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Home > Judgments > 2012 archive

F v F [2012] EWHC 438 (Fam)

Final hearing of a financial remedy application in a complex big money case

The husband was a wealthy man at the time of the marriage. He was chairman of the company he had founded called (for the purposes of the judgment) Franklin Plc. He utilised the high financial rewards of his employment and shareholding to invest and create further wealth, purchase or enable the purchase of residential property and permit a conspicuously high standard of living.

In 1996 the husband settled the irrevocable HF Family Settlement ("the 1996 trust") for the benefit of members of his family.

In 2003, a shareholders' agreement was drawn up between the husband, the wife and the 1996 trust family trustees by which the shares were reclassified. The shareholders' agreement otherwise prevented the sale/transfer of shares outside existing shareholders or other trusts settled in similar terms to that in 1996, prevented the wife's removal as director, prohibited the making of gifts or payment (other than earned remuneration), to the husband's elder children and provided for the payment of all salaries, bonuses, dividends and distributions, save that salary "increased annually by either 5 % or the percentage increase in profit over the previous year, as defined by the executives' profit sharing scheme, whichever is the highest", to be paid tom or for the benefit of, the  husband and wife into their joint account. 

Macur J identified several disputed matters of fact and that any or all of them might become irrelevant to the outcome dependent upon the decision as to the status of the 2003 shareholders' agreement and the weight to be afforded to it. Neither party sought to uphold the agreement and both sought to vary it to their advantage.

Macur J found that that there was good reason not to hold the husband and wife to their agreement whether it was post nuptial or maintenance in the light of circumstances prevailing at the time of their divorce and particularly with regards to the interests of the trust.

The factual issues subsequently addressed were as follows:

(i)   the valuation of the husband's pre-marital wealth and the extent to which it should be isolated from the marital property subject to division;

Macur J held that it was significant and could not be ignored: its value in 1993 and the increase due to 'passive growth' indexation had to be left out of account for the purposes of assessing fairness of division.

(ii) the treatment of the husband's dispositions to his elder children;

Macur J held that the wife has not discharged the burden of proving any alienation of matrimonial funds with the intention of defeating or reducing her claim, nor of wanton and reckless behaviour to found any 'add-back' argument quasi or otherwise. In particular, it was concluded on the evidence that the dispositions were indicative of the husband's intention to deal fairly with all of his children during life and after death.

(iii)  the valuation of the life interests in the former matrimonial home ("Peyton Place");

Peyton Place was settled by the husband and the wife. The beneficiaries included the settlors, their children and their children's children. Macur J made findings as to valuation on the basis of the expert evidence.

(iv)  the valuation of the existing shareholdings in Franklin;

Macur J considers in some detail the conflicting valuations of the company's shareholdings and again made findings.

(v) the valuation of the wife's maintenance needs.
 
On the basis of agreed average past household expenses that permitted "generous interpretation" of her needs, Macur J considered the future maintenance needs of the wife as custodial parent of the children whose educational expenses would continue to be covered, to be £300,000.  These would decrease as the children attain the age of financial independence, which was taken to be the conclusion of their tertiary education. The parties agreed the maintenance to be attributed to the children amounted to £105,000 p.a. The appropriate Duxbury calculation to fund the remainder required a capital fund of £4.974m. A lump sum payment would be made to augment the wife's present net assets.

Macur J ordered on the basis of a clean break in life and death that:

- the 1996 settlement be varied to provide for the net proceeds of sale to be divided as to one-third to the husband and two thirds to the wife and re-invested in separate properties. No other variation was made and specifically not to remove any of the present trustees.

-the wife a larger share to reflect that the children primarily would continue to make their home with her and to balance assets as they would fall post-variation of the shareholders' agreement.

-the trust's reversionary interest to be transferred and not crystallised.

-the husband to pay to the wife a lump sum of £0.75 m. and to transfer any remaining interest in or control over two other properties to the wife.

-the shareholders' agreement be varied by total rescission.

-a sum for child maintenance was approved.

In the division of the assets, on the basis of available matrimonial property, excluding the pre-marital value of Franklin as increased by passive growth, the award to the wife was approximately 45% of the total matrimonial assets. If available and ascertainable non- matrimonial property, that is 52% of the present day gross value of Franklin, was included the division would provide her with approximately 36% of the assets.

Summary by Alfred Procter, barrister, 1 Garden Court


______________________


Case No: FD10D04494


Neutral Citation Number: [2012] EWHC 438 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 05/03/2012

Before :

MRS JUSTICE MACUR DBE
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Between :

WF Petitioner

- and - 

HF Respondent

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(Transcript of the Handed Down Judgment of
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Mr M Pointer QC (instructed by Vardags Solicitors) for the Petitioner
                  & Mr N Yates
Mr L Marks QC (instructed by Manches LLP) for the Respondent
         & Ms C Cowton 

Hearing dates: 17 January to 24 January 2012
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Judgment
As Approved by the Court

Crown copyright©

.............................

 
Mrs Justice Macur DBE :
 
PRELIMINARY OBSERVATIONS:
1. This ancillary relief dispute has been the subject of 3 substantive directions hearings and conducted at final hearing by specialist matrimonial leading and junior counsel on each side, instructed by specialist matrimonial solicitors and costing the husband and wife £2.4 million between them. Both the husband and wife have been surrounded by a legal entourage of at least 5 personnel throughout the 8 days of proceedings in court. I regret that these statistics have not ensured compliance with rules of evidence, the Pre-action Protocol and Family Proceedings Rules 2010 or the spirit of Practice Direction 25A effective for proceedings commenced post 6 April 2011. In these circumstances the raised emotions, distrust, entrenched positions and consequent waste of court time were entirely predictable. The position has not been ameliorated by the apparent disinclination of Counsel to communicate throughout the hearing save in the Court room itself culminating in the necessity for me to direct the exchange of written closing submissions before I was addressed on the same since otherwise "the usual practice" of providing them just at the moment when the address began would have been followed.  It is difficult to conceive that either party can have their expectations realistically managed in such a scenario.

2. The open offers of husband and wife to resolve this case, dated 11 May 2011 and 12 January 2012 (superseding that of 29 June 2011) respectively, are irreconcilable in any degree save as they relate to child maintenance payable by or on behalf of the husband to the wife and a clean break in life and death. Amongst other proposals to settle the matter the wife seeks to vary the terms of the Peyton Place settlement and share agreement as described below so as to rescind the husband's life interest in the matrimonial home and in the Franklin shares, tantamount to leaving him an employee with a restricted salary of no more than £200,000 per annum. Conversely, the husband seeks to transfer the life interests he and the wife hold in Peyton Place to properties purchased with half of its proceeds of sale each and to remove the wife as director and shareholder of the company. I am not surprised that a privately funded family dispute resolution hearing before a retired judge of the division failed to achieve its aim.
 
BACKGROUND:
3. The agreed and comprehensive chronology prepared for trial can be exhibited to this judgement. The relevant background, as I find it to be, may be summarised as follows. This is the husband's third marriage. He has been widowed and divorced. He has 4 children from his first marriage now aged 44, 41, 37 and 35. He has no continuing financial ties to his second wife. The wife in these proceedings has never been married before. At the date of their marriage on 20 December 1993 he was 62 and she was 32. They are now 81 and 50 respectively. Decree nisi was pronounced on 11 January 2011. They have 3 children together aged 17, 16 and 12.

4. The wife is acknowledged by the husband to be a loving and devoted mother. She relinquished her career on marriage and has been the main homemaker throughout. The relatively modest net proceeds of sale from her London flat, purchased in 1985 and sold in 1997, being £152,000 were invested upon the husband's advice in a portfolio managed by Singer & Friedlander. It has been augmented by contributions from the husband and has increased in value and inter alia utilised during the marriage for the purchase and/or renovation of properties for the use of the family.
 
5. The husband was a wealthy man at the time of his marriage to the wife. He is the chairman of the company he founded in 1971, Franklin Plc ("Franklin"). It has survived previous recessions and thrived. It looks well placed to survive the present recession and emerging competition from Asian markets. Patently, it is and has been well managed and directed. It is the origin and continuing mainstay of the family wealth. The husband had and has utilised the high financial rewards of his employment and shareholding to invest and create further wealth, purchase or enable the purchase of residential property and permit the family a conspicuously high standard of living.

6. I find on the evidence, principally revealed in a recently produced bundle relating to a tax investigation being conducted in 1992, that his many diverse financial interests at that time were not confined to Franklin. Of note, given the significance afforded to them on behalf of the wife, it is clear that the husband has had, and continues to do so, a particular interest in antique clocks and time pieces which is not confined to their aesthetic worth.  There is no satisfactory evidence that these other financial interests continue to exist and whether they do or not is largely irrelevant in the circumstances of this case in that they would clearly constitute non-matrimonial property.
 
7. The marriage has been in difficulties on several occasions during the 16 + years before presentation of the wife's final petition. The wife has sought reassurance as to her own and the younger children's financial security at these times against the background of generous financial assistance and lifetime dispositions to the older children by their father resulting in the transfer of a valuable investment portfolio to the wife, creation of trusts, the deletion of beneficiaries from existing trusts and a share management agreement.
 
TRUSTS/SETTLEMENTS:
8. On 21 February 1996 the husband settled the "irrevocable" HF Family Settlement ("the 1996 trust") for the benefit of his children and remoter issue, their spouses, widows, widowers and their children and his own widow. A letter of wishes of the same date sought that his younger children's needs be considered a primary call upon trust funds during their education "and would not envisage payments being made to other beneficiaries" but thereafter, when they became independent, to make adequate provision for his widow if not sufficiently well provided for from other sources, to support the efforts of any child who appeared to be making a career in Franklin and, subject to these factors, for the benefit of all of his children equally. The husband endowed this trust with 30% of the issued Franklin shares in March and April 1996.
 
9. In May 1996 the wife was appointed additional trustee of the 1996 trust and in August 1996 became a non-executive director of Franklin. Thereafter it appears that in June 1997 a further "Letter of Guidance" was drafted upon the husband and wife's joint instructions to "make no mention of the [husband's] elder children". This letter has not been produced. I do not know whether it was executed. A signed letter of guidance dated July 1999 does not exclude his older children nor any of their children as potential beneficiaries in certain prescribed circumstances, but retained priority for the couple's own children and the husband's widow as before.
 
10. In July 2001 the husband transferred a further 18% of the total issued shares in Franklin to the 1996 trust.  By deed of appointment in July 2003 the wife's sister was made an additional trustee and the elder children and their children were effectively excluded as beneficiaries of the 1996 trust.
 
11. The matrimonial home is Peyton Place, purchased after the marriage by the husband from the proceeds of sale of his former residence, another substantial country house. Following renovations Peyton Place was conveyed into the parties' joint names in 1994. On 4 July 2003 it was settled by the husband and wife in the "irrevocable" Peyton Place Settlement. The trust fund is defined as "the property and all property from time to time representing the same". The beneficiaries include the settlors, their children and their children's children. The settlors are expressed to have the beneficial use and enjoyment of any property that forms part of the trust fund.

12. In October 1998 SCI Amandier was incorporated in France, 90% of the shares being held by the wife and the remainder by the husband. The property, L'Amandier was purchased in the approximate sum of £900,000. Renovations/refurbishments were made. The husband and wife disagree substantially as to the cost of the same. They agree that more recently a budget of €1.5 m francs was assigned to further works – this to obtained from the portfolio held by the wife. In July 2004 the husband had transferred an additional plot of land to the SCI and thereafter endowed his 3 youngest children with his shares, merely retaining a usufruct.
 
13. On 4 July 2003 a shareholders' agreement was also drawn up between the husband, wife and 1996 family trustees ("the share agreement").  By that agreement the shares were re-classified into A, B and C ordinary shares and assigned as to 48% A and B shares to the 1996 family trust; 52 % of the A shares to the wife; 52% of the B shares to the husband; approximately 49 % of 14,444 C shares to the husband and 51% to the wife – they to be converted numerically like for like into A shares upon the husband's death and 7,000 bequeathed to FX, managing director of Franklin.  The B shares carried all voting rights; the A shares all dividend rights. The C shares provided the vehicle for the husband's long since expressed testamentary intention to 'reward' Mr X.

14. The share agreement otherwise prevents the sale/transfer of shares outside existing shareholders or other trusts settled in similar terms to that in 1996, prevents the wife's removal as director, prohibits the making of gifts or payment, save earned remuneration, to the husband's elder children and provides for the payment of all salaries, bonuses, dividends and distributions, save that salary "increased annually by either 5 % or the percentage increase in profit over the previous year, as defined by the executives profit sharing scheme, whichever is the highest", to be paid to or for the benefit of husband and wife  into their  joint account.  The caveat has attached exclusively to the husband's salary amounting to approximately £13 m net since 2003, but only  £8.4m of which was paid into his sole account.
 
15. In August 2004 the husband contributed £350,000 towards the purchase of a house for the wife's mother. 50.10% of the net proceeds of sale, net rents and profits of the property is held in the WF Discretionary Settlement created in June 2004 for the benefit of the husband and wife's children, remoter issue, their spouses, widows and widowers, the wife's mother and charities. The wife and her mother hold the remainder in approximate shares of 1: 2.

16. In or about April 2008, a property in Chelsea was purchased in the wife's name for  £2m +, and an additional £470,000 was spent on improvements. In July 2008 48% of the property was settled in trust for the benefit of the children of the husband and wife jointly, who were to be trustees.

OTHER DISPOSITIONS:
17. The husband transferred a valuable share portfolio worth approximately £2.477 m into the sole name of the wife in September 2002 at the time of negotiations concerning the share agreement and Peyton Place Settlement.

18. Between 1996 and 2002 and more recently the husband gifted money and money's worth to his four elder children in the total sum of £8m+.

19. I set out the nature of these settlements and dispositions in some detail to indicate the husband's attitude to financial planning and his past generosity towards the wife. I find they are significant factors to bear in mind when evaluating the submission made on behalf of the wife that the husband has alienated or concealed matrimonial funds and her ultimate proposals for outcome.

ISSUES:
20. There are several disputed matters of fact which may be summarised as (i) the valuation of the husband's pre-marital wealth and the extent to which it should be isolated from the marital property subject to division; (ii) the treatment of the husband's dispositions to his elder children; (iii) the valuation of the life interests in Peyton Place; (iv) the valuation of the existing shareholdings in Franklin; and (v) the valuation of the wife's maintenance needs. Any or all of these may become irrelevant to outcome dependent upon my decision as to the status of the 2003 share agreement and the weight to be afforded to it. Neither party seeks to uphold it. Each seeks its variation to their own advantage and attendant disadvantage of the other.
 
VARIATION OF SETTLEMENTS:
21.  There is no issue but that the 2003 settlements referred to above are post nuptial settlements subject to variation by the Court in accordance with section 24 (1) (d) of the Matrimonial Causes Act 1973, with no reason to afford significant weight to the fact of the agreement in the determination of the respective cross applications to vary the terms of the settlements. What is in issue between the parties is whether the share agreement is also a maintenance agreement as defined by section 34(2), subject to variation by the Court in accordance with section 35 (2) as interpreted by the Supreme Court in GRANATINO V RADMACHER [2010] 2 FLR 1900.

22. There is no express provision within the share agreement that provisions made for the transfer of shares or the allocation of salaries, bonuses or dividends to the parties' various bank accounts, whether sole or joint, are to accommodate or govern the rights and liabilities between them when living separately. In this respect it is an incomplete contract.  Each side asks me to imply a term as to duration of the agreement.

23. The wife argues that there is no clause bringing the agreement to an end upon divorce or separation and that by paragraph 4.2 the agreement is expressed to be "irrevocable" save by joint agreement, and must therefore survive separation and consequently be caught by the statutory definition of a maintenance agreement. The husband argues that the terms of the agreement in so far as it relates to their drawings upon the company, in whatever form, makes clear that it could not govern their finances post separation since it refers to their joint bank accounts, and therefore quite clearly informs the construction of the agreement as not falling within section 34(2).

24. The definition of "financial arrangements" in section 34(2) as "provisions governing the rights and liabilities towards one another when living separately…" I construe to cover only those agreements made with the expressed or clearly implied purpose of governing the parties' financial affairs including in the event of separation and not those that could do so only if certain terms of the agreement were re-constituted – as the wife agreed in evidence would be necessary in this case.
 
25. A term ought not to be implied unless it is in all the circumstances equitable and reasonable. It cannot be so classified if it is inconsistent with the express meaning of the agreement and fails to accord with the provable intention of the parties.

26. This particular agreement – poorly drafted as paragraph 3.2 is – obviously and expressly caters for the parties' access to a joint bank account. In those circumstances and the absence of express provision to the contrary it is illogical and unreasonable to imply a term that it is to cater for separation.

27. In construing the document I cannot find any implicit purpose that it should endure separation, rather the contrary, adopting not only Mr Marks QC's submissions on behalf of the husband but also Mr Pointer QC's written arguments on behalf of the wife that "it is unrealistic for the court to consider the three separate transactions that took place in July 2003 in isolation. Plainly...this was part of a comprehensive financial re-organisation by the family of their affairs, and the process should be considered as a whole." The Peyton Place settlement made at the same time as this share agreement provides for each spouse to have a life interest and right of residence in the property. This could not be reasonably construed to cover the separation of the parties. The fact that the wife seeks the husband's removal and the husband seeks release of monies for purchase of alternative accommodation because of the acrimony and emotional upheaval of the separation illustrates the point.

28. This analysis/construction of the language of the share agreement does not rely upon an examination of the parties' intentions at the time of making the same. In these circumstances it is unnecessary to qualify what appeared to be Mr Pointer QC's bald argument that the intentions of the parties could never be relevant to the construction of such an agreement. (In that he may seek to defend the same, I view the case of CHARTBROOK LTD v PERSIMMON HOMES LTD [2009] UKHL 38, upon which he relied, to govern the case where a court is "asked to decide what the parties could reasonably be taken to have meant by the language which they finally adopted to express the agreement" and not the case where a term must be implied to give business efficacy to the contract, and/or to represent the obvious, but unexpressed, intention of the parties, which is dependent upon the presumed common intention of the parties to be ascertained objectively. )
 
29.  However, if another Court is invited to reconsider this matter I make the following findings on the admissible evidence.
 
30. There is no dispute that this agreement was initiated by the perilous state of their marriage at the time. Nevertheless, I am satisfied beyond the requisite degree that both parties wished and believed that the marriage would continue.

31. The evidence concerning the circumstances of the making of the share agreement has been well rehearsed before me both on paper and orally. I make clear, as I did on several occasions during the hearing, that I dismiss any hearsay evidence from my mind.  The contents of solicitors' notes, the parties' accountant's notes or the memory of the managing director as to what the husband said to them at the time of making the agreement are inadmissible as evidence of the truth of the contents of the husband's conversations/instructions. The maker of the statements, the husband, was always known to be available and has been called to give evidence. The fact of the conversation is only relevant to rebut any allegation of recent fabrication, which is not alleged here. It is therefore inadmissible. Regard to these rules of evidence would have obviated the need to produce the voluminous documents or associated witnesses.
 
32. Professional privilege having been waived by the husband, I unreservedly accept the evidence of Mr Leney, the husband's solicitor, that he advised his client not to proceed with his avowed intent to divest himself of all assets in favour of the wife, and as to his apparent demeanour at the time and patent disregard of professional advice tendered by phoning the wife's solicitors himself to make such an offer upon Mr Leney's refusal to do so.
 
33. There is no suggestion on the evidence that the husband lacked mental capacity at the time of making the offer nor subsequently when he signed the share agreement 12 months later, which substantially ameliorated his starting position by preserving for him voting rights and consequent financial rewards in his sole name.
 
34. Professional privilege having been waived by the husband, I accept the evidence of the accountant, KN as to her advice to the husband regarding the re-classification of shares and the manner in which the share agreement was actually prepared between herself and MB, employed by a professional firm of company secretaries, without specific instruction from the husband but with his consent and the input of the wife's solicitor of that time. I am less convinced of the accuracy of her evidence concerning the wife's stated understanding that the husband had previously been drawing £10,000 per month and not, as wage slips at the time clearly portray £46,666. However, I am not satisfied to the requisite degree that she was acting fraudulently in her dealings with the wife at this time, nor is there any evidence to suggest that she was the husband's agent when discussing financial matters with the wife or her solicitor in this regard. KN, as the wife's tax accountant and also advising members of Franklin's board, was acting in stark conflict of interest but my assessment of her as a witness leads me to conclude that she was her own fool and nobody else's knave in doing so.

35. The agreement having been signed by the parties has subsequently been executed in its performance over the years. The wife is dissatisfied with its actual operation, which has resulted in significant sums of money being legitimately paid into the sole account of the husband and has instituted a claim in professional negligence against her former solicitor. She does not seek to set the whole agreement aside by reason of her alleged mistake as to the level of the husband's salary, nor do I understand that she is actively asserting misrepresentation on his part. However, on her own evidence, she clearly did not appreciate the implications of paragraph 3.2 as drafted.

36. I conclude that both parties entered into the agreement having taken or having positively disregarded or refused independent legal advice tendered. Neither was coerced to do so, albeit that the impetus for the husband was his obvious conviction that this was the only way to avoid the prospect of a marriage breakdown. I accept his evidence that he did not understand this agreement to survive divorce. I regard the wife's evidence that she considered this agreement to be irrevocable to be almost mantra like in delivery. I am led to conclude that she had not given any thought as to its status upon separation or divorce.

37. Mr Pointer QC on behalf of the wife seeks that I should afford weight to those parts of the agreement that benefit the wife and vary those that do not. The result of the variation proposed would be to remove the voting rights attached to the B shares and significantly to restrict the remuneration and drawings of the husband whilst ensuring the payment of a specific dividend to the wife. She would acquire a controlling shareholding immediately. The husband's income would cease upon termination of his employment. He would not be entitled to dividends.

38. No doubt in support of this proposal the wife attempted to adduce evidence of Dr Simon Turner, a "strategic consultant". I requested Mr Pointer QC to reconsider his expressed intention to call this witness. He did so. I make clear that I would have refused to admit the evidence on a number of bases:

(i) no permission was sought/granted for it to be admitted as an expert report; (ii) it expresses opinion whilst expressly acknowledging lack of expertise;

(iii) it expresses opinion upon company issues which are irrelevant to my consideration and, I may say inherently offensive in the context of a very successfully run company and likely to engender resentment between present board members and the wife who has sought to introduce it. My decision on the outcome of the share agreement is not influenced by the business experience/acumen of the wife nor her ideas for the future of the company. In short a pointless, costly and counter-productive exercise.

39. I consider the wife's proposal is a radical variation that strikes at the core of the agreement. Fair outcome in this case demands that it should stand in its entirety or fall altogether. The wife has not been disadvantaged financially during the subsistence of the agreement and has increased her property and share portfolio. The 1996 trust's interests have been protected to date.

40. Neither the husband nor wife could be said to be left in financial need if I were to uphold the agreement. The wife has since been further endowed with the profits of company success in the purchase of property, which she holds to her own, and the children's use.  However, that variation obviously is necessary following the breakdown of the parties' relationship some 7 years on is made clear by the acrimony it has engendered which threatens the business dealings of the company upon which the parties' wealth depends and thereby the future financial security of the children of the marriage as beneficiaries of the 1996 trust. That is, as controlling shareholder and only subject to action by the minority shareholders the husband is at liberty to block dividends, vote for an enhanced executive profit sharing scheme and charge the assets of the company to his personal advantage and the disadvantage of the wife and trust yet is unable to appoint his successor as chairman of the family business which he incorporated 40 years ago and thereby seek to ensure its continuing success. In these circumstances he has the capacity and, subject to my decision as to variation of the agreement, a reason to undermine the value of the shareholdings substantially.
 
41. I find that there is good reason not to hold the husband and wife to their agreement whether it is post nuptial or maintenance in the light of circumstances prevailing at the time of their divorce and particularly with regards to the interests of the trust. I make clear that I am confident that the wife's removal from the company affairs will not undermine the security of the trust.

PRE-MARITAL WEALTH:
42. The significant pre-marital wealth of the husband cannot be ignored. The central plank of the family finances throughout the marriage has been Franklin. I do not accept the evidence of the wife that she has played any significant role in the business to date and reject her claim to have re-invigorated the company's fortunes or the husband's interest in the company. I have seen Mr X, the long-term managing director of the company, give evidence. His measured responses to questions of both husband and wife were compelling and convincing. I accept his evidence that many of the ideas said to have been inculcated into the company's development by the wife had been utilised long before 1993 and also that the husband was still playing an active role in the company at that time with no indication of his intention or desire to retire. He did not accept that the company was in the "doldrums" and points out that it made a £650,000 profit on £3.5 m turnover at a time of recession in 1993. Therefore its value in 1993 and the increase due to "passive growth" indexation must be left out of account for the purpose of assessing fairness of division.

43. The wife has sought to decrease the value of the company and/or the husband's pre-marital assets by reference to tax investigations ongoing in the early 1990s. Her evidence is that prior to their marriage the husband informed her that he owed £3m to the Inland Revenue, which had been instrumental in his second wife's decision to make no financial claim upon him. It has been the subject of extensive interrogation of records and cross-examination of the husband and the accountants.

44. I am satisfied that the Franklin audited accounts reveal only the matters relevant to the corporate tax position and have been taken into account in its valuation. I am satisfied that the husband's personal tax liability was significant but met from his personal resources including a dividend declared by Franklin and relating to company profits. I do not consider the recently produced documentation to undermine the husband's credibility or to reveal him guilty of fraud. They do reflect on the accuracy of his recollection on the resolution of this issue. I do not discount the wife's evidence on this point but in the circumstances of his obvious pursuit of the wife at this time consider that his statement was swaggering.

45. The fact that I have determined the issue in favour of the husband does not deflect my criticism of the husband's solicitors for failure to consider the need to make on-going "full and frank disclosure" of documents relevant to issues in the case. It is not for Leading Counsel for the husband to pronounce the issue "closed" or to rely upon the lack of specific direction for disclosure of such documents at the pre-hearing review. Once it becomes clear that there is an issue that may become relevant to outcome the obligation is clear. I acquit the husband's solicitors of deliberate concealment. I am satisfied beyond any doubt that the failure to produce what transpired to be the "Theodore Goddard" report referred to by the wife in evidence was unintentional; the error due to a failure of recognition of the document the husband had produced.
 
DISPOSITIONS TO OLDER CHILDREN:
46. Mr Marks QC on behalf of the husband argues that the wife seeks to make a quasi 'add back' argument in relation to these distributions and thereby to dilute the principles established in NORRIS v NORRIS [2003] 1 FLR 1142 and VAUGHAN v VAUGHAN [2008] 1FLR 1108. There is suggestion and express reference to "add back" to be found in the wife's open settlement proposals dated 29 June 2011 and 12 January 2012 respectively.

47. Mr Pointer QC for the wife disavows any such intention and argues that these dispositions have a two-fold impact. In summary, first, that the husband cannot on the one hand say that these distributions are attributable to pre-marital property and then seek to rely upon the same pre-marital wealth to diminish the wife's fair share of matrimonial assets, for that is to engage in what is tantamount to double accounting. Second, that the husband cannot seek to say that fairness dictates that he should receive such relief as will permit him to make testamentary bequests to all his children without reference to the fact that he has already made lifetime gifts with a view to inheritance tax planning. In addition the husband has been cross-examined to the effect that he has retained a beneficial interest in these gifts.

48. For the avoidance of doubt I make clear that the wife has not discharged the burden of proving any alienation of matrimonial funds by the husband with the intention of defeating or reducing her claim, nor of wanton and reckless behaviour to found any "add back" argument, quasi or otherwise. Further, I consider it entirely reasonable that the husband should have made lifetime bequests to his elder children at times when making provision for his younger children and third wife from the monetary rewards of Franklin, whether earned during the course of the marriage or not. The husband's youngest 3 children born of the wife are beneficiaries of trusts valued at a conservative £10 m. That he believes he has a continuing moral or paternal obligation to provide for the children of his first marriage, during which time he founded Franklin, regardless of their age is entirely reasonable as is his desire to employ active inheritance tax avoidance schemes. The wife in oral evidence accepted that she was aware he made dispositions with a view to the "7 year tax thingy". The lifetime bequests to the elder children did not adversely impact upon the high standard of marital lifestyle. I conclude from the evidence that these dispositions are indicative of the husband's intent to deal fairly with all of his children during life and after death. I therefore reject Mr Pointer QC's arguments in the context of this case that they should effectively cancel out the significance of pre-marital property or undermine the husband's case that he should be allowed to contemplate further testamentary provision for all of his children. 

49.  Equally I am not persuaded to the requisite degree that the husband has retained any beneficial interest in the assets that he has apparently gifted to any of his elder children. He refutes the same whilst admitting nominally 'tenanting' a property held by his elder daughter to the benefit of all 4 older children for the purpose of council tax computations. I did not credit the explanation but am satisfied that his interest was as a tenant to permit occupation by a third party. It is significant that nearly 90% of the value of the lifetime bequests were made prior to the 2003 settlements.

50. The evidence relating to recently acquired clocks after separation is obviously subject to greater cynicism and deserves proportionate scrutiny. I note the transfer of the insurance policy to the name of the husband's elder daughter in comparative recent times but am satisfied by the husband's explanation of this transaction in the light of previously executed wills making prospective specific bequests of these or similar timepieces to his nominated family heirs. Whilst I have some doubt that they will be retained and not traded for other clocks/watches I am not persuaded that the husband has any retained financial interest in the same.

VALUE OF EXISTING ASSETS:
51. A schedule of assets is all but agreed save for the valuation of the parties' life interests in Peyton Place and their shareholdings in Franklin. There is a dispute as to whether (i) the wife is able to recover a loan made to her sister in the sum of  £8,400; and (ii) whether the wife's recently purchased car should be included, or the husband's boat. In addition I have been informed after conclusion of the evidence as to the wife's outstanding tax liability in the sum of £70,440.28. There has been no evidence adduced as to (i) and there is therefore no basis to disregard it. I see no reason to exclude either car or boat. They are of equivalent value in any event and cancel each other out. The wife's tax liabilities are set out in a tax return and I take them into account, since the husband's similar tax liability has been included in the overall account. Excluding their interests in matrimonial home and company, the husband has net assets worth about £5.981 m and the wife about £4.842 m.

PEYTON PLACE:
52. Peyton Place is valued at £4.5m with vacant possession. A Mrs N, aged 70, presently occupies a converted tack room at the express oral invitation of the wife and has done so for a number of years. Her previous accommodation has been re-let.  The husband did not demur from the invitation and has known of the arrangement throughout. The terms of her occupation are as licensee. She is not a tenant. The evidence is that she was told that she could remain as long as she wished following her own rented accommodation becoming flooded. No one has sought to obtain a witness statement from Mrs N. The single joint expert has not spoken to her. The wife argues that Mrs N may be able to claim proprietary estoppel in which case the single joint expert says that the value of the property is reduced to £4.050 m.

53. The existence of a proprietary estoppel may arise in circumstances where the words or conduct of the landowner induces a licensee to think that he will receive some interest in the land, or alternatively be allowed to occupy the land indefinitely, or for a considerable period, and as a result the licensee either spends money on the property or otherwise acts to his detriment. There is no evidence that Mrs N has acted to her detriment or prejudice and consequently it is impossible to make any finding that Mrs N has established this equitable right. In that the wife seeks to assert the probability of the same she bears the burden of so doing. She has failed to discharge the burden.

54. The relevance of this prospective third party interest is entirely otiose in terms of executing the fair division of assets. If, as she contends, the wife is to remain living in Peyton Place, she appears unperturbed by the continuing occupation of an outbuilding by Mrs N. If, as the husband contends, the house is to be sold and the proceeds divided equally subject to the transfer of interests of the trust, both husband and wife must bear the consequences of a situation which has existed for some time with at least the tacit approval of each. Its only worth is in terms of the balance sheet when comparing the Court award to the wife against total matrimonial property. 
 
55. The single joint expert, Mr Adams-Cairns has now valued the life interests of the husband and wife in Peyton Place to be £1.2m and £4.065m respectively on the basis that they are sole life interests in accordance with his initial letter of instructions dated 14 December 2011. In fact, in accordance with the terms of the Peyton Place settlement, both life interests co-exist.

56. In his supplemental report dated 24 January 2012 he states that he is "unaware of a life interest ever having been sold." He confirmed this in oral evidence. The improbability of sale is increased to the point of impossibility unless the terms of the settlement are varied to extinguish the life interest of one or the other. Whilst satisfied as to his integrity and of his status as expert in terms of valuation of property, the task Mr Adams-Cairns was set and has recently conscientiously undertaken has no established methodology to inform it. There is an obvious logic in his approach of multiplying likely rent to be achieved/sought in accordance with life expectancy and the contingent risks to both landlord and tenant of an uncertain term but I would be hesitant to rely upon the resultant figures in any case which required precise attribution of value in order to achieve exact division.

57. On the basis of his valuation of the wife's life interest, she having the longest actuarially calculated life expectancy, Mr Adams-Cairns agrees with Mr Marks' proposition that the reversionary interest to the Trust is valued at £435,000. There is no indication in any of the Court orders that consideration has been given to whether the minor children as beneficiaries' of any settlement should be separately represented pursuant to FPR 9.11. I do not take Mr Marks QC's subsequent arithmetical submissions in closing to be indicative of any claim that I order the sale of the property and make appropriate division of the proceeds to the husband and wife absolutely after payment to the Trust of £435,000, rather a submission as to the ascertainable value of a matrimonial asset for the purpose of the balance sheet. This has the obvious advantage of a precise calculation on a known and verifiable valuation. I intend to take this course.  On this basis I am satisfied that there is no actual detriment to the beneficiaries' position. An order was made that the trustees of the Peyton Place settlement be served with the parties' Forms A and E and I assume compliance with of the same. The trustees have not sought to be represented. 

58. Mr Pointer QC in his closing submissions is dismissive of the exercise conducted by Mr Adams-Cairns. For the reasons outlined in paragraph 57 above I agree there is no question but that this expensive exercise was futile. This may have explained why no steps were taken by those representing the wife to seek clarification of the joint expert report but for the fact that the wife attempted to produce a sole "expert" report on this issue into evidence on the first day of the hearing without any notice to the husband and subsequently dispatched that report to Mr Adams-Cairns when I had refused to admit it. This behaviour, whether in ignorance, neglect or disobedience of civil/family rules of procedure amounts to malpractice and has the effect of conflating raised emotions and suspicion. There is absolutely no mitigation for the wife's solicitor sending to Mr Adams-Cairns the report that was ruled inadmissible. Its only purpose, objectively viewed, would be to seek to influence the opinion of Mr Adams-Cairns.
 
FRANKLIN:
59. The value placed upon Franklin is agreed at £17.5 m by the two experts, Mr Nick Andrews of KMPG LLP, initially instructed as single joint expert, and Mr Hugh Mathew-Jones of PKF (UK) LLP, the wife's sole instructed expert, on the basis that it is sold on the open market as a whole. In these circumstances I do not determine the merits of their different approaches.  This agreed figure inevitably ignores the existence of the share agreement.
 
60. Objection was taken by Mr Pointer QC to the capacity of Mr Marks QC to cross-examine Mr Andrews since he had not expressly abandoned him by instruction of a sole expert witness as had the wife. I regard the objection to be facile. There can be no impediment upon relevant cross-examination by either party regardless of initial joint instruction on anything other than expertise. An expert is obliged to give opinion regardless of origin of instruction. The Court is not bound by expert opinion and will necessarily reject the same when undermined by inherently flawed or self-explanatory contradictory views exposed during cross-examination.

61. There is no provision for the division of the net proceeds of sale during the husband's lifetime between holders of the A, B and C shares. Presumably a pro-rata division in accordance with the value placed upon the component shares could emerge in negotiation/mediation in the event of sale. However, neither husband, wife nor trust have any desire to sell the company and in my view the overall value therefore becomes a benchmark reference against which to examine the competing opinions of the two experts as to the value of the respective shareholdings if they were to be sold/ transferred individually.

62. That said I consider the valuation of the individual shareholdings in the context of the share agreement to be so artificial as to border on the meaningless. The share agreement prohibits the sale/transfer of shares to other than existing shareholders and Mr X, the managing director. Mr Mathew Jones makes the irrefutable point that in these circumstances the open market value is nil. Neither the husband nor the wife would welcome alien shareholders or influence in the company; both obviously regard it as an on-going family concern. The share agreement presumes the continuing role of the husband as chairman of the board.
 
63. It is clear to me from the reports and evidence of the expert witnesses that their preferred methods of valuations of the individual shareholdings are based upon different considerations and perspectives. Mr Andrews' valuation is based upon a "going concern" basis that underlies his capital valuation of the business and the existence of the trust as shareholder. He does not thereby evaluate an aggressive alien controlling interest. He adopts the approach of discount and/or premia to the 100% valuation of the company based on his assessment of their relative worth. This arguably accords more closely with the existence of the share agreement than any other method.

64. Mr Mathew-Jones looks from the perspective of an arms length purchaser with no vested interest in other than acquiring a good return for outlay. Consequently he adopts the "income and capital value" approach to the individual shareholdings. This arguably accords more closely to a genuine sale on the open market assuming a willing seller and purchaser. Logically, the restraint upon an alien shareholder seeking to recoup their investment within the 8 years' actuarially calculated life expectancy of the husband is minimal. The risk to the remaining shareholders is considerable. There would be little impediment to the charging and sale of assets to fund the drawings of the holder of the B shares.

65. The respective rates of discounts and/or premia applied in each valuation reflect their respective approaches and result in figures in stark contrast. Neither approach hits the mark in the actual circumstances of this case as indicated above. That is, I do not find the financial worth of the husband's shareholding to be a paramount consideration for him. I do determine that an open market valuation must ignore the matters of dynastic continuity. Likewise I find that whilst the wife has a shared interest in the continuation of the company for her own children she must nevertheless seek to place greater emphasis upon the valuation of the shares to secure for herself a greater figure for comparative division of available assets.

66.  In these circumstances there is little surprise that the figures produced by the experts are irreconcilable, even when a similar valuation process engaged by Mr Mathew-Jones was adopted by Mr Andrews.
 
67. Mr Marks QC impugns Mr Mathew-Jones' integrity by levelling the criticism that he is biddable. Having heard his evidence and the justification for his opinion I do not accept that submission but regrettably it is the contents of the letter of instruction of Mr Mathew-Jones that enables the professional slight. This letter was only made available at my instigation further adding fuel to the fire of presumed partiality. I can see no reason to refuse to disclose the same if the letter of commission endorses an impartial approach.  It had apparently not been requested because of the objection taken in other cases by Mr Pointer QC to the production of the same on the basis that it was not required in accordance with the Civil Procedure Rules. Mr Pointer did not take the same objection when I requested the letter of instruction and conceded that it was at least arguably disclosable in accordance with the Family Proceedings Rules and associated Practice Direction.
 
68. That said, I do prefer the approach of Mr Andrews in that it accords more closely to the reality of the situation as indicated above. I would therefore use his figures in relation to value of shareholdings for the purpose of the balance sheet if they became relevant. In fact, in view of my intended variation of the share agreement I intend to utilise the value of the company if sold as a whole with appropriate reduction to reflect pre-marital acquest for the purpose of comparative balance sheet.

69.  Mr Mathew-Jones was not instructed to value the company as in 1993. Mr Andrews values it at £5m, adopting a weighted average to the Earnings Before Interest, Tax, Depreciation and Amortisation of the 3 years 1991 to 1993 to achieve a base year figure and applying a multiplier based on comparator companies with appropriate discount to adjust for Franklin's unquoted company status and adding back surplus cash from 1993 and a control premium to reflect the husband's 100% shareholding. Mr Mathew-Jones concedes that the benefit of hindsight would reveal this to be a "bargain" in the light of subsequent years' profits.   However, I accept his evidence to the effect that hindsight is not an appropriate science to apply in the valuation of a company 17 + years ago which must validly reflect the circumstances of the time and the price that a purchaser at arm's length would be prepared to pay then.

70. I am satisfied on the evidence that Mr Andrews was entirely correct in viewing the positive and negative figures shown as "prior year adjustments" described in the notes to the audited accounts for years ending 31 December 1991, 1992 and 1993 as irrelevant to his calculation for the 3 years ending 1993 in the light of the notes to the 1992 financial statement relating to the purchase by the husband of capital and revenue costs of the failed Country Club Venture and an Inland Revenue enquiry "centring on taxation treatment of  particular transactions entered into since 1981". I am satisfied the figures relate to corporate tax liabilities and not those of the husband's income tax liabilities. Mr Pointer QC's examination in chief of Mr Mathew- Jones and cross-examination of Mr Andrews amounted to an invitation to speculate upon the integrity of audited accounts. In those circumstances, I find no reason to disregard Mr Andrew's expert opinion on the 1993 valuation.  I do not accept the argument that the prospect of any tax investigation would have devalued the company.

71. I refused permission to admit as evidence in the case that part of the wife's sole expert addendum report which dealt with his opinion of "indexation" of the 1993 value of Franklin. It was not sanctioned by Court order nor considered in the pre-trial review, nor consented to by those representing the husband. It was triggered by the invitation of the wife's leading Counsel to re-consider a concession made in the first expert meeting. Its inclusion within Mr Mathew-Jones addendum report was tantamount to ambush reminiscent of the approach taken to the valuation of the life interests in Peyton Place. The husband was not in a position to gainsay the opinion expressed by seeking his own expert in the time frame imposed by receipt of the report and the date of the final hearing.

72. This did not prevent Mr Pointer QC from utilising the same as a forensic tool for the purpose of cross examination of Mr Andrews, nor did it preclude Mr Mathew-Jones' expressed reservations in relation to 'passive growth' and 'indexation' of a trading company, as did Wilson LJ (as he then was) in JONES v JONES [2011] 1 FLR 1864.  However, I consider that Mr Andrews correctly interprets the approach of that Court to reflect the growth value either in terms of comparative of industry specific indexation or of an equivalent investment in money's worth. Mr Mathew- Jones was not asked to, nor did he consider the indexation of the company's capital assets in 1993 that, according to Mr Andrews, may well show an even greater uplift. I find no reason to depart from the expert opinion of Mr Andrews on this point. I take the appropriate uplift to be 100% giving a notional pre-marital value of £10m for present purposes.

73. FX's position may be impacted upon by the variation of the share agreement. He has given evidence but has not sought independent representation. I am satisfied on the balance of probabilities that he did not seek leave to intervene in these proceedings his own right since the intended testamentary bequest of Franklin shares will be honoured. In any event he is to be served a copy of the order in so far as it governs the variation of the share agreement and may take such legal advice as he deems appropriate.

MAINTENANCE NEEDS:
74. The wife's budget for the purpose of establishing her maintenance needs was opened as "aspirational". It is entirely unrealistic and without historical basis or reasonable future projection. The husband's opening gambit as to his own maintenance needs are excessive and form no useful comparison. On the basis of agreed average past household expenses that permits "generous interpretation" of her needs, I consider the future maintenance needs of the wife as custodial parent of the children whose educational expenses will continue to be covered are £300,000.  These will decrease as the children reach the age of financial independence, which I take to be the conclusion of their tertiary education. The parties agree the maintenance to be attributed to the children amounts to £105,000 per annum. The appropriate Duxbury calculation to fund the remainder requires of a capital fund of £4.974m. A lump sum payment will be made to augment the wife's present net assets.

DIVISION:
75. Peyton Place was the matrimonial home. The husband does not seek to argue that his sole provision of the significant purchase monies should invalidate the usual understanding that this has become matrimonial property. The wife professes an attachment to Peyton Place for herself and the children of the family. She seeks to remain in Peyton Place and to have the husband's life interest extinguished.

76. Mr Pointer QC relies upon the case of R v R (FINANCIAL PROVISION: REASONABLE NEEDS) [1994] 2 FLR 1044 to support the wife's argument that she should be allowed to remain in the matrimonial home on the basis that it does not need to be sold in order to meet the housing needs of the husband or otherwise skews the fairness of division of assets. I find he is unable to maintain any argument other than that based upon the emotional attachment of the wife and, it is said, children of the family to the property. There is sufficient net equity to comfortably re-house husband and wife. It is not reasonable to suggest that the husband should 'lodge' with one of his adult children or otherwise deplete his net assets to provide for his accommodation in late life.
 
77. I order the 1996 settlement be varied to provide for the net proceeds of sale to be divided as to one-third to the husband and two thirds to the wife and re-invested in separate properties. I make no other variation and specifically not to remove any of the present trustees. I award the wife the larger share to reflect that the children primarily will continue to make their home with her and to balance assets as they will fall post variation of the share agreement. The trust's reversionary interest will be transferred and not crystallised. If so particularly attached to this property the wife is at liberty to consider the sale of the London or French property to meet the intent of this order. For the avoidance of doubt, if Peyton Place is not sold its net value is to be calculated without regard to Mrs N's position for the purpose of payment out to the husband.

78. I order the husband to pay to the wife a lump sum of £0.75 m. and to transfer any remaining interest in or control over the Chelsea property and L'Almandier to the wife.

79. As indicated in paragraphs 39 and 41 above I intend to vary the share agreement by total rescission and thereby resurrect to the husband the A and C shares previously assigned to the wife. Whether the wife continues to be a non-executive director of Franklin will therefore depend upon the decision of the Board and will not be governed by the terms of the agreement. The wife is but one trustee of the 1996 settlement that holds 48% of the shares of the company. She does not have a controlling vote amongst her fellow trustees. In these circumstances, I do not see her continuing role as trustee to undermine or adversely impact upon the running of the company.

80. I have not been called upon to determine division of any household contents. I approve the sum of £35,000 per annum maintenance for each of the children during their minorities or otherwise when in tertiary education for first degree. I understand that this will be funded primarily by the 1996 trust.

81. This will constitute a clean break in life and death.

82. On the basis of available matrimonial property, that is excluding the pre-marital value of Franklin as increased by passive growth, this means that the wife achieves approximately 45% of the total matrimonial assets. If available and ascertainable non- matrimonial property, that is 52% of the present day gross value of Franklin, was included the division would provide her with approximately 36% of the assets.

83. Order accordingly. Any ancillary applications to be dealt with on written submissions.