided equally, subject to an adjustment in favour of W to represent a straight capitalization of 5 years' maintenance at £31,000 per annum. 

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


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Neutral Citation Number: [2011] EWHC 1759 (Fam)
Case No: FD09D00561
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION SITTING IL LIVERPOOL
+CIVIL JUSTICE CENTRE

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 06/07/2011

Before :

MRS. JUSTICE ELEANOR KING
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Between :

GS Applicant

- and - 

L Respondent

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- - - - - - - - - - - - - - - - - - - - -

Miss Katharine DAVIDSON QC  (instructed by Thomas Eggar LLB) for the Applicant
Mr. Edward BOYDELL (instructed by Wilsons) for the Respondent

Hearing dates: 28th, 29th 30th & 31st March 2011, 1st April and 5th May 2011
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Judgment 

This judgment is being handed down in private on 6th July 2011. It consists of 29 pages and has been signed and dated by the judge.  The judge hereby gives leave for it to be reported.

 The judgment is being distributed on the strict understanding that in any report no person other than the advocates or the solicitors instructing them (and other persons identified by name in the judgment itself) may be identified by name or location and that in particular the anonymity of the children and the adult members of their family must be strictly preserved.

 

Mrs. Justice Eleanor King :

Introduction
1. This is the final hearing of an application for ancillary relief.  The wife is aged 41; the husband is aged 43.

2. The family live in Spain. They have two children now aged 10 and 9. This is a ten year marriage where the husband is the breadwinner and the wife the homemaker.

3. In this case the court has to determine the distribution of liquid assets of approximately £4.0m, a sum which although substantial by everyday standards, is not large in the context of so called 'big money' cases. 

4. The wife wishes to remain living in the family home in Spain together with the children and to return to work. She seeks an equal division of the assets and given the uncertain state of the job market, she additionally seeks either an enhanced share of the assets to reflect a sum which would equate to 10 years spousal maintenance or, in the alternative, a joint lives maintenance order for her and maintenance and school fees for the children.

5. The husband for his part seeks to ring fence £1.49m of the £4.0m assets on the basis that that sum represents assets which were owned by him prior to the marriage; only after deduction of that figure he submits, should the balance of the assets be divided equally. This, he says, is the correct result properly achieved by one of two routes; either by way of the court enforcing a community of property agreement signed by the parties in Spain in 2002 or, failing that, by virtue of his having acquired and held certain assets in his sole name prior to the marriage.

6. The husband's open position at the start of the trial was that spousal and child maintenance should be determined in accordance with Spanish law as set out by his Spanish expert. During the course of his oral evidence the husband accepted that his proposals were unfair and also that English law would determine the level of maintenance.  He accordingly amended his proposals from the witness box. The proposal of the husband is now that the wife should receive maintenance for 2 years and that thereafter there should be a nominal order in her favour until the younger child attains 18 years. In closing submissions he said through his counsel, Mr Boydell, that he would consider a clean break if the terms were right.

7. This is, in my judgment, first and foremost a case about the proper provision or "needs" of the wife and children. Unhappily as a consequence of the polarised positions of the parties, the matter has been heard over a period of 5 days in the High Court and evidence on Spanish law has been filed by no less than 4 experts (with the husband's expert flying over from Spain to give oral evidence). In addition the husband has had both English and Spanish lawyers to advise him. The costs are now in excess of £300,000.       

8. The husband feels himself to be a victim of blatant 'forum shopping' on the part of the wife. Shortly before the trial he wisely withdrew an application to stay these proceedings.  He now accepts the jurisdiction of the English courts. Unhappily his acceptance has been limited to form only. His primary case has been that this court should approach the case as if it were being heard in Spain and to make orders in the same terms as would be made under Spanish law.

9. The wife feels that the husband has, largely as a consequence of what she would say has been his misguided approach to this litigation, wilfully run up unnecessary costs which she now seeks to reclaim, either by way of an issue based costs order or by so called 'add back'.

The Parties
10. I have seen and heard both parties give evidence and be cross-examined. So far as the wife is concerned Mr Boydell listed in his submissions a series of 'inconsistencies' on the part of the wife, seeking to suggest that she is deliberately untruthful in relation to much of her evidence. The husband himself, however, referred to the wife as 'chaotic' and that is how I found her to be in relation to many dates and issues of chronology. I do not accept that she got a number of dates and issues of detail wrong deliberately in order to improve her case. Whilst she was, on some occasions, dramatic and may well have exaggerated, I found her to be essentially truthful about the crucial issues; for example, the important issue of the marital agreement. That is not to say I accepted her evidence unequivocally on all matters; I did not for example believe her when she said that she had not finally decided whether or not to leave England to return to live in Spain at the time when she filed her divorce petition.

11. The husband for his part gave controlled evidence; he had a much better mastery of dates and chronology. I found him to be essentially honest but in my judgment, he too was not entirely truthful in relation to all matters.  I do not accept that I have been given an entirely frank account about his attempts to obtain proper verified information in relation to his new job in Spain. Whilst I am not satisfied that the husband is misleading the court as to his remuneration package as is suggested by the wife, there has been a wholly unacceptable delay in obtaining basic information, which delay was, I am satisfied, in large measure caused by the husband. This may have been due to a concern on his part to avoid 'rocking the boat' with his employers until after his probationary period was over; even if that was the case, the unsatisfactory and late disclosure has inevitably led to the generation of frustration, suspicion and increased costs on the part of the wife.  The husband has, in my judgment, manipulated the litigation for his own ends, principally to succeed in his determination to have the case dealt with under Spanish law and ideally in Spain.

The Proceedings
12. In this case the court is faced with the resolution of substantial and ingenious legal arguments covering a number of areas. I, however, remind myself at this early stage of this judgment of the guidance recently given by the Court of Appeal in Robson v Robson, [2010] EWCA Civ 1171 a case dealing with inherited assets but equally applicable here in relation to its restatement of basic principles:

"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, 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 hierarchical 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 subsection 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 work place and the other at home). ……..

8. The duration of the marriage and the duration of the time the wealth had been enjoyed by the parties will 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. ……..

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 will provide the right answer. Weighing the various factors and striking the balance of fairness is, after all, an art not a science.

13. The parties married in 1999.  There are 2 children of the marriage C, aged 10 and S, aged 9.  The wife issued a divorce petition based upon the husband's alleged unreasonable behaviour on 27th November 2009 followed almost immediately with an application for leave to remove the children to live in Spain on 4th December 2009. 

14. On 22nd December 2009 the wife made her application for all forms of financial relief.  Decree Nisi was pronounced on 11th June 2010 and an order allowing the children's relocation to Spain was made by consent on 24th June 2010. 

15. On 29 October 2010 an order was made by District Judge Reid for certain household bills to be paid from a joint account and for interim periodical payments to be paid to the wife of £4,700pcm (£56,400pa). In fact the money has been paid from a joint account and the husband accepts that adjustment will have to be made to the schedule of assets to reflect that fact.

Background
16. The wife was born and brought up in Spain.  She is highly intelligent and educated: she has a degree in law and an MBA specialising in finance strategy and marketing.  The wife has studied in France, Switzerland and the USA; she is a fluent English speaker and also has a good understanding of French having studied at the Sorbonne for a short period of time in the mid 90s.

17. The husband is half German and half Polish. He too is highly intelligent and educated. The husband was educated at public school and university in England.  The parties met in London in late 1998 where they were both working as bankers. 

18. In February 1999 the husband bought a flat in London  for £370,000 with a mortgage of £270,000.  In July that year the parties began to live together at the London flat.  At that time the wife was working for an investment bank in Londonand the husband worked for the London branch of a French bank.

19. The husband and wife had intended to get married in Spain during the course of 2000; however in the autumn of 1999 they discovered that the wife was pregnant and decided to get married immediately: this they did by virtue of a cancellation at the Chelsea Registry Office on 27th November 1999. 

20. Early in the new year of 2000 the wife gave up her job  and C was born in July  2000.  For the next 6 years the husband and wife had traditional roles, with the wife being homemaker and the husband breadwinner.

21. During the course of his evidence, it was put to the husband that he had asked his wife to stop work and to be at home with the children.  The husband denies asking the wife in terms to stop work. He said that she was happy to give up her job although he said he "wanted a home" and that in his opinion it is easier to "have a home" if one person is there looking after the house and children.  He emphasised that he contributed and occasionally would cook and did the shopping. I am satisfied that the husband very much wanted his wife to be at home taking on the traditional role as homemaker.

22. In about April 2001 the family relocated to Spain due to the husband's work commitments.  Initially he continued to be employed by the French bank  but he subsequently worked for a German bank.  In January 2002 S was born.  On the 2nd April 2002 they bought a property in Madrid.  On the same day as the parties purchased the Madrid property they signed two documents:

i) An Escritura de Compraventa which document declared how the property was to be held as between husband and wife (the equivalent of a declaration of interest where the property is held as tenants in common). The declaration was that 16.88% was to be held by the wife with the remainder to be held equally between the parties.

ii) An Escritura de Capitulaciones Matrimoniales (CM). This document provided that all future assets would be owned equally under the Spanish matrimonial property regime known as "Sociedad de Gananciales". 

23. The effect and meaning of the CM under Spanish law and the parties' intention and understanding at the time it was signed is, so far as the husband is concerned, at the heart of this case and the existence of this document is the only reason the case is being heard in the High Court.  At the time of the FDR (July 2010) the Supreme Court's decision in Radmacher was still awaited and the evidence of the Spanish legal experts who were then instructed in relation to Spanish law, and the CM in particular, was (and remains) in dispute. 

24. The Madrid property  was bought for €1,020,189 with a very substantial mortgage.  The husband's evidence is that at the date of purchase, he knew that he was going to receive a guaranteed bonus of approximately €700,000 following his anticipated move to the German bank.  At the date of the signing of the CM there was, he accepted in evidence, approximately €30,000 equity in the property. 

25. On 13th September 2002 the marriage was registered in Spain.  Without such a registration the CM would have been of no effect under Spanish law.  The wife gave evidence that the marriage was registered by her, not to ensure that the CM was binding but to ensure that upon S's  registration into kindergarten, the "family book", (which forms part of Spain's identification procedure) would show him to be a child born in wedlock rather than outside wedlock.  The husband's Spanish law expert pointed out that in Spanish law there is no distinction between legitimate and illegitimate children and that formal proof of the marriage would not therefore be necessary.  How a person felt, she said, from a social point of view about such a distinction, was a personal matter.  The husband submits that the registration of the marriage by the wife is supportive evidence that the wife understood and intended to be bound by the CM.

26. I have observed the husband and wife in court for 5 days and seen and heard both of them give lengthy evidence.  They are both deeply traditional and concerned about appearances.  I have no doubt that the wife would be horrified at the thought that anyone might mistakenly believe that her child had been born outside marriage and in my judgment, the husband equally so; I bear in mind that upon the discovery that the wife was pregnant, it was at his insistence that he did what he called "the honourable thing", and the couple were married in London within days even though the wife was at that stage only 2 months pregnant. He told me that even though they had married straight away on discovering the pregnancy, the very fact that the wife had conceived out of wedlock had caused ructions within his family. 

27. I accept that the wife filed the certificate of registration at the time she did to ensure that no one could ever suggest that S was not born within a marriage.  The fact that in law such a thing would not have been necessary does not in my judgment undermine the wife's evidence in this regard.  The "family book" and subsequent registration of the marriage is in my assessment one example of a number of instances where the wife has got (as the husband put it) a "bee in her bonnet" resulting in her resolving the perceived problem in very much her own way.  The husband describes how, when she had an anxiety, the wife would talk and discuss the matter incessantly, unable to leave the issue alone until she had resolved it to her satisfaction, even if, as was sometimes the case, the resolution was not necessarily the most straightforward or even rational.  Another example of such behaviour on the wife's part, to be considered later in this judgment, is the circumstances surrounding the making of the CM. 

28. A characteristic of both the husband and wife is their prudence with money.  During the course of the wife's teenage years her father was made bankrupt.   The husband suggests that this had the effect of the wife having an almost pathological need for financial security.  The wife described in evidence the care with which she managed the household finances and how, if the husband received a bonus, she would always tell him to pay off part of the mortgage rather than buy her expensive gifts.

29.  I have no doubt that the traumatic events of her teenage years have informed the wife's attitude to money.  However, having seen and heard the husband give evidence, I am satisfied that in this respect, if in no other, they were well suited.  The husband was himself very good and careful with money. To his considerable credit he saved hard from his earliest days as a young banker. As a consequence the family are in the enviable position of having two substantial properties, both mortgage free and which were paid for out of income, despite the husband having had a period of 2 years when he was without paid employment. 

30. In 2006 the wife began to consider returning to work.  The wife says that she and the husband were concerned that his position at the German bank  was insecure due to internal changes.  She said that the husband had told her that "the writing was on the wall" so far as his future was concerned.  Through a contact of the husband's, the wife was able to secure employment with a Spanish bank and started work on 19th April 2006.  This was full time employment requiring a lengthy commute, long hours and frequent travel, often to Latin America.  The wife, I am satisfied, was more than willing to return to work. She told me that she felt that the children were a little bigger and would be able to manage and the husband, she said, agreed to her plan.  I do not accept that fear of redundancy for the husband was the sole reason for the wife's return to work.  I am satisfied that the wife felt ready to return to work outside the home. I am equally satisfied that her fear of financial insecurity and concern about her husband's job security reinforced that desire and probably informed the timing of the decision. Whilst I accept the husband's evidence that, when he was finally made redundant in December 2006 it was a considerable shock to him, I equally accept that with the change of regime at the bank, the husband and wife had sensed for many months that in what is in any event an insecure world, the husband's position was particularly insecure. 

31. The wife's return to work was not a success for this family.  Between April and the husband's redundancy on 15th December 2006 both the husband and wife worked full time in pressurised jobs.  The children were still only 6 and 4.  I accept the wife's evidence that the strain drove the marriage nearly to breaking point.  In mid 2006 the parties teetered on the brink of divorce.  The husband sought legal advice from a lady called Isabel Winkels, a Spanish lawyer, who has acted for him ever since. The wife took informal advice from "a friend of a friend" but I am satisfied never engaged a lawyer or had advice other than informal advice in relation to a proposed separation agreement drawn up by Isobel Winkels.

32. At about the same time the husband also consulted Withers, solicitors in London. It was put to the husband that that consultation took place as he knew that English law would apply and he wished to know what order an English court would make. The husband did not answer that question directly but said that he had seen Withers at a time when things were emotionally hard and he was "scared". He was he said emotionally distraught and nervous and "was being cautious". So far as I can tell, it was during the course of his evidence that the wife knew for the first time that the husband had sought advice from Withers in 2006. The advice the husband received at that time is privileged. What is, however, clear is that in 2006 the husband sought legal advice from both English and Spanish lawyers about the consequences of a divorce. 

33. The husband was, I accept, committed to the marriage and wished to save it if at all possible.  He spoke to the wife's family, a family as traditional as his own who, he accepts, put considerable pressure on the wife to salvage the marriage for the sake of the children.  There was therefore no physical or actual separation at that time. 

34. On 15th December 2006 the husband was made redundant from the German bank.  The wife says, and the husband does not deny, that he told the wife that he would like a sabbatical and some time off.  The wife said in evidence and in her written material that she was entirely content with this as her husband had worked very hard and deserved a break.  She said the husband did however make it clear that this was indeed to be a sabbatical: child care and the household tasks were done by employees and the wife continued to manage the household in the same way as she had done when they were both working.  The husband also had a knee operation at this time; he therefore had a few months off before starting to look for work seriously in around April 2007.

35. I am satisfied that the wife remained almost exclusively responsible for the running of the household and the organisation of the children.  The husband himself said that when she returned to work he had asked her to find someone "adequate" to look after the children and that she had found someone that was in his view "not adequate". He said that as of April 2007, he was extremely busy dealing with head hunters etc. in an attempt to find employment.  The husband said that his wife had wanted to go back to work and she had chosen to "complicate her life" by going back to work. Effectively the husband was saying that the difficulties she had in juggling work and home were of her own making. Whilst the devotion of the husband to his children is not in doubt and he did "help" in the house and was a 'hands on Dad', the primary burden and responsibility for running the house and children undoubtedly remained that of the wife throughout the husband's period of unemployment. 

36. By March 2008 the wife felt unable to continue to cope.  She therefore gave up work.  In the latter part of 2007 and throughout 2008 the husband, in addition to looking for work, was attempting to consult from home.  No evidence has been produced, and indeed it has not been suggested, that the attempt at providing independent consultancy services produced any income for the husband or the family at that time. 

37. The husband finally managed to obtain employment in March 2009. To his considerable disappointment he had been wholly unable to find work in Spain. It is important in the context of the husband's submission that the wife will quickly and easily find well paid employment in Spain that, when he started looking for work in April 2007, the husband had only been out of the banking world for some 4 months after continuous employment of 17 years and even so he was unable to find work in the banking/finance world in Spain despite looking for 2 years. The new job  meant that the husband was now based in London. It produced a package which was considerably less than that to which he, and therefore the family, had been accustomed prior to the period of unemployment.

38. At that time the London  flat was let out to tenants.  The husband therefore rented a room and returned home to Spain each weekend.  Initially the husband was reluctant for the wife and children to move over to join him in London and I accept his evidence that it was his fixed intention to relocate as soon as he could find employment in Spain.

39. The parties' links with the UK had however by no means been severed.  As of March 2009, it was the husband and wife's joint intention that the children should be educated in England in the public school tradition.  To this end, each of the children had a place at a well - known prep school in Oxford and they were to start there, as boarders, in September 2010. The family home was to remain in Spain, although consideration was being given to the wife undertaking a course in England so she would be near to the children during term time.  The husband's hope was that the children would thereafter move to his old school, which by now had become co-educational. 

40. During the husband's period of unemployment, the wife's income was paid into a bank account which she had been required to open by her employers,  and which was in her sole name.  The family lived not on this but on money held in bank accounts either in the husband's sole name or the parties' joint names.  The husband now says that the wife, because of her alleged obsession with money, kept the money for herself and refused to allow it to be used for day to day expenses.  The wife for her part said that it was all joint monies and it did not matter from which pot the bills were paid.  Ultimately the money in the wife's account of some €117,000 was used to repay the mortgage on the Madrid property.  I accept the husband's evidence to this extent: I accept that the wife's powerful desire for financial security made her determined to have some money in her own name, in the same way that she had wanted the residue of her income from her early years at work to be reflected in an enhanced share in the Madrid property. 

41. There was, I am satisfied, no question of the wife secreting money away and although the money was in her name, she genuinely regarded the money as "our money".  Given the care with which this couple ran their financial affairs there can be no other reason, other than her need for personal financial security, for expensive fees to have been paid to transfer monies internationally in order to provide cash to pay the bills, something which it was necessary to do if there was not to be recourse to the monies held in the wife's account.

42. In May 2009 the tenants of the London flat unexpectedly gave notice and the husband moved back into the property. The husband's job, he said, was very demanding and he wished to focus on his job during the week and then spend the weekends relaxing in the good weather in Spain.  When the London flat  came free the wife decided to join the husband in England, ready for the new school year.  Her plan was that the children would have a year in an English state school, improving their English, prior to starting at the prep school in September 2010.  The husband did not think this was necessary as, although his wife said the children needed to improve their English, he thought it was good enough.  The husband said that the wife showed a sudden enthusiasm for the move and it was a "quick decision".  At the time, he said in evidence, he believed she wanted them to be together although he was surprised at her decision.  He said in cross examination that he could accept that it was a decision made by the wife in good faith, although it did cross his mind that she was moving so that she could divorce in England. 

43. Such a thought must indeed have crossed the husband's mind at the time as he said in evidence that in the autumn of 2009 he got advice from his Spanish lawyers about issuing what he called a "protective" divorce petition in Spain.

44.  In September 2009 the wife and children therefore moved to London and into the flat with the husband.  In October 2009 the family went to Poland to celebrate the 70th birthday of the husband's mother.  It is clear from the mass of evidence that the relationship between the mother and the father's family has always been difficult.  I have not been told by either the wife or the husband what happened in Poland but, (whilst phrasing it in different ways), the husband and wife both agree that the events that took place at that party led to the wife deciding that the marriage was finally over.  It was put to the wife in cross - examination that the first the husband knew that divorce was a possibility was when the wife, without prior warning, presented him with a divorce petition whilst they were out having dinner sometime around the end of November 2009.

45. That is clearly not the case given that he himself had been seeking legal advice in Spain and that he described how he had been having nightmares about divorce and that there had been a number of conversations about the state of their marriage.  In addition the correspondence shows that the wife's solicitors had been in touch prior to the dinner. The husband described ringing his Spanish lawyer about a protective petition and said that if he had really thought that the wife was issuing a petition in London he would have "told Isobel sharpish" in order to protect himself.  The husband however accepts that as of November 2009 the wife could not have issued a petition in Spain as the family was by then habitually resident in England. 

46. The petition is dated the 27th November 2009.  The husband failed to send back an acknowledgment of service which resulted in an application having to be made for deemed service.  This was despite the fact that his solicitors had written in conventional terms indicating the husband's desire for a friendly divorce and that the decree nisi should be obtained as rapidly as possible.  In evidence the husband admitted that he had not sent back the acknowledgment of service as he wanted to "explore his options" with a view to divorcing in Spain.  He felt that issuing divorce proceedings in England was an underhand action on the part of his wife and he wanted to do what he could to "stick to" the Spanish agreement.  He said that he was convinced and remained sure that "this" (meaning issuing divorce proceedings in England rather than Spain) was "planned". 

47. On 16th January 2010 the husband moved out of the London flat. 

48. Meanwhile during the course of 2010, the wife's application for leave to remove the children to Spain was proceeding. It was listed for trial in May and was not reached. It was therefore relisted to be heard a month later on 24 June 2010. Unbeknownst to the wife the husband was, at that time, negotiating with his present employers with a view to moving back to Spain himself. The parties spent a whole day in May trying to agree terms and a final agreed order of great complexity was made after extensive further negotiations on the basis that the husband would be in the UK.  These further negotiations took place three days after the husband had met up with - what was to become – his new Spanish employer to agree his contract and terms of employment.

49. By September 2010 the whole family had relocated to Spain and the wife and children moved back into the Madrid property.

50. The litigation has not run smoothly. The husband failed to provide documentary evidence relating to his new employment: the wife therefore applied for a Letter of Request to obtain the information direct from the husband's employers. On 2 February 2011 the husband issued proceedings in Spain.  He said in his statement in support that "this is to resolve the division of the children's time, my financial obligations to them, my financial obligations to [my wife] and the implementation of our post-nuptial agreement". These proceedings have recently been dismissed in their entirety for want of jurisdiction. The husband said in evidence that he intended to seek an order that the children spend week about with each parent and that the wife's maintenance would be reduced accordingly. His statement makes it clear that he had not given up hope, even immediately before the start of this trial, of enforcing the CM through the Spanish courts.

51. On 18 February 2011 the husband made an application to stay the English proceedings, an application subsequently withdrawn.

Forum Shopping
52. The husband accuses the wife of "forum shopping" and said that she came to England in 2009 with the sole purpose of taking advantage of the more generous divorce settlements available to wives in this country than in Spain. He asks the court therefore to treat that as 'one of the circumstances of the case' and   look to applying the Spanish approach to maintenance.

53. I do not accept that the wife relocated to England in 2009 with the specific intention to get divorced. I am satisfied that at that time the marriage, although in difficulties, was continuing. It made sense for the wife to come over once the London flat became free given that the children were due to go to school in England in September 2010 in any event. Both husband and wife accept that whatever went on in Poland at the grandmother's  birthday party had precipitated the final irreconcilable break up and it was indeed immediately after that that the wife sought advice from English solicitors.  It may well have been that she was then advised to issue in London, indeed she had no choice as she was now habitually resident here. I do not believe that the wife, in a calculated and manipulative way, uprooted the children and put them in new schools in a different country for a matter of months, thereby exposing herself and them to the risk that an English court would not allow her to take the children back to Spain, all with the sole aim of instituting proceedings in England.

54. The husband himself did everything he could to "forum shop". He, unbeknownst to the wife, got advice from not one but two different sets of English solicitors. He delayed filing his acknowledgement of service, he had considered issuing a 'protective petition' in Spain at a time when the wife was coming over to join him in England and the marriage was still subsisting.

55. If only these two gifted and charismatic people, who are each devoted to their children and families, had been able to step back from their jurisdictional chess game and think about what would be a fair outcome, then a great deal of heartache and much of the £300,000  costs would have been saved.

56. One of the consequences of so much time, money and energy having been expended on ascertaining what order a Spanish court would make had this divorce been taking place in Spain, has been that the husband has become wholly fixated on that aspect of the case. He made it clear in the witness box that he believed that this court should make an order as if it was a Spanish court – his wife should be bound by her agreement (as interpreted by his Spanish lawyer). His open proposals were made in the same terms as he would have expected a Spanish judge to order and the husband told me in evidence that those open maintenance proposals were as advised by his Spanish lawyer Ms Carrillo. Those proposals are significantly below that which would be ordered by an English court in relation to both the children and the wife.

57. In cross-examination the husband was pushed to say whether he thought the offers (as recommended by his Spanish lawyers) were 'fair'. Initially he prevaricated, saying that they were in the same terms as they would be in Spain. The husband when pressed said that he did not in fact think they were fair and asked for time to consult his legal team and make fresh proposals. I reminded him that this was an English court who would apply English law to this English divorce. When he returned to the witness box the husband had significantly increased his offer for maintenance to make it, if not an 'English' offer, something approaching that which an English court would think to be appropriate. As a result the figures in relation to child maintenance are now agreed.

58. Before turning specifically to the s25 criteria it is necessary to deal with the Spanish Agreement.

The Spanish Agreement
59. The husband's case is that the CM was signed at the wife's request. The wife agrees. She has been clear throughout that the rationale was her anxiety to provide herself and the children with financial security in the event that the husband died prematurely. The husband accepts that that was what the wife said at the time and was the focus of their contemporaneous discussions; they were both of the view that the signing of a CM would achieve that result. The wife's fears could have been allayed had the husband made a will. The husband said in evidence that he was too busy to make a will and told the wife that "she had the time, she could organise it, have one drawn up and he would sign it". Given such an attitude and the necessity of obtaining legal advice as to the proper form of will where the principal assets were abroad, it is not hard to see why the wife, who was at this time moving house and had two children aged 2 and 3 months and who was having to be involved with the notary in any event in order to complete the purchase of the Madrid property, chose the simple route of the CM in order to ensure that in the event of the husband's premature death she would have provision.

60. The CM was signed against the backdrop of each party's perception of the status of the assets held by either of them at that time. The husband regarded the London flat and his savings as 'his' exclusively. It is for that reason that he had previously refused to transfer the flat into joint names despite requests by the wife to do so. The husband has conducted these proceedings on the basis that the effect of the CM is to exclude those assets he acquired prior to the marriage from consideration. He believes that the wife should now be bound by her 'contract'. I have no doubt that the husband believed that the effect of the CM was to reduce to legal form his already existing belief that his wife would only have an interest in those assets acquired by either of them after the date of the marriage.

61. I am equally certain that the wife at no stage intended to make a concession that the London flat was other than matrimonial property. I accept her evidence that in her mind, when she gave up work (she says at the request of her husband), sharing the assets was to some extent compensation for giving up her career.

62. It is common ground that financial security was of considerable importance to the wife. She had asked the husband on more than one occasion to transfer the flat into joint names; I do not believe that his refusal to do so meant that the wife accepted she had no interest in the property. In reaching this conclusion I not only take into account my assessment of the wife and her evidence, but also that fact that when the CM was signed the value of the wife's interest in the Madrid property amounted to only approximately €52,500 of which €15,000 represented her interest in her sole name of 16.88% (although a substantial part of the mortgage was paid off very quickly).

63. I accept the evidence of the wife that she did not believe the CM was retrospective and that she believed they shared the English assets. At the time the CM was signed, the wife had two children under 2. S was not even three months old, it is hardly surprising therefore that she felt vulnerable and, despite the husband's assertion that she had 'time' to arrange a will for him, it is understandable that she went for what seemed to her to be the simple solution of arranging the CM. Given her almost pathological need for financial security, in my judgment it is inconceivable that she would knowingly have signed the CM (which gave her assets of about €52,500 that is to say €15,000 in her own name over and above her joint interest in the Madrid property), and in doing so, wave all her interest in the London flat with its equity of several hundreds of thousands of pounds, and also in the husband's pre-marital savings.

64. The rationale behind the granting of the enhanced share of 16.88% given to the wife in the Madrid property has been difficult to unravel. Neither party is really able to explain how the figure came to be reached but only that it was intended to reflect the fact that the wife had contributed her savings to the acquisition of the property. Even so there is no discernable correlation between the amount and the percentage. The wife said that it was really a matter of pride for her to say she had not come to the marriage empty handed. 

65. I have concluded that at the time that the Madrid property was bought the husband was utterly preoccupied with his work; he describes the wife as "talking and talking" about topics when she had something on her mind. I am satisfied that the wife, who had just had her second child, was very anxious about her security at this time and that the husband, who was working extremely hard, 'went along' with what she wanted.  This included not only the CM but the recognition of her contribution to the purchase price of the house. I am entirely satisfied that the 16.88% in no way represents a quid pro quo for the wife for the fact that the husband was to have a sole interest in the London flat.

66. It follows therefore in my judgment having seen and heard the parties give evidence, that I have concluded that neither party had a full appreciation of the implications of the nuptial agreement. Not only was there no common understanding as between themselves of what they believed and intended the contract to achieve, but, given that the Spanish legal experts (as is discussed below) do not know what it means, neither could they have had a full appreciation of what the CM meant under Spanish law.

The Spanish Experts
67. On 13 April 2010 Deputy District Judge McHardy gave the husband permission to file expert evidence as to the 'applicability and meaning' of the Spanish post-nuptial agreement and for the wife to file evidence in reply.

68. The husband accordingly filed an opinion from his Spanish lawyer Isabel Winkels dated 26 April 2010 and the wife from  Mrs Maria del Mar Abril Perez del Campo on about 6 July 2010.  On 14 July 2010 HH Judge Horowitz QC gave permission for both parties to adduce further expert evidence in relation to the agreement and made provision for the experts to meet.

69. The parties each decided to instruct fresh experts and Mrs Justice Baron gave permission on 17 February 2011. The wife instructed Alberto Cedillo, who filed a report dated 24 February 2011 and the husband, Diana Carrillo whose report is dated 7 March 2011. Baron J's order required the experts to meet or speak on or before 11 March 2011 and to provide a schedule of agreements/ disagreements.

70. By the first day of the trial, neither party sought to rely on their original expert. Despite this, no schedule of agreement or disagreement had been forthcoming as between Mr Cedillo and Ms Carrillo.  It had still not been finally agreed when Mr Cedillo, on behalf of the wife, had actually gone into the witness box, although after a brief adjournment it was finalised (by now on day 3 of the trial).

71. Given that the cost of 4 experts had been incurred and the case was transferred to the High Court specifically because of the 'international element', the expert testimony when it was stripped down was in all essentials agreed and the only issue in respect of which they disagreed was a matter of professional judgment as to how a Spanish judge might deal with a particular matter.

72. The Spanish evidence can be summarised as follows:

i)  Under Spanish conflict of laws the law applicable to the divorce of the parties and its economic consequences is English law.

ii) After the marriage it is possible to alter the economic consequences of the law applicable by signing an agreement (CM) before a Notary Public.

iii) By the agreement entered into by the spouses on 4 April 2002 they submitted to the Spanish matrimonial property regime of "community of assets" (sociedad de gananciales). This is ordinarily the default position upon marriage in Spain whereby all property acquired thereafter is owned equally.

iv) Divorce produces the dissolution of the matrimonial property regime. The Spanish courts are bound by the property regime applicable with regard to the distribution of the parties' assets and under no circumstances can they depart from or override the regime.

v) The economic consequences of the CM take immediate effect but do not have retrospective effect.

vi) English law continues to be the law governing the period of time up until the signing of the CM. A party would have to make an application for English law to be invoked and evidence would thereafter be adduced on English law for the judge to consider:

a) Mr Cedillo's opinion is that Spanish judges are accustomed to applying foreign law and would carry out the exercise of applying English law to the assets owned by the parties prior to the CM and apply community of property to the property acquired after the CM, subject to the 'uplift' of 16.88% in favour of the wife in respect of the Madrid property.

b) Ms Carrillo was of the opinion that a Spanish judge would be reluctant to apply the law of two different jurisdictions to one marriage and that, whilst taking note of the English law, a Spanish judge would apply Spanish law to the totality of the marriage with the consequence that the assets in the husband's name owned by him prior to the signing of the CM would be his absolutely.

Both experts agreed that this is an unusual case not least because the community of property is the default regime in Spain and ordinarily applies from the date of marriage.  This case is unusual not only because England is the proper law of the marriage but because the CM was signed several years into the marriage.

73. Mr Boydell, on behalf of the husband, asks me to accept the evidence of Ms Carrillo on the basis that "it is nonsense" to think that the Spanish court would apply two different laws to one marriage. Indeed on one view that may seem so to an English Court who does not routinely apply foreign law to the cases before it. That is not however the position in Spain where the local courts regularly apply foreign law. The experts agree that English law is the law which would apply to the marriage for the period prior to the CM providing that it was invoked (which it inevitably would be). Mr Boydell asks me to conclude that a Spanish judge, having had English law invoked, would then decline to apply English law and apply Spanish law instead.

74. Both Mr Cedillo and Ms Carrillo are highly respected and experienced lawyers. They each agree on the law. They vary however on their prediction as to how a Spanish court might determine the outcome of what they agree is a novel legal argument. In my judgment it cannot be right, and it is not necessary on the facts of this case, for this court to second guess the conclusion to which a Spanish court might come in respect of a novel point of law, particularly in respect of a decision which may well have significant public policy implications in Spain.

75. Ultimately what the Spanish evidence tells me is that the legal consequences of the agreement in Spain are unknown and are likely to be controversial.

76. Turning then to the parties understanding of the effect of the CM; in Radmacher  Baroness Hale, when looking at the circumstances in which an agreement was made, said:

"172. The court will be looking first for a clear indication that the parties intended a divorce court to give effect to their agreement. The textbook and other precedents which I have seen certainly do their best to make this clear. The court should also take into account the parties' understanding as to the legal effect of their agreement…… The parties' expectations and understandings as to the effect of their agreement should they later divorce will therefore be an important factor in deciding what is fair"

77. In the present case :

i) Neither party has suggested that they discussed (or contemplated) divorce at the time of the agreement. In evidence the husband agreed with the wife that the governing motivation at the time of the agreement was not divorce but ensuring adequate provision for the wife in the event that the husband died. I do not accept the submission, made by the husband in his written submissions that the wife's primary motivation was to ensure she had an equal share in future bonuses the husband may earn. I find that the parties entered into the agreement at the wife's instigation, the primary intention being of both parties being to give her financial security in the event of the death of her husband.

ii) Understanding of the legal effect / implications of the agreement:

a) For the reasons already set out, I find that there was no mutual understanding between husband and wife in relation to the agreement: the husband believed it ring-fenced his pre-acquired assets; the wife did not.

b) The experts cannot, with any degree of certainty, tell the court what would be the legal effect of the agreement. This is not because they disagree about the law, but because the situation is highly unusual and there is no precedent; they are left each expressing their view about how a Spanish judge might interpret the law in what is a novel situation.

78. The court could, by reference to the guidance in the judgments in the Supreme Court, go through the Radmacher discipline and make an assessment in relation to each of the three questions:

i) Factors detracting from the weight to be accorded the agreement;

ii) Factors enhancing the weight to be accorded to the agreement: the foreign element; and

iii) Fairness.

In my judgment it is not necessary to go beyond the proposition advanced by Lord Philips at paragraph 75 which is to be applied in the case of any ante- and post-nuptial agreement:

"the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement"

79. In the present case I find that neither party had a full appreciation of the implications of the agreement; this was in part because they themselves were not ad idem and in part because, even had they had legal advice, their position in relation to the CM under Spanish law is unclear.

80. It follows therefore that I find the CM provides the court with little or no assistance in carrying out the s25 exercise which is my primary task.

81. In all the circumstances the only intention or expectation which I can infer is that both parties intended, subject to the 16.88% additional interest in the Madrid property, that all assets acquired subsequent to the signing of the CM would be shared equally.

Non Matrimonial Property
82. The husband submits that in the event that the court does not conclude that the CM prescribes the division of the assets, then in any event certain identified assets with a current value of £1,653,223 should be treated as assets owned by him prior to the marriage and should accordingly be regarded as his absolutely. The balance of the assets should thereafter be divided equally between the parties.

83. The assets the husband seeks to exclude fall into three categories:

London flat £1,135,002
Cash and Investments £134,006
Pension £384,215
Total £1,653,223

84. Recently there has been considerable debate and a number of reported cases dealing with the thorny question of how assets should be treated which have either been inherited or owned prior to the marriage by a party. Most recently the issue was considered by the Court of Appeal in Jones v Jones [2011] EWCA Civ 41  and  N v F (Mostyn J) 11 March 2011.

85. There is no doubt that the husband came into the marriage with substantial assets, which assets are capable of being the subject of forceful arguments in favour of their being excluded as non-matrimonial property. In my judgment however, for the reasons set out in my consideration of the s25 factors set out below, those assets are (with the exception of the pension) required in order to satisfy both the immediate and long term needs of the wife and children (and indeed the husband). It is therefore on the facts of this case inappropriate and unnecessary to get into the vexed question of whether the London flat is a matrimonial home and if so whether it has become matrimonial property or how growth on any of the assets should be assessed.

86. So far as the pension is concerned, it can and should in my judgment properly be excluded from the division of the assets, a position effectively, although not absolutely, conceded by the wife. The pension cannot be drawn down for many years and was accrued in its entirety before the marriage; the fund cannot be used to provide for the wife's needs in either the short or medium term. Given the benefit of the capital with which she will leave the marriage and a working life of 25 years ahead of her, fairness in my judgment requires that the husband should retain his pension fund absolutely.

S25 Factors
Income, earning capacity and other financial resources
Assets:
87. The parties have been unable to agree a schedule of assets. There are some relatively minor disagreements which are easily resolved but there are four significant issues which need dealing with separately, although quite shortly. They are:

i) Tax :
a) GP tax scheme: this is a tax scheme in which (in what have been described as 'extremely remote' circumstances), the husband would have to repay £80,000 by way of tax. The situation would only arise in the event that the bank involved defaulted. Whilst that in itself is not such an unimaginable event as it would have been 5 years ago, it remains a very remote possibility. I take the view that the husband should bear that remote risk; I reach that conclusion in part because the wife needs complete security in respect of the assets in her hands and in part because the husband is going to retain his pension and will therefore have a substantial fund in addition to that held by the wife.

b) HMRC: the husband received a tax rebate of £800,000. The husband seeks an indemnity from the wife in respect of this rebate. For the same reasons as set out at (i)(a) above I do not propose to require such an indemnity.

I should make it clear that I have excluded these two remote potential liabilities on the basis of the submissions made by the wife as to the remoteness of any such clawback and her need for financial security. If the wife was so ill advised or sufficiently vindictive to take any deliberate action following these proceedings, designed by her to cause that remote risk to crystallise into an actual liability, then, whilst I cannot and would not wish to try to tie the hands of another court in the future, I would not expect the wife to be able to rely on this court's knowledge of the theoretic risk taken into account by the court at this trial, to provide her with a defence to any application by the husband for a reconsideration of the distribution of the assets in the light of any substantial tax liability in relation to these two tax schemes.

ii) Costs:  the husband's English costs are £158,071 of which he has paid £66,330 leaving £91,741 outstanding. The wife for her part has paid all but £36,836 of her total costs.  Each party has received £80,000 from their Coutts joint account of which two tranches of £20,000 and £40,000 were specifically ordered to be paid towards costs. The husband submits that the outstanding costs of both parties should be included in the ordinary way as liabilities on the assets schedule. The wife submits that that would be unfair as it would mean that she, having used her money to pay costs, would be now, in effect, contributing towards the costs of the husband. The wife points out that the husband has spent over £50,000 on his Spanish lawyers, a figure which the husband does not accept; he says the figure is in fact €33,000 whereas the wife still owes at least €15,000. Mr Boydell suggests that to adopt the approach of the wife would be to treat the costs as if they were an 'addback' which would require an examination in detail as to what the husband was spending his money on at the time when he was incurring the costs liability and that the court would have to find a 'wanton' element in his spending before the court should do other than prepare the assert schedule on the basis of a simple reflection of current outstanding liabilities.

I accept the argument of Mr Boydell on this and the outstanding costs of both parties will remain as liabilities on the assets schedule. I note in any event that, even if the husband had spent the entirety of the amount allegedly overspent by him, on costs as set out in (iii) below, he would still have an outstanding liability in respect of costs of £42,158.00.

iii) Addback: the wife has sought an addback of £56,000 in relation to alleged overspending by the husband since separation. That figure has been calculated by simply deducting the maintenance paid to the wife from the amount allegedly spent by the husband over the same period.

iv) Issue-based costs order: finally, the wife seeks sums by way of costs which relate to specific elements of the litigation including some £30,000 representing the cost of the "leave to remove" proceedings. Given that the leave to remove proceedings are separate Children Act proceedings which have been concluded by consent with no order for costs, it seems to me that the only way this court could make any provision for those costs would be by making a finding that the order in relation to costs had been a pragmatic decision to resolve the case and that this court should now make a detailed examination of the circumstances surrounding the proceedings with a view to 'adding back' the wife's costs incurred in those proceedings.

88. Recently the courts have been increasingly asked to 'addback' sums to one side or the other in ancillary relief cases.   The two leading cases in relation to so called 'add back' are the cases of Norris v. Norris [2003] 1 FLR 142 and Vaughan v. Vaughan [2008] 1 FLR 1108,

89. In both cases the sums sought to be added back had been spent in the period following separation.  In Norris, the sum sought to be added back was expenditure over income of £350,000 in a period of just two years. In Vaughan, it was £80,000 in gambling debts.  The judge in Vaughn described the husband's behaviour "as bizarre, inexplicable and objectively profoundly irresponsible".  In Norris, Bennett J in dealing with the overspend in that case said at paragraph [77]:

"The overspend, i.e. the expenditure over income of £350,000 in a little over two years, at a time when he was about to and then did enter into protracted litigation with the wife, can only be classified as reckless, and particularly at a time later on when the dot.com and the stock market collapsed. A modest overspend in the context of a rich man would be understandable and could not be classified as reckless. But in the circumstances of this case, as I have set them out, in my judgment the scale and extent of the overspend was reckless. I do not think it appropriate to add back the entire overspend, but I do not consider it unfair to add back into the husband's assets the figure of £250,000. In my judgment there is no answer that the husband can sensibly give to the question, "Why should the wife be disadvantaged in the split of the assets by the husband's reckless expenditure?" A spouse can, of course, spend his or her money as he or she chooses, but it is only fair to add back in to that spouse's assets the amount by which he or she recklessly depletes the assets and thus potentially disadvantages the other spouse within ancillary relief proceedings."

In the case of Norris Bennett J referred specifically to the husband ordering a Ferrari motorcar during the course of the proceedings at the cost of £115,000. It should be noted that even so Bennett J did not 'add back' the totality of the overspend.

90. In the case of Vaughan v. Vaughan Wilson LJ giving the leading judgment made these important observations [14]:

"The only obvious caveats are that a notional re-attribution has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element) and that the fiction does not extend to treatment of the sums re-attributed to a spouse as cash which he can deploy in meeting his needs, for example in the purchase of accommodation. At all events the district judge's failure to despatch the issue by reference to the relevant legal principle in my view conferred upon the circuit judge an entitlement, at any rate in principle, to despatch it differently."

And at paragraph [28]:

"In that re-attribution has to be conducted very cautiously and in that, following more detailed argument than we have received, the circuit judge identified the parameters of the total sum dissipated by the husband as being between £100,000 and £175,000, I propose in my calculations to adopt the minimum figure."

91. In the reported cases the courts have therefore taken into account the extent, timing and nature of the alleged wanton dissipation and set it against the backdrop of its general assessment of the overspending party. Against that backdrop the courts have then moved on to consider to what extent fairness requires there to be a degree of 'add back' and in doing so exercised considerable caution, bearing in mind that fictional money cannot be used to meet a party's housing or other needs.

92. Recently in the case of Rider v Rider Coleridge J was asked to 'addback' a substantial sum, the allegation being that the wife had overspent on her legal costs. He said as follows:

"As a matter of principle I would discourage the pursuit of this addback approach which inevitably leads to a quasi taxation of the costs during the hearing but without the material which would be available to a costs judge. It rather flies in the face of the no order starting point and leads to debates about costs by the back door which the new rules were designed to try and prevent."

93. In my judgment the alleged overspend of £56,000 does not satisfy the criteria set out in Vaughan.

94. So far as the costs of the leave to remove proceedings are concerned, I accept that the husband was genuine in his opposition to the application at a time when he had no chance of employment in Spain. I also accept that he had had a number of job offers which fell away at the last minute prior to the offer from his present employers and that he had reached the stage in negotiations he had reached on 21 June, when he agreed terms with his present employers, on at least one earlier occasion. In my judgment therefore the loss to the wife in terms of costs was a relatively small proportion of her overall costs. Was the husband's failure to inform the wife of his job offer and call a halt to the proceedings at that stage 'wanton' such that he should now be penalised? In my judgment it was not. It was singularly unfortunate that he did not keep the wife informed of the progress of his job application. An anxious and tedious day could have been avoided in negotiating and drafting an order that was made on the basis that the husband would be in the UK but - an order would still have been required and I suspect the husband would still have wanted it to make provision for the eventuality that this job too came to nothing.

95. Outstanding costs: so far as issue-based costs are concerned the proper time to consider these is at the conclusion of the judgment.

96. In the light of these findings and the notes below the following table, the assets can be summarised as follows

Asset

Wife

Husband

Total

London Flat

 

1,135,002

1,135,002

Madrid Property

829,523

589,921

1,419,444

Bank Accounts

 

 

 

Joint

545,587

528,587

1,074,174

Wife

16,585

 

16,585

Husband

 

28,911

28,911

Other Investments

 

 

 

Wife

768

 

768

Husband

 

180,260

180,260

Money held by Farrar

 

7.000

7,000

Maintenance

5,000

 

5,000

Liabilities

 

 

 

HMRC

 

-19,502

-19,502

  Maintenance

 

-5,000

-5,000

Outstanding costs

-38,836

-91,741

-130,577

Total Ex Pension

1,358,627

2,353,438

3,712,065

Pension

7,821

384,215

392,036

Total inc Pension

1,366,448

2,737,653

4,104,101

 

33.29%

66.71%

 



There is no allowance in the CGT calculations for improvements in respect of either property.
i) The husband's tax outstanding is included as a liability.
ii) There is no reduction for the H's alleged overspend and the H's inheritance from his grandmother is excluded by agreement.
iii) The table includes the payback agreed by the H to allow for the fact that maintenance was paid from a joint account.
iv) Golf Club shares together with chattels and cars are excluded, the parties having agreed to retain one adult and one child golf club share each.

97. The total assets excluding the husband's pension therefore amount to £3,712,065. An equal division gives each party £1,856,032. If the wife retains the Madrid property  as part of her half share she would require an additional £436,588.50 to give her equality.

98. There has been considerable dispute about the earning capacity of the wife. Each party has approached head hunters and also each other's head hunters. The husband says the wife has presented a downbeat picture of her skills and qualifications to the head hunters, the wife says that the aggressive and inappropriate direct approach of the husband to a head hunter only damaged her prospects. I have no reliable independent evidence to assist me in relation to this issue but have been able to form a view of the wife's prospects in general terms from having seen and heard the evidence and cross-examination of the parties and by taking judicial note of the current adverse economic climate both in the UK and Spain. I have concluded:

i) The wife has a genuine desire to return to work, although, given her last disastrous foray into the workplace in 2006, she is understandably anxious as a single parent to ensure any job dovetails with her care of the children. The husband's recent application for a shared care arrangement has been dismissed by the Spanish courts on the basis that they have no jurisdiction and I have been told that he can only make a further application in the event that there is a change of circumstances. I therefore proceed on the basis that the wife will continue to be the children's primary career.

ii) I am satisfied that the wife will look for work immediately and will   earn as much as she possibly can given the much reduced standard of living from that to which she was used during the marriage and also her own strong personal need for financial security.

iii) I take into account the enviable qualifications of the wife and also the evidence that the husband gave of the considerable benefit that she has in seeking work in Spain in being Spanish but speaking fluent English. 

On the other side I take into account;

a) her relative lack of experience - 2 years in the last 11 years and her age: 41.     

b) the  difficult state of the Spanish economy. I take into account the fact that it took the husband 2 years to find work in Spain and when he did it was at a significantly reduced remuneration package from that which he had previously enjoyed when he worked in Spain. I note his evidence that it is harder to obtain posts at a higher level than the level at which he would expect the wife to be looking. 

c) That the wife will have the primary responsibility for two young children for many years to come, which responsibility would change in its nature but not reduce in the event that they go to boarding school in due course.

d) That the 'fall back" position of the wife is that she will do a PhD which will take three years and thereafter become a teacher which would require two years as an assistant teacher.

99. In my judgment the wife will find work but it may take a significant length of time and it may well be at a relatively modest level, at least initially until she can build up experience and contacts or alternatively retrain. Whilst it is impossible to predict the level of income she will achieve, I am satisfied that after 5 years either within the financial sector or by retraining, she will be earning the same or better than the level of spousal maintenance which can currently be afforded.

Income
100. The husband's current income is:

Net Basic  €111,600
Net Bonus €13,500
Total  €125,100

It is agreed that the husband will pay school fees and reasonable extras at about €20,000pa and child maintenance of €11,000 each together with the health insurance; a total continuing obligation of €42,000 pa plus the health insurance.

101. The husband in addition offers maintenance for the wife at the rate of €30,000 for 2 years and thereafter a nominal order until S reaches 18 years. The wife for her part seeks €34,800 grossed up in accordance with Spanish tax law (that figure being half of the balance of the husband's income after payment of child maintenance), together with 33% of the husband's annual net bonus, each on a joint lives basis.

102. Since the conclusion of the evidence the wife has amended her position so that she now seeks a clean break order. She seeks a half share of the liquid assets, no pension share and a sum of €481,495 to represent 10 years maintenance at €34,800 but grossed up as is required in relation to a Spanish maintenance order and in accordance with tax advice she has received.

103. I indicated to Mr Boydell that my preliminary view was that in order to satisfy the wife's needs, there would need to be an equal division of the liquid assets and I then gave him the opportunity to take instructions and to make submissions on that basis. The husband knowing that to be the case nevertheless says that he too would like a clean break, if it can be afforded.

Contributions
104. Each party has made a full contribution to the marriage, the husband as breadwinner and the wife largely as homemaker but also for "a period of time" earning. The earning capacity of the wife has undoubtedly suffered as a consequence of the joint decision of the parties' that the wife should stay at home with the children – a decision reinforced when the wife stopped work in March 2008 for a second time after having gone back to work for a period of time. It should be noted that the husband's earning capacity has been significantly eroded by the global economic downturn, although he no doubt hopes that it will again increase as the economy recovers.  

The husband brought to the marriage significant assets.

Needs
105. The wife's original budget as appended to her Form E was €175,044 pa. Given the husband's earning capacity at that time I do not regard that as unreasonable.  Even if, as the husband suggests, the figures are somewhat inflated, the drop in standard of living between the €72,000 pa suggested by the husband or, even the €84,133 pa on the wife's formula, is marked. I bear in mind that in addition during the marriage the family routinely saved significant sums.

106. It remains the husband's aspiration, supported by the wife, that the children should attend English public schools. It is not in the interests of the children for their lifestyle to be wholly out of kilter with that of their school fellows.

107. In my judgment the needs of the wife and children (and husband), cannot be adequately met from the level of maintenance the husband can afford to pay, whilst also maintaining a suitable home for himself and the children when they are with him.

108. The wife's earning capacity is a largely unknown quantity but, on the limited information before me, it seems that it is more likely to be below rather than above €50,000 pa and will be reduced by the necessity of paying for child care. Even if, as is suggested by the husband, the wife was able to earn enough to give her a surplus beyond the figure of spousal maintenance and if, as has been suggested by Miss Davidson QC on her behalf, she was allowed to retain the first €12,000 she earns prior to there being any reduction in her own maintenance, the wife would in my judgment still need to have recourse to capital (or the income from capital) in order adequately to provide for the reasonable needs of herself and the children.

109. If the maintenance of the wife is to come to an end sooner rather than later, whether reflected as a division of the assets or by way of a maintenance order, then on the facts of this case that can only happen if she has capital to produce income to supplement an earned income which, given her obligations to the children, is unlikely to be adequate on its own.

110. The wife wishes to stay in her home with the children. Although the husband initially presented a case to the effect that the house should be sold and she should move to something smaller, he has shifted his position to an acceptance that, for the time being anyway, the wife will continue to live there. On any view this seems to me a sensible concession; the house does not represent such significant over-housing such as to justify incurring the very considerable costs involved in a sale – nearly a third of the equity would be lost on sale and repurchase. The house is mortgage free.

111. So far as the husband is concerned the flat in London which he is to keep can be used for rehousing either by sale or by utilisation of the rental income. The husband said in evidence that he hopes to own a property in Madrid similar to the wife's, to retain the London flat and to buy a modest property in the country outside Madrid. It is clear therefore that the husband remains optimistic that he will be able to recover financially both from the effects of the recession and of the divorce.

112. Pursuant to s25A I have a statutory obligation to consider whether a clean break is achievable and if so when. I also have to strive to achieve a fair outcome, the first consideration being the welfare of the children.

113. In my judgment the order sought by the husband would not be fair. Once the Golf Club shares, chattels and, most significantly, the costs are taken out of the assets schedule, the proposal of the husband whereby the whole value of the assets owned by him before the marriage (as valued by him) are deducted from the asset schedule prior to an equal division of capital would leave the wife with £1,225,439 (£4,104,101 - £1,653,223), a sum less than the value of the Madrid property. Such an order would not only be unfair but would not, in my judgment, satisfy her needs and would not be in the interests of the children. I am conscious that Mr Boydell by the inclusion of chattels and the Golf Club shares was able to make the wife's capital interest equate (just) with the value of the Madrid property but in my view that is a somewhat distorted view of the capital and, as I have already made clear, the wife requires substantial capital in addition to her home if her and the children's needs are to be met.

114. This is a case where the husband understandably wishes to be able to look forward to a time when he is free from the burden of paying spousal maintenance. The wife is still only 41 and this is a marriage of moderate length 10 yrs.

115. Given the bitterness of the litigation to date and the seeming impossibility of the parties reaching consensus in relation to virtually any issue, it is important to attempt to give the parties, as near as is possible, finality. An open-ended maintenance order would, I am confident, result in fresh litigation, probably in two years time when the husband believes the wife's maintenance should come to an end under Spanish law. That would bring with it with all the renewed complications and accompanying cost of fresh litigation.

116. The question therefore arises as to what would be a fair outcome? In this case a fair outcome is one which would recognise all the s25 factors by providing for the long term needs of the wife and children, by the recognition of each parties' contribution to the marriage and, in so far as possible, the recognition also of the fact that the husband introduced substantial assets to the marriage.

117. In my judgment 10 years is too long a period for spousal maintenance for the wife. She is still only 41 now and in 10 years time S will be 19 and C 21 years old. I am equally certain that two years is not long enough. In my judgment the right figure is 5 years. This will allow the wife to rebuild her career and if necessary retrain as a teacher. By then S will be 14 years old.

118. I have concluded that the right figure by way of maintenance is €35,000 which converts to £30,701pa. (say £31,000).  This leaves the husband with about €35,000 p.a. to live on from his salary but leaves his bonus, which at present is relatively modest, available for his exclusive use.

119. Having considered the matter carefully I take the view that this is one of those cases where the issues can be resolved by way of an adjustment of the assets as opposed to the making of a maintenance order in favour of the wife. The orders I make are intended to be entirely tax neutral and represent the division of the parties' capital taking into account all the s25 factors only one of which is the maintenance entitlement of the wife.

120. The assets of £4,104,101 will be divided as follows;

Total Assets

 

 

4,104,101

 

H's Pension

376, 394

 

  -376, 394

 

Total after Pension

 

 

3,727,707

 

Equal Division

1,863,853

1,863,853

 

 

W's adjustment

 -155,000

   155,000

 

(£31,000x5)

Division of Assets

1,708,853

2,018,853

 

 

Less Madrid Property

 

-1,419,444

 

 

W capital to invest

 

    599,409

Approx £26,500 per annum (At a Glance)

 


121. The order the court will make will therefore be that;

i) The husband shall retain his pension entitlements.

ii) The husband will forthwith transfer his interest in the Madrid property to the wife. In the event that he fails to do so within 6 weeks of the date of this order the wife shall be entitled to place a charge on the London flat the cost of which will be borne by the husband.

iii) The wife will receive the sum of £600,000 from the Coutts account as within 28 days of the date of the order. The issue of  potential tax and reclaim of tax shall be dealt with as suggested by way of cross undertakings and indemnities as proposed by the husband and drafted in such a way as to ensure that neither party shall have a 'windfall'.

iv) The Barclays joint account in Madrid is to be shared equally and the small Coutts account in London is to be the property of the husband.

v) Unless either party issues an application for the court to determine the issues of contents by 4pm on 13th August 20121, neither party shall be entitled to issue any such application thereafter and all contents shall remain the absolute property of the party in possession. It  should be borne in mind by the parties and any District Judge hearing this issue that the husband has  retained the entire contents of the London flat, removed (in the wife's absence and without consultation) all those contents he wished for from the Madrid property and has spent substantial sums on refurbishing and equipping his current flat. The court has only reluctantly left the issue of contents at large because the issue was not specifically addressed at trial and it may be there remain a few personal or sentimental items at the Madrid property which the husband ought properly to have returned to him.

vi) The wife shall not contact the husband's employers directly or indirectly for 12 months and thereafter no such approach will be made without giving the husband 14 days notice in writing of her intention to do so.

vii) The husband shall continue to pay the wife maintenance at the same rate until such time as the lump sum is paid in full.

122. I have made the order in relation to the wife making any approach to the husband's employers as requested by the husband. The order is intended to lead to a clean break and to bring the war of attrition to an end. Between the conclusion of the trial and submissions the wife approached Coutts and persuaded them to transfer rental monies that are the husband's alone into the joint Coutts account. Such behaviour must come to an end and it is not in anyone's interests for the job security of the husband to be jeopardised.

123. In her written submission the wife advertised her intention to apply for an issue-based costs order. No doubt she will wish to consider the content and detail of those submissions in the light of this judgment. If the wife still seeks such an order I am prepared, if the parties so wish, to deal with the application on paper to which end the wife should file her amended submissions within 14 days of the handing down of this judgment and the husband should reply 14 days thereafter. If there is no agreement to costs being dealt with in this way then the matter should be re-listed in the ordinary way for an oral hearing.

124. I should make it absolutely clear that the order I have made is intended to achieve finality and to bring to an end the destructive behaviour of this husband and wife towards each other, if not for their own sake, for the sake of their children. The husband has told the court through his Counsel that he accepts that the children will now live with their mother and that absent a change of circumstances he cannot make any further applications to a Spanish court. These English proceedings have been conducted on the basis that the wife will be returning to work in the relatively near future. I should make it clear that that being so, this court would not regard the coming to fruition of that plan as a change of circumstances which would justify a wholesale review of the children's living arrangements and the launching of fresh litigation in Spain. The father understandably hopes contact can be developed by negotiation with his wife once these proceedings are concluded. The court hopes that that will be the case and that once these proceedings come to an end the wife will feel able to discuss contact from a position of financial and emotional security.