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H v H [2008] EWHC 935 (Fam)

Judgment in ancillary relief proceedings involving valuation of a privately owned restaurant business and where both parties were seeking a clean break. The wife was awarded 67% of the "non-business wealth" plus periodical payments.

The couple had married in 1990 and the effective date of separation was found to be in 2005. They had two children, aged 10 and 13, both in private education. The wife valued the total wealth at £7.8m (the business accounting for £5.3m of that total) and so was seeking £3.8 plus schools fees and maintenance of £12,000 p.a. for each child.

The key issue in this judgment was the dispute over the valuation of the business. Both parties had provided expert evidence on the point, using a rule of calculating "maintainable earnings" and then applying a multiple to arrive at a capital value: the wife's expert used a multiplier of 9 and the husband's, 6. After reviewing all the evidence before him, and making comments as to the utility and expense of detailed valuations, Moylan J concluded that a multiplier of 6.5 should be applied, given evidence of other similar transactions, on future maintainable earnings of £725,000. This gave a total gross value of £2.8m after allowing for £1.7m of debt.

Armed with this valuation, the judge concludes that this is not a clean break case as there are insufficient assets to ensure that the award would be fair, while accepting that if the resources had exceeded needs he would have departed from equality in view of the husband's special contribution. On a needs and sharing basis then he awarded the wife £1.45m from the available assets, plus a periodical payment of £60,000 p.a. The husband would also pay £20,000 maintenance and the school fees. The wife's shares in the restaurant business were to be transferred to the husband.

Neutral Citation Number: [2008] EWHC 935 (Fam)

Case No: FD05D06790

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 26/03/2008

Before :

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Between :

H (Applicant)

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H (Respondent)

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Timothy Bishop (instructed by Messrs Sears Tooth) for the Applicant
Mark Johnstone (instructed by Davies Arnold Cooper) for the Respondent

Hearing dates: 5, 6, 7, 8, 9 and 19 November 2007 and 26 March 2008
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Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic



This judgment is being handed down in private on 26 March 2008. It consists of 23 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.

The Hon. Mr Justice Moylan :
1. This judgment follows the hearing of the Wife's ancillary relief application.

2. The Wife is represented by Mr Bishop and the Husband by Mr Johnstone.

3. I have heard oral evidence from the Wife; the Husband; two expert accountants, Jeffrey Nedas of BDO Stoy Hayward for the Wife and Mr Epstein of Haslers for the Husband; and an enquiry agent. The trial bundles were far more extensive than required. I have been referred to only a very small number of the documents. I have also had comprehensive written and oral submissions. I have taken all the matters raised by them into account when reaching my decision.

4. The main factual issue between the parties is the value of the restaurant business owned by the parties and operated by the Husband. The very substantial difference between the experts derives partly from factual issues, which have an effect on the maintainable earnings for which they each contend, and partly from a significant difference between them as to the appropriate multiple (6 against 9). When reviewing this aspect of the case, I will have to make such findings as I consider necessary for the purposes of my decision. However, throughout the hearing I have been concerned at the forensic approach adopted by the parties.

5. The experts agree that the exercise they are engaged in is an art and not a science. As Lord Nicholls said in Miller v Miller; McFarlane v McFarlane [2006] UKHL 24; [2006] 2 AC 618 [26]: "valuations are often a matter of opinion on which experts differ. A thorough investigation into these differences can be extremely expensive and of doubtful utility". I understand, of course, that the application of the sharing principle can be said to raise powerful forces in support of detailed accounting. Why, a party might ask, should my "share" be fixed by reference other than to the real values of the assets? However, this is to misinterpret the exercise in which the court is engaged. The court is engaged in a broad analysis in the application of its jurisdiction under the Matrimonial Causes Act, not a detailed accounting exercise. As Lord Nicholls said, detailed accounting is expensive, often of doubtful utility and, certainly in respect of business valuations, will often result in divergent opinions each of which may be based on sound reasoning. The purpose of valuations, when required, is to assist the court in testing the fairness of the proposed outcome. It is not to ensure mathematical/accounting accuracy, which is invariably no more than a chimera. Further, to seek to construct the whole edifice of an award on a business valuation which is no more than a broad, or even very broad, guide is to risk creating an edifice which is unsound and hence likely to be unfair. In my experience, valuations of shares in private companies are among the most fragile valuations which can be obtained.

6. Both parties seek clean breaks. By her Open Proposals dated 17th October 2007 and at the hearing the Wife has sought 50% of the parties' net assets with child maintenance of £12,000 per year for each child plus the payment of school fees. Mr Bishop's final Schedule values the total wealth at approximately £7.6 million of which the business valuation accounts for approximately £5.3 million. Mr Bishop, therefore, submits that the Wife should receive £3.8 million. To achieve this, the Wife would have to receive all the liquid wealth and the Husband would have to borrow approximately £1.6 million through the business. This is on top of existing borrowings of £1.8 million.

7. The Husband's final position has moved from that set out in his Open Proposals dated 23rd October 2007. In those proposals he sought a school fees' fund of £350,000 and the sale of the former matrimonial home. It was proposed that the Wife should receive, on a clean break, what was then calculated as being 42% of the remaining wealth, namely approximately £1.7 million of £4 million. Mr Johnstone's final Schedule values the wealth at a total of £4.2 million. The Husband still seeks the creation of a school fees' fund but at the reduced level of £260,000. He also still seeks the sale of the former matrimonial home with the Wife, effectively, receiving all the net proceeds of sale. In his final submissions, Mr Johnstone submits that the Wife should receive approximately £1.3 million net (after deducting legal costs which Mr Johnstone submits should not be deducted for reasons I will deal with later in this judgment). It is acknowledged that this is insufficient for a clean break which, it is submitted, would require the Wife to receive an additional £300,000. It is submitted that this would give the Wife an unfair proportion of the wealth.

8. Having read the papers and each party's written arguments, at the outset of the hearing I had formed the provisional view that each party had adopted what I regarded as the most extreme possible position. Each party clearly faced substantial hurdles in seeking to achieve their respective positions. It was, of course, only a provisional view, but I was surprised that the parties appeared to consider that the bracket of reasonable orders extended as far in either direction as contended for by them. I also did not consider that this was a helpful approach for them to have adopted. To adopt such extreme positions does not assist the court or, in my view, the parties in seeking to achieve a result which is fair both in outcome and in the manner in which it is achieved.

9. The Husband is now aged 64. The Wife is now aged 49.

10. The parties met in 1988 and started living together in 1990 when the Wife moved into the Husband's property at South Kensington, London. The marriage took place on 18th August 1990. It is the Husband's second marriage. The parties separated in 2004. Divorce proceedings were commenced and a decree nisi pronounced. They then reconciled and the decree was rescinded. The marriage broke down finally in 2005 with the Wife filing a new Petition on 8th December 2005. The effective duration of the marriage is, therefore, 15 years. The Husband left the former matrimonial home in August 2006.

11. There are two children of the family: R aged 13; and J aged 10. Both children are in full-time education. They are both being privately educated. There is some doubt as to which schools they will each go to in the future but both parents want them to continue to be privately educated. The only difference between the parties is that the Husband seeks the creation of an education fund to pay for or assist with future school fees.

12. The Wife studied and trained as a fine artist. This included two years at the Slade between 1986 and 1988. The Wife worked as an artist during the early years of the marriage. She had a studio and sold work at annual exhibitions. She has not pursued this career effectively since the younger child was born.

13. The Husband is, by training, a chef. He has spent the vast bulk of his career working at one restaurant, "Q". This restaurant is situated in London and has been operating at these premises since 1972. It is and has always been a single site restaurant. It is in an area of London which has always been relatively affluent but has become increasingly affluent and fashionable over the course of the last 30 years as London has benefited in particular from the wealth generated by the financial services industry.

14. The first matrimonial home was the Husband's flat at Melton Court, London. In 1997 the family moved to another flat in Melton Court,. This property was bought for £560,000 and the previous one was sold for £460,000. In January 2004 the final matrimonial home was purchased for £1.1 million. This property is in Battersea. Melton Court was let until it was sold in February 2007 for just under £980,000 net. The net proceeds of sale (less amounts deducted since) are held for the parties by a firm of solicitors, Healys.

15. In addition, for much of the marriage the family had a holiday home in Normandy. This had been purchased by the Husband in 1989 and was bought by him for £111,000. This property was sold in 2005 and the net proceeds of sale of £448,000 are held in the parties' joint names.

16. The Husband began working in Q in 1974. Very shortly after this, on 16th June 1975, he and a colleague entered into a licence agreement with the owners of the restaurant, In 1976 they set up a company, now called Y Ltd, through which they operated the restaurant. In 1986, the Husband bought his colleague out. The licence agreement was also amended and made personally with the Husband. The licence was determinable on six months' notice.

17. The Husband has set out in his main Affidavit the work (in terms of time, range of responsibilities and ideas) he has put into developing the business. The Husband has clearly been instrumental in developing the restaurant's style which has been successful and has stood the test of time. The restaurant is very much the product of his work over the last 33 years.

18. On the 27th April 2001 the Husband transferred 24% of the shares in Y Ltd. to the Wife.

19. In 2002 the licence fee was increased to 24% of the gross takings of the restaurant (the equivalent of 28.2% of its net of vat turnover). In 2005 the owners sought an increase in the licence fee to 26% of the turnover and, in the event that this was not agreed, gave notice of their intention to terminate the licence agreement.

20. The Husband decided that he should seek to buy the under-lease from the owners. The owners of this company had received what is described as a "fragile and un-sustained offer" of £3.5 million. The Husband sought funding for his proposed purchase from the Bank of Ireland. The Bank commissioned a report from a firm of surveyors and valuers called Taylors. Their first report is dated 9th June 2005. This valued the under-leasehold interest at £2.5 million. The Husband then sought funding from Lloyds TSB. They also commissioned a report from Taylors. Their second report is dated 11th April 2006. This report also gives a value of £2.5 million.

21. On 22nd May 2006 the Husband bought the under-lease for the restaurant premises. The purchase was effected through a new company called Z Ltd. The Husband owns 70% of this company and his pension fund holds 30%. The consideration for the purchase totalled just over £3 million and was obtained through a bank loan of £2 million, £900,000 from the H's pension fund and loan notes of £330,000 (the balance of these funds was used for purchase costs and refurbishments). The bank loan is repayable over 10 years with interest being paid at 2% above base rate (currently approximately £285,000 per year). The capital due has been reduced to £1.8 million. The loan notes are repayable over 2 years at approximately £175,000 per year and the amount due has reduced to £93,000.

22. In Mr Epstein's Report he considers the extent to which the restaurant has increased its turnover in real terms over the last 20 years. The turnover for the calendar year 1988 was £1.5 million. For the calendar year 2006 it was £3 million. The RPI figure for December 1988 was 110.3 and for December 2006 was 202.7. The 1988 real equivalent would therefore be £2.75 million as against the actual turnover of £3 million, not a very substantial real increase.

23. The licence fee payable by the business has represented a very high percentage of the net operating profit. By way of example, for the year 2005 the amount paid was £771,000 which represented 86% of the net operating profit. The figures for 2006 were £848,000 and 83%. The licence fee has, therefore, been a very significant drain on the business and has, obviously, had a very significant impact on the net operating profit as well.

24. During the course of his oral evidence Mr Nedas repeatedly stressed that a key element in assessing the value of the business is the fact that it has been trading without much change in style for over 30 years – that it has "stood the test of time". In the light of this evidence, it seemed plain to me that the current value of the business reflects the Husband's work in it for the past 33 years and, as a result, it would be artificial to seek to define the business as solely matrimonial property. This contention is based on the fact that until May 2006 the Husband was only a licensee and therefore had no asset with any significant realisable value. I will return to this point later in this judgment. However, in my view this approach highlights again the dangers referred to by Coleridge J in RP v RP [2007] 1 FLR 2105 when he said [58]:

"Mr Sharp has drawn my attention to some passages … where [Baroness Hale] has highlighted some of the rationales which may, in a given case, necessarily be implicit in achieving fairness and which should be borne in mind in the divisionary process … They are very helpful in ensuring the court achieves a fair result and does not become stuck or formulaic in its approach as it has done from time to time in the past … However, care needs to be taken to ensure that these passages are not treated as some kind of quasi-statutory amendment.

Indeed, care needs to be taken that this guidance does not itself result in the court's approach becoming stuck or formulaic by reference to artificial constructs such as matrimonial property".

The Proceedings
25. The Petition is dated 8th December 2005. Decree Nisi was pronounced on 10th August 2006. The Wife's Form A is dated 3rd March 2006.

26. On 13th June 2006 the Wife applied for maintenance pending suit. The wife's application for maintenance pending suit was heard by Deputy District Judge Hillier on 30 October 2006. The Order provides for the Husband to pay the Wife £2,250 per month, plus outgoings for the former matrimonial home plus continuation of the wife's salary from the business.

27. The Wife's total costs are £280,000 of which she has paid £155,000. The Husband's total costs are £126,000 of which he has paid £66,000.
28. As stated earlier in this judgment, the most significant factual dispute between the parties is over the value of the restaurant business. This dispute involves a number of subsidiary issues which I will need to address, including, the extent to which the Husband receives undeclared cash and other benefits in kind from the business and the impact of this on the realisable value of the business. The value contended for by the Wife (based on Mr Nedas) is £5.3 million net and that for the Husband is £1.7 million net (based on Mr Epstein).

29. Both parties gave oral evidence at length. I do not propose to deal with all the, frankly legion, disputed factual issues raised during the proceedings. I will only deal with my conclusions on disputed issues when relevant to my decision. At times during the evidence it seemed as though the parties could agree about nothing. I gained the clear impression that both felt constrained to set their respective evidential cases at the highest or lowest possible level. I have already referred to the distance between the outcomes sought by the parties and this distance was reflected also in their evidence. I have no doubt that both the Wife and the Husband engaged in extravagant assertions in order better to support their cases. They also both failed to be sufficiently careful in the written evidence given by them or on their behalf. The difficulty for a tribunal following such a conclusion, and the consequent loss of confidence in the evidence being given, is how to identify where truth ends and, being generous, hyperbole begins. If, I have, as a result failed properly to identify this line, in my view the parties have only themselves to blame.

30. One issue canvassed in the evidence was the extent to which the Husband had deliberately chosen not to seek to increase turnover. There was said to be little incentive for him doing so as, approximately, 28% of any increase in gross turnover would have to be paid to the owners. The Wife contends that the Husband deliberately chose not to develop the restaurant business to its fullest extent because this would largely benefit the owners and give them an incentive to stay and demand more on a sale. She gave evidence about meetings the parties had had with the Manager in which she says they discussed being able to increase the turnover by as much as 50%. Although the potential for growth can be an important part of the valuation exercise, ultimately, the experts in this case do not seem to have placed any significant reliance on this factor in arriving at their opinions as to the value of the business. However, having heard the evidence of both parties on this issue, whilst I can well understand that the structure of the licence fee might have acted as a disincentive, I do not accept that the Husband has deliberately chosen not to maximise the income of the restaurant nor that he has any specific opportunity to enhance the turnover by, for example, increasing the seating.

31. Mr Bishop relies on a long list of matters in support of his submission that the Husband has not given truthful evidence. He is certainly justified in referring to aspects of the Husband's evidence as being inconsistent with documentary evidence. One example is the Husband's assertion in his Affidavit of 4th August 2006 that his manager did not leave because he had stolen money. This is followed by the Husband saying he does not know where the Wife got her figure of £60,000 from which she suggests the manager stole. That figure was given in a letter from the company accountants dated 21 June 2006 which also refers to "the theft". However, as I have already indicated, I found both parties unsatisfactory witnesses.

32. The Wife employed enquiry agents because the Wife believed that the Husband was living with a Mrs A at her property. The Husband was seen to be staying at the property on three nights that the agents attended in a week in May 2007, two nights in June and a number of nights in August. He was also present and involved in a move from a property in Clapham to Chelsea, to a property owned by Mrs A and her husband who are also divorcing.

33. I propose to deal with the relevant section 25 factors before dealing with the valuation of the business.

Section 25 Factors
Financial Resources
34. I now deal with the issues relevant to the parties' financial resources.

35. The value of the former matrimonial home. During the preparation of this case the parties obtained, and relied only on, a market appraisal from a single joint expert. By a consent order made on 27th July 2007 the parties agreed to the valuation of the property being updated by way of market appraisal. The difficulty with the appraisal is evident from its own terms. It records, "we would expect to achieve a figure between" £1.8 and £2m and then ends with these words:

"This letter is an indication of sale price and not a formal valuation that can be used for loan, matrimonial or security purposes. If you require a valuation from a qualified chartered surveyor, then please contact our professional valuation department".

These same words had appeared in an earlier appraisal dated 23rd March 2007.

36. Once this problem was identified, the Wife's Solicitors chose to seek to deal with the situation unilaterally. This was a mistake. At the commencement of the hearing Mr Johnstone objected to the admission in evidence of the valuation obtained unilaterally by the Wife. Having regard to the flaw in the existing market appraisal I gave permission for the parties a joint valuation. One has been obtained and it values the property at £1.65 million. This value has now been agreed. The net proceeds of sale, taking into account the Wife's potential US tax liability (of £62,000 on the basis of any sale taking place after February 2009), total approximately £930,000.

37. The funds held by Healys (being the remaining proceeds for the sale of the Melton Court flat and the French property) total approximately £1.215 million. The Wife has a US tax liability in respect of the sale of Melton Court, due by 15th April 2008, of approximately £75,000, giving a net sum of £1.14 million.

38. The Wife has some land on Block Island, Rhode Island valued at £250,000. The net proceeds of sale, again allowing for the Wife's US tax, are just over £200,000.

39. The Wife has other net assets of approximately (£250,000) taking into account her liabilities in respect of her costs including unpaid costs of £125,000.

40. The Husband has net assets of approximately nil, also taking into account his unpaid costs' liability of £60,000.

41. Pausing there, the total liquid assets are just over £2 million.

42. The Husband has pension funds valued at £1 million, of which £900,000 has been invested in the business. He also has a pension in payment which has been ascribed a capital value of £145,000. The Wife has a pension fund worth £26,000. Total pension funds, excluding the sum invested in the business are £270,000.

43. The combined crude total (crude because I am adding assets of different classes), is £2.29 million.

44. As set out in Mr Johnstone's written submissions, for the period 2000/2005 the Husband has received annually, average net dividends of £90,000, an average net salary of £34,000 and average net declared benefits of £8,000. The net total from these three elements is £132,000 (of which £8,000 is in benefits). The Husband also receives a pension in payment of approximately £8,500 per year net, giving an historic average net annual total of £140,000.

45. What income will the Husband be able to obtain from the business in the future? Both experts agree that the business can distribute its annual profits as there is no need for the company to retain any significant cash for trading purposes. A simple analysis is to contrast the amount paid as a licence fee with the new position. In 2006 the licence fee was £848,000. This has been replaced with £270,000 rent, up to £100,000 rates and approximately £285,000 debt repayments (only the interest of which is tax deductible), a simple difference of approximately £200,000. The company has also been paying £175,000 in repayment of the loan notes, which will end in a few months. I will return to this issue later in this judgment after dealing with the value of the business, part of which exercise involves an assessment of the future maintainable earnings.

46. The Wife is undertaking a year's course at the Kensington School of Design which will give her a certificate of interior design and decoration. She is also an artist. I consider that the Wife has only a modest earning capacity which it will in any event take some time for her to be able to use to generate an income.

Standard of Living.
47. The family have clearly enjoyed a good standard of living.

48. Each of the parties fully contributed during the course of the marriage. I do not regard either party as having made any special contribution during the marriage. Both parties will continue to make contributions to the welfare of the family.

49. In her evidence, the Wife refers to her involvement in the restaurant business, in particular her part in seeking to persuade the Husband to purchase the restaurant lease, and to her role in the sale of Melton Court. The Husband disputes the Wife's evidence. I do not resolve this conflict as I do not consider that any contributions the Wife might have made or did make to the business and/or otherwise enhance her claim. As I have said, I consider that the Wife made a full contribution during the marriage.

50. Mr Johnstone sought to argue that the Husband had made a special contribution prior to the marriage. I confess that I found this argument difficult to follow. Mr Johnstone is in my view entitled to argue, as he does, that the current value of the business reflects the Husband's work in it over 33 years. It appears, however, that he is, in addition, seeking to argue that the restaurant business represents a special contribution made by the Husband prior to the marriage. If Mr Johnstone is indeed seeking to go further, I do not accept this latter argument. The circumstances in which it is possible successfully to establish an exceptional contribution are circumscribed by authority. I do not consider that there is any merit in the argument on the facts of this case.

Financial Needs and Obligations
(a) Capital:
51. The Wife wants to remain living at the house in Battersea. The Husband contends that housing at this level is far in excess of the Wife's reasonable needs and that she could re-house at a cost of just over £900,000. He relies on property particulars in the Battersea area with an average price of £820,000. These were only produced by letter dated 23rd October 2007. With the hearing commencing on 5th November 2007 this was far too late. In addition, the particulars chosen failed to provide me with a broad picture of alternative properties available for the Wife and the children. In her oral evidence, the Wife highlighted her two main objections as being (i) that these properties, although close to the location of the former matrimonial home, were in a very different environment and (ii) that they were too small.

52. I have been hampered in my assessment of the availability of alternative properties for the Wife by the narrow focus of the alternative property particulars which have been provided. However, in the event this has not affected by decision as I consider that the Wife should, and will, have sufficient capital to enable her to stay at the house in Battersea (albeit with a mortgage). In other words, I do not consider that she should be required to move to cheaper properties, unless she chooses to do so.

53. In his Affidavit of 31st August 2007 the Husband put his housing need at £850/900,000. He denies that he is in a relationship with Mrs A. He accepts that they were living together but asserts that this came to an end in January 2007.

54. I do not accept that the Husband ceased living with Mrs A in January 2007 as he asserts. I have no doubt (from the evidence of the Wife and the enquiry agent) that he continued to live with her beyond that date and probably still continues to do so. However, whilst this might mean that he is able to obtain accommodation with Mrs A, I do not consider it follows that he has no need for available capital. It would not be fair to the Husband to make him dependant on Mrs A for his own home.

55. Both parties should have sufficient capital to enable them to purchase housing at a reasonable level. In this exercise, I must take into account the fact that the Wife is the provider of the children's primary home. I will consider later in this judgment the manner in which my award meets what I assess the parties' respective needs to be.

(b) Income:
56. The Wife's Form E budget totalled approximately £82,000, including £31,000 in respect of the children but excluding school fees. It is clear that not all the children's expenses at this level would be met by an order for periodical payments for the children.

57. The Husband contends that a reasonable budget for the Wife and children is in the region of £46,000 year. Mr Johnstone sensibly confined his cross-examination of the Wife to certain aspects of her budget to seek to demonstrate that its overall level was excessive.

58. Broadly assessed, I consider that the Wife's budget gives a reasonable indication of her income needs. I will have to determine what level of periodical payments is fair, having regard to the available income.

59. The Husband's long-term income needs are similar to the Wife's.

The Value of the Business
60. I propose to summarise the evidence and arguments relevant to this issue and then set out my conclusions.

61. Each expert has provided a substantive written report: Mr Nedas' is dated 1st June 2007 and Mr Epstein's is dated 28th August 2007. They have also provided a Joint Statement dated 28th September 2007.

62. Mr Nedas has valued the company by reference to its "enterprise value". To quote from Mr Nedas' report:

"In assessing the value of the above companies, I have adopted an Enterprise Value approach. This involves the assessment of the future maintainable earnings of the restaurant business, and an application of a multiple to those earnings to calculate the "Enterprise Value" or capitalised value of the business. From this Enterprise Value, the net debt of the companies is deducted in order to determine the Equity Value".

The future maintainable earnings he adopts are the earnings before interest and taxation ("EBIT").

63. In his substantive report, Mr Epstein appeared to disagree with this approach:

"In my experience, the best guide to the value of any company or business is a comparison with a real live transaction between unconnected parties as witnessed in the market place at a similar period in time to that at which the valuation is being undertaken.

The text book definition of the value of a business is usually referred to as the price, which a hypothetical willing buyer will pay a hypothetical willing seller in an open market situation, both parties having equal knowledge and acting for self interest and gain.
Therefore, I should like to draw the court's attention to the transaction on 22 May 2006, when the interest of the underlease holders was acquired for the total consideration of £3,029,866.

In my opinion, there can be no better benchmark or yardstick for the true value of that part of this business at 22 May 2006 as the parties were not connected, the transaction was freely negotiated and, therefore, indicates the price that an actual willing buyer paid an actual willing seller. I refer to this later in this report in my alternative calculation of the value of the business."

64. Although he disagreed with Mr Nedas' approach, Mr Epstein addressed the elements used by Mr Nedas, namely future maintainable earnings and multiple. Mr Epstein then broke the value down between the constituent elements, including the pension fund. Whilst this might technically be correct, I propose to look at the overall value for the purposes of my judgment. As the constituent elements are all owned by the parties, albeit through different vehicles (including a pension fund), they have effective control over the whole value.

65. In the Joint Statement, the experts agree that an "Enterprise Value (EBIT) approach is an appropriate methodology by which to assess the value" of the business. They do not agree about the multiple to apply nor do they agree about the figure to take for the EBIT of the business.

66. As to the latter, the final positions are: Mr Nedas argues for maintainable earnings of £856,000 and Mr Epstein for £633,000. The main differences between these two figures are (i) a difference of £50,000 in respect of rates (Mr Epstein takes rent and rates at £370,000 and Mr Nedas £50,000 less); (ii) a difference of £80,000 included by Mr Nedas in respect of benefits allegedly obtained by the family from the business, by way of "food and lifestyle" benefits and "cash and expense" benefits ; and (iii) a difference of £93,000 added by Mr Nedas to reflect assumed additional profits for the year 2007. Mr Nedas had originally undertaken a different analysis in respect of future turnover increases but this was not pursued. In any event, I would have had great difficulty in placing any weight on an average increase in turnover taken from other businesses when the actual increases varied from -24% to + 24%.

67. As for the appropriate multiple, Mr Nedas takes a multiple of 9 while Mr Epstein takes a multiple of 6.

68. (i) The Rates. In my view, this issue epitomises the danger of treating the valuations in this case as though they provide precise figures. In March 2007, the local council increased the rates to £100,000 from the previous level of £50,000. The Husband has joined an appeal by a number of local businesses as a result of being approached by a firm who provide free assistance in appeals. Payment of their fees is by results. The appeal process has not yet been concluded and I have no evidence on which I could decide whether the appeal is or is not likely to be successful. This uncertainty was recognised by Mr Nedas in his oral evidence, when he said that the position would be covered as the sale would probably be negotiated so that the price actually paid would in part be deferred and would be dependant on the outcome of the appeal. This is all very well but, based on their written valuations, Mr Nedas' valuation would be £450,000 too high if the appeal fails and, if it succeeds entirely, Mr Epstein's value would be £300,000 too low.

69. This is one, and just one, example of the factual uncertainties which will almost inevitably be part of any business valuation exercise. Further, Taylors in their reports referred to the prospect of "sizeable increases in the rates payable in future years". I do not have the luxury of being able to say that the value I take can in part be deferred and will depend on the true figures in the future.

70. I propose to reflect this uncertainty in the EBIT figure I use for the purposes of this judgment.

71. (ii) Cash and Other Benefits Received from the Business: The Wife's case is summarised first in Mr Nedas' Report. It is contended that £80,000 must be added to the annual profits to reflect cash and other undeclared benefits allegedly taken/received by the family from the business.

72. Mr Nedas sets out an analysis of the non-cash benefits allegedly received by the family from the business. This is based on instructions received by him from the Wife to the effect that goods and services were provided by the restaurant for the family. These benefits are listed under seven separate headings (including "general grocery supplies" at £3,120 and "kitchen implements and equipment" at £2,600) and have been given an annual value of £30,000.

73. In addition, again on instructions from the Wife, Mr Nedas records that a significant number of family expenses were paid in cash or from funds of the restaurant business. In paragraph 5.25 of his report Mr Nedas set out a non-exhaustive list of these expenses (in part dating back to 1988) which include the re-roofing of the French property at a cost of approximately £16,000, expenditure on the Husband's boat including mooring fees, holiday costs excluding airfares (based on the family having at least four holidays every year of which two were taken in the Caribbean), clothes, housekeeper and au pair costs and other items. The Wife's case on this issue, as summarised in Mr Nedas' Report, is as follows:

"The Wife has advised me that, to her knowledge, the source of the funds used to fund these expenses did not come from the personal bank accounts of the parties or other funds of the marriage. Rather, the Wife's understanding is that the funds, mainly cash, were gained by way of various "rebates" or "kickbacks" the Husband received from suppliers to the restaurant, for example, the fruit and vegetable supplier.

If these costs were not met by cash, then funds from the restaurant's bank account were utilised."

74. Mr Nedas sets out in his report what he describes as well known ways in which cash can be procured through a restaurant business. They are (a) volume discounts received from suppliers in cash; (b) cash refunds following payment of inflated invoices; and (c) participation in or skimming of Tronc payments. As to this last point, the restaurant did not have a tronc system until after May 2006. Based only on the information given to him by the Wife, Mr Nedas has calculated that the cost to the profit and loss statement of the cash benefits derived by the family from the business has been running at £50,000 per year.

75. Mr Nedas has also referred to the limited amount of cash drawn by the Husband from the business.

76. Mr Nedas refers to the gross profit margin achieved by the business of approximately 72% as against the fact that meals and wine are marked up to produce a gross yield of 75/80% and 75% respectively. He states that part of the difference may be accounted for by the benefits obtained by the family.

77. As I have recorded, Mr Nedas adds a total of £80,000 to the profit and loss statement. This addition in turn adds £720,000 to the value of the business. Before turning to the Wife's evidence, it became clear to me from his oral evidence that Mr Nedas' estimate of £80,000 was the very broadest of estimates and not based on any secure calculations. Mr Nedas would say in response that this was due to the failure of the Husband to give the true picture and, as a result, he was left with no choice. This will require me to form my own view of the effect of the evidence which I will deal with later in this judgment.

78. In her Affidavit sworn on 5th September 2007, the Wife alleged:

"I now deal with the benefits of cash which H received ever since I have known him. He usually got at least two lots of cash in brown envelopes, once a month, of between £1,000 and £1,500, one from Mr F who supplied fruit and vegetables and often came to the house, and the other from the suppliers of meat/fish who did not come to the house. This went on until he left although by the time of the break up of the marriage H was secretive albeit I saw a lot of cash in his wallet and he used to keep wads of cash in the safe. Also over the years H has been wont to sell privately champagne, wine and other spirits to customers which he charged the restaurant. These benefits did not just include food and drink but extensive laundry, dry cleaning and all kitchen implements and equipment in both our homes in London and France. The cash also was exchanged at local bureau de change for Euro and previously French francs to fund his house in France, paying for over the years substantial new slate roofing (6 bedroom manor house and 3 large attached barns), new central heating and bathroom, windows and doors, gardener and housekeeper, gardening machinery and our supplies whilst we were in France … We entertained lavishly, sometimes having 20-40 people for the weekend with endless supplies of food and wine. All this is set out in great detail by Mr Nedas in his report and I will not repeat same. What Mr Nedas says is accurate.

Whilst dealing with benefits, it is now apparent that H skimmed off cash by use of a tronc system after I left. The tronc is monies obtained from service charges to customers on their bills. I am advised this is an entitlement of the staff, not the proprietor. However, H has been taking 20%- 30% of that tronc as has been admitted by some of the staff to me when they telephoned and complained earlier this year."

79. It can be seen that the Wife here expressly confirms what is set out in Mr Nedas' report. I refer to this because in her oral evidence it became apparent, during cross-examination, that she did not in fact agree with all the allegations contained in the report and that some of them were unsustainable.

80. In her oral evidence the Wife described the benefits received by the family from the restaurant. These included the following benefits in kind. Meat and fish were provided daily. Fruit and vegetables would be delivered once per week in a huge crate. Wines and spirits would be delivered a few times per week. Cheese/smoked salmon and other such items were supplied on request. When the family went to Normandy wine and food came in crates and from the restaurant's suppliers by truck. Electrical equipment was purchased on the restaurant account along with plates, cutlery and other items.

81. In addition, the Wife reiterated that she "always knew" where cash used by the family came from. It was from the meat supplier and the fruit and vegetable supplier. As to the latter, it was not the one she had identified in her Affidavit, who had been the supplier until about five years ago, but the subsequent supplier. He gave the Husband £1/1,500 per month. The Husband had obtained a Statement from the previous supplier saying that he had never made any cash payments. The Wife said that she had made a mistake. Of course genuine mistakes can happen but this was an important element of the Wife's case because, as set out in Mr Nedas' report, cash had allegedly been used to meet very significant family expenditure since at least 1988 and, as set out in her Affidavit, this was a source of cash "ever since I have known him".

82. The Wife also alleged that the Husband sold wine and that (as recorded by Mr Nedas) the violin teacher had been paid for with wine from the restaurant.

83. The Wife was cross examined extensively on this issue. From the Wife's evidence it was clear that she was not able to substantiate the figures set out in Mr Nedas' report and, indeed, appeared to have given little thought to those figures. It was clear to me that they were Mr Nedas' figures, not hers. To give specific examples: the Wife conceded that the inclusion of "general grocery supplies" was an error and should not be a separate item as set out in Mr Nedas' report; she also conceded that the violin teacher had not been paid exclusively in kind, again as stated in Mr Nedas' report (an invoice which was produced showed £210 was paid in wine out of a total bill of £2,225). The Wife's evidence, frankly, did not begin to support the assertion that kitchen implements and equipment costing £2,600 per year were being supplied by the restaurant; the Wife conceded that the cost of re-roofing the French property (£16,000) was not all paid in cash (she said that if Mr Nedas' report suggested this, it was wrong); she said that the inclusion of grandchildren was wrong and agreed that electronic appliances had not been bought with cash.

84. It became clear to me that the Wife did not agree with, and either had not seen or had not studied with sufficient care, all the factual assertions contained in those parts of Mr Nedas' report in which he purports to set out the Wife's case on benefits derived from the business. It is to state the obvious when I say that this seriously undermines the value of evidence based on these factual assertions.

85. Mr Epstein makes a number of points in answer. I do not propose to repeat them all. He questions how a business, which is already achieving very high gross margins, could also be overstating its purchase costs by £80,000 per year. He also disputes the extent to which a purchaser would be prepared to pay any additional sum in respect of profits which cannot be shown to exist and could not be evidenced. Mr Nedas appeared rather dismissive of this last point although he did acknowledge that the price paid would probably consist of a base price and an earn out based on a warranted profit figure. He also made it clear that the accounts would only form a platform for the negotiations, as necessary corrections would be made or revealed during the due diligence exercise. This again demonstrates the difference between a valuation exercise and an actual sale. Further, I have considerable difficulty in accepting that a purchaser would pay £720,000 for hidden profits which are based on the owner having allegedly obtained undeclared benefits from the business.

86. Mr Epstein also responds to Mr Nedas' comments about the gross profit margin. He refers to "normal trading variations from budgeted gross profit margins to allow for wastage, pilferage, discounts to customers and other inherent problems that arise in the running of any business". In my view this is a fair point. Some allowance would have to be made for these elements. Mr Epstein also states that the achieved margin of approximately 72% is above industry norms.

87. The Husband denies that he and the family have received cash and benefits as alleged by the Wife. He denies that he has ever received any cash from suppliers. He contends that the benefits received from the business were covered by his declared benefits in kind. As for the cost contained in Mr Nedas' report for food, the Husband pointed to the difference between restaurant cost and supermarket cost, the latter he estimated being some 60% to 100% higher than the former.

88. Mr Bishop cross-examined the Husband about the family's lifestyle. He also cross-examined the Husband about the amount of cash withdrawn by the Husband either through his director's account (which records private expenses and drawings) or through his bank account. The total drawn by the Husband as cash in this way was very modest and certainly appeared to me to be insufficient to meet the cash expenses being paid by the family and the lifestyle enjoyed by the family.

89. Where does all this evidence leave me? I am unable to come to any specific conclusions. This is not a criticism of the way in which the case has been argued, as I do not want to suggest that any further detailed investigation would have been justified at all. It is a reflection of the evidence given by the parties. It will be clear already that I do not accept the evidence of the Wife or the Husband on this issue. I believe the Wife has wholly exaggerated the benefits (cash and otherwise) received by the family from the business. On the other hand, I consider that the Husband has underestimated the benefits received and I do not accept that he has been meeting the family's cash expenses solely in the manner claimed by him. I will deal with the effect of my conclusions on my assessment of the value of the business later in this judgment.

90. (iii) Increased Turnover. The arguments on this issue have developed from those set out in the written reports. I have already referred to the argument being advanced by Mr Nedas in his Report. Mr Epstein said in his Report:

"As there appears to have been an actual increase in turnover in 2007 and this may have been instigated in order to offset the increase in rates, I believe it is only fair to accept an increase in profitability of 8.5%."

91. This appeared to be a concession that such an increase was justifiable. When he gave oral evidence, Mr Epstein said this was not correct and he was simply commenting on Mr Nedas' report.

92. In the Joint Statement, the experts agree that an adjustment is required for any variation in the profitability of the restaurant since December 2006 to reflect the current level of the restaurant's earnings. Although the principle is agreed, the quantum of the adjustment is not agreed.

93. I have been given the figures for the restaurant's turnover from the end of 2006 to August 2007. Figures were supplied to Mr Nedas on 6th November 2007. These were later said to have wrongly included the service charge figures in the total turnover for July and August. I have been provided with two schedules and I accept that the mistake was made. The increase achieved in turnover from 2006 for the months January to August 2007 becomes 4.32%. Mr Nedas argues that this increase has to be pro-rated, giving an annual increase of approximately 6.5%.

94. Although Mr Epstein accepts the principle that his maintainable earnings figure should be increased if the actual earnings had increased during 2007, he cautions against relying on the figures produced for turnover to August 2007 as they were simply print outs produced from the company's computers. One significant error, he says, has been identified already and more could be discovered when the figures are audited.

95. In my view it is appropriate to reflect this factor, namely the likely increase for 2007, in the EBIT figure, although I also consider it appropriate to be conservative when taking such an increase into account. I do not propose to do more than say that this factor is reflected in the EBIT figure which I take, as set out later in this judgment.

96. (iv) The Multiple. In his report dated 1st June 2007 Mr Nedas deals with the appropriate multiple in this way:

"As I detailed in my preliminary report, in determining an appropriate multiple to apply to FME, specific regard must be given to the restaurant, its trading history, and market presence. I have considered the EBIT multiples that are known to have been utilised in the sale of restaurant businesses of a similar nature and size.

I have conferred with and sought information and data from my colleagues who specialise in the restaurant and leisure sector. My firm has considerable experience in selling restaurant businesses, assisting in acquiring restaurant businesses and in insolvency assignments.

In my preliminary report I considered an EBIT multiple of between 8 and 10 as being appropriate. Given the current information that my colleagues have provided and my understanding of the business and its market, my opinion is that an EBIT multiple of between 8 and 10 is still appropriate".

97. These paragraphs are not very helpful. Generalised assertions of this sort give little indication of the weight which they can be given. Further, if the opinion being expressed is based on information supplied by others, that information must be expressly stated.

98. This flaw was clearly recognised. By letter dated 18th October 2007, additional information is supplied by one of Mr Nedas' colleagues. This contains details of 23 transactions involving groups of restaurants of different sizes in the years 2005, 2006 and 2007. The average Ebitda multiple was 9.9, ranging from just under 5.7 to 12. The letter states:

"The earnings multiple a purchaser will be willing to pay for a restaurant business is always guided by the characteristics of the particular business. The following factors are usually particularly important:-

i. Absolute profit levels and the rate of profit growth;
ii. The market saturation for restaurants of the type;
iii. Whether the restaurant's concept is capable of rollout; and
iv. The quality of the management and infrastructure.

In my experience, the multiple payable for a single site restaurant will usually be less than that payable for a growing multi-site operation because the business is smaller and the roll out potential not proven. The difference between the size of the multiples could be as much as one third but could be less depending upon a prospective purchaser's view of the prestige and development potential of the business being acquired."

99. The fact that we are not engaged in a scientific exercise is forcefully demonstrated by this letter when it states that the amount a purchaser would pay would depend on that purchaser's view of the prestige and development potential of the business. This is not an objective assessment of a broad market but a clear recognition that the value would be the product of an individual's subjective assessment.

100. In support of the multiple for which he contended, Mr Nedas relied heavily on the fact that the business had "stood the test of time". He made this point several times during his oral evidence. Accordingly, he considered that the multiple would be at the upper rather than the lower end of the possible range. He did, however, accept in answer to questions from me that the amount which a purchaser would decide to pay was subjective, based as it would be on their assessment in particular of the potential to replicate the business at other sites.

101. Mr Epstein bases his multiple on the May 2006 transaction. He calculates that the amount paid for the purchase of the company holding the underlease represented a multiple of 5.73:

"As far as I am aware, multiples generally have not increased or for that matter reduced significantly since May 2006. However, I do accept that the price asked of H may have been slightly less than they might have asked of an investor similar to themselves, because of the relative ease of the transaction between two parties who both knew the restaurant, which would possibly have helped to facilitate the transaction.

I would suggest, therefore, a small increase in the multiple to reflect this, but would consider that no multiple higher than 6 is appropriate and the actual transaction between them and H provides, in my opinion, first class evidence."

102. Mr Nedas rejected this approach, saying that the transaction in May 2006 was completely different from the disposal of the whole business. That transaction involved a deal between a licensor and a licensee both of whom were dependent on the other.

103. Both Mr Bishop and Mr Johnstone made extensive and detailed submissions on the valuation of the business. I do not propose to summarise them in this judgment. In essence, by reference to a number of factors, Mr Bishop submits that I should prefer the evidence of the Wife and that of Mr Nedas. Mr Johnstone relies on the Taylors' valuations, the amount paid by the Husband in 2006 as well as the evidence of the Husband and Mr Epstein. I have dealt with some of the specific issues during the course of this judgment.

104. I now deal with my conclusions. I have already made plain during this judgment my objection to treating the valuation exercise as though it is an exact science which, to adopt again the words of Lord Nicholls, justifies a thorough investigation when such an investigation is not only extremely expensive but also of doubtful utility. I am also concerned that in dealing with the parties' respective cases at length I might appear to be validating the exercise which has been undertaken. I make clear that I have done so only because I felt it would be unfair to these parties not to deal with the issues which have been raised.

105. During the course of his oral evidence, Mr Nedas referred to what would happen in practice. The purchaser and vendor would undertake a detailed analysis of the business and its prospects and would probably agree a base price and an earn out based on a warranted profit figure. In other words, the process in "real life" would be very different from the exercise in which I am engaged and would incorporate flexibility to reflect reality. I am being asked by both parties to arrive at a fixed determination of the value. I am not for a moment suggesting that the court in a matrimonial case should seek to follow the same process which would be adopted in a "real" sale. I am simply pointing to the artificiality of the valuation exercise in which I am engaged.

106. Taking all the above matters into account, I propose to take future maintainable earnings at £725,000. This makes allowances for the uncertainty over rates, for a slight adjustment in respect of cash/benefits in kind and for the increase in turnover (and profit) achieved in 2007. I do not seek to break down the allowance I have made as between the different elements. I have undertaken a broad assessment of all the evidence.

107. I have come to the clear conclusion that, when adopting a value for the business for the purposes of assessing my award, I should adopt a multiple of 6.5. I bear in mind the multiple paid by the Husband in 2006 and the content of the Taylors' reports. However, the former was a different type of transaction, as identified by Mr Nedas, and the latter have been largely superseded by the evidence I have heard. I place greater weight on the average multiples given in Mr White's letter with a discount of one-third. I was not convinced by Mr Nedas' evidence that a prospective purchaser would not adopt the one third discount referred by Mr White. A multiple at this level reflects the lower multiples achieved as set out in the table in that letter, most (if not all) of which were not single site restaurants. Any greater multiple is in my view too speculative for the purposes of the exercise in which I am engaged.

108. Therefore, the gross value of the business which I propose to take for the purposes of my judgment is £2.8 million (£4.7 million less £1.9 million of debt). It is agreed that there is no liquidity in the business. The tax position is complicated because of the way the interests are in fact held and because of the prospective changes to the rate of capital gains tax. I propose to take what I acknowledge is a very broad estimate, of the tax and costs of a sale, of £280,000, giving a net total of £2.5 million.

109. The total capital is, therefore, £4.79 million: £2.5 million plus £2.29 million of non-business assets listed earlier in this judgment.

110. This value is divided between company Y Ltd, company Z Ltd and the pension fund. Mr Nedas has not sought to divide the gross value between these different entities, whilst Mr Epstein has done so. As I have already indicated, I do not consider it necessary to seek to do so. However, I have taken into account the fact that the Wife is the owner of 24% of the shares in company Y Ltd.

111. I return now to a further and consequential issue, namely the income which the Husband can be expected to derive from the business in the future. Mr Nedas produced a helpful schedule summarising the position based on a range of assumed future maintainable earnings. Taking my EBIT figure of £725,000, and allowing for the cost of the current Lloyds loan (totalling £285,000 as set out in the letter from the business' accountant dated 5th December 2006 and assuming £140,000 is interest and the rest is capital – this will clearly fluctuate over time) and the cost of the Husband's income at £126,000 (rather than the notional amount of approximately £50,000), the additional gross amount available to be drawn from the business in one form or another is very approximately £250,000. In his submissions, Mr Bishop applied a tax rate of 40% to the whole of the gross sum. I would expect a significant part of this income to be paid by way of dividend. I propose, therefore, to take the Husband's total net income at approximately £250,000, taking into account also the declared benefits in kind and his pension in payment.
112. Mr Nedas also gave evidence about the amount he considered the business would be able to afford to borrow an additional sum in the region of £1.67 million. Mr Epstein did not agree that the business could afford to borrow at this level. I would, in any event, not regard the imposition of any significant additional borrowing as a financial burden which it would be reasonable to require the Husband to assume.

113. Both parties seek a clean break. It is well recognised that a clean break should be achieved if it can be fairly achieved. The question in this case is whether a clean break can be achieved fairly.

114. Mr Bishop submits that there is no justification for departing from an equal division of that wealth. He has referred me to a number of authorities. Accordingly, on my figures, he would submit that the Wife should receive approximately £2.4 million, being half of the total of £4.8 million. (It is not clear to me whether, on these figures, he would contend that this would provide the Wife with insufficient capital to meet her needs which he put at £3 million in his opening written submissions.)

115. Mr Bishop submits that both parties brought some assets into the marriage but they counter balance each other. In respect of the business, Mr Bishop seeks to discount the effect of the pre-marital history based on the fact that the Husband was operating as a licensee and, accordingly, did not have an asset with any significant realisable value. Whilst this might be technically correct, it is a highly artificial argument and, even in its own terms, glosses over the fact that the buy-out in fact occurred after the effective end of the marriage. It is artificial because it is clear that the present value of the business is very significantly based on the fact that it has been operating successfully at the same site for over 30 years.

116. It is clear to me that the current value of the business reflects the work put into it by the Husband since 1974. Both experts focussed heavily on the fact that it is a business which has been trading in the same format since 1972 and has, therefore, stood the test of time. This was regarded by them both as being a critical factor influencing its current value. Whilst, the Husband might have had only a six month licence to sell prior to May 2006 and hence an asset of little realisable value, it would in my view be wholly unrealistic to treat the current value as having been created only in or since 2006. As I have said, the current value reflects 33 years of endeavour. I do not consider it appropriate, or indeed possible, to seek to divide this current value into marital and non-marital property. In this case such an exercise would be a wholly artificial exercise. I adopt the word "artificial" from the speech of Lord Nicholls in Miller/McFarlane at [27]:

"This difference in treatment of matrimonial and non-matrimonial property might suggest that in every case a clear and precise boundary should be drawn between these two categories of property. This is not so. Fairness has a broad horizon. Sometimes, in the case of a business, it can be artificial to attempt to draw a sharp dividing line as at the parties' wedding day … Accordingly, where it becomes necessary to distinguish matrimonial property from non-matrimonial property the court may do so with the degree of particularity or generality appropriate in the case."

117. Mr Johnstone submits that the Wife should receive approximately £1.5 million of the family wealth (part of which reflects an argument as to costs, which I deal with later). He accepts that this is insufficient for a clean break which, he submits, would require the Wife to receive an additional sum of £300,000. This he then, somewhat elliptically, submits would not represent a fair division of the capital.

118. In his closing submissions, Mr Johnstone sought to divide the assets into pre-matrimonial and matrimonial property. I consider, in the circumstances of this case, that this is an unduly formulaic approach and, in any event, I do not consider it possible to draw a clear dividing line between the two categories of property. I have already made plain, however, I do take into account that the current value of the restaurant reflects the Husband's work in it since 1974.

119. I have already indicated that I reject Mr Johnstone's argument that the Husband has made a special contribution as that concept is generally understood.

120. Mr Johnstone submits that my award should reflect the disparity in the litigation costs incurred by the parties. The Wife's costs are £280,000 and the Husband's £126,000. This is a significant disparity and I accept that this is an argument which can be deployed in the right case. This is not such a case. The Wife's legal costs are significantly more than the Husband's but I do not consider that they represent unreasonable expenditure by her. A significant reason for the level of the costs is the fact that each party has instructed an expert accountant – and Mr Nedas has clearly undertaken a great deal more work that Mr Epstein (this is not a criticism of either accountant, it is simply stating the position). I do not fully understand the reasons for each party being permitted to instruct their own expert and it is, frankly, an expense which could have been avoided.

121. The Husband also contends that £260,000 should be set aside as a school fees' fund. I do not consider this necessary. On the figures as I have found them to be, there should be sufficient income to meet these expenses on an annual basis.

122. It is trite to say that the pivotal factor in every case is to ensure that the award is fair. Once the relevant building blocks have been assembled into a provisional structure, it is in my view essential to undertake a global assessment of the fairness of the proposed award. In the present case, this global assessment immediately leads me to the conclusion that the award proposed by the Wife is not fair for a number of reasons. It would give the Wife more than all of the available capital and would not, therefore, effect a fair balance in the division of the wealth (principally for the reasons identified in Wells v Wells [2002] 2 FLR 97). Nor would it be fair to require the Husband to sell his business when it has been the focus of his working life since 1974 and when he intends to continue working in it for many years into the future (at least 5/6 years full-time). It would also result in the selection by me of an arbitrary date which might not be the right time at which to seek to realise the value in the business. Nor does it properly reflect the fact that the current value in the business is due to the work undertaken by the Husband in it since 1974 – in other words, if the wealth exceeded needs, I would consider that this case was one in which a departure from mathematical equality was justified.

123. Such a global assessment also leads me to the conclusion that the award proposed by the Husband would not be fair. It would not on any view be sufficient to enable the Wife to meet her needs (even if her long term income needs were taken at, say, £50,000, this would require a Duxbury fund of just over £1 million and her housing need is well in excess of £700,000) and it would also not provide her with a fair share of the capital on the basis of a clean break.

124. I make plain that, in my judgment, this is not a clean break case. There are insufficient available resources for such a result to be fair. The extreme positions adopted by the parties, as referred to earlier in this judgment, has been the product of their respective attempts to seek to achieve what I consider to be an unrealistic outcome.

125. Having dealt with the relevant section 25 factors and the other issues referred to above, I propose to focus on need and sharing, neither party having submitted that this is a case in which compensation has any application.

126. The Court of Appeal in Charman v Charman (No 4) [2007] EWCA Civ 503; [2007] 1 FLR 1246 made clear that the sharing principle applies to all the parties' property. This principle is easier in its application when the court is dealing with a clean break. When there is both a capital award and a continuing order for periodical payments, the assessment of the fairness of the capital award becomes more complex. It may, or may not, be the extent of the capital received by one spouse depending, for example, on whether the court later exercises it power to award further capital under section 31 of the Matrimonial Causes Act 1973 or whether the order for periodical payments ends as a result of the recipient's remarriage.

127. The award I propose to make is as follows. The available resources of £2 million (being the net amount after payment of the liabilities as referred to in this judgment and taking the assets at their net values) will be divided as to £1.45 million to the Wife and just under £600,000 to the Husband. I consider it reasonable for the Wife to continue to live in the house in Battersea but with a mortgage in the region of £150,000. The Husband will be able to purchase accommodation at a cost to him of £850/£900,000 (i.e. with a mortgage in the region of £300,000) either for himself or as a contribution to shared accommodation with Mrs A. The Wife will also have transferred to her the Canada Life pension, giving her total pension funds of approximately £90,000. The Wife will, therefore, have total capital assets of just over £1.5 million and the Husband will have just over £3.2 million. The crude percentages are approximately 32%/68%; the Wife will, however, have 67% of the non-business wealth. I consider that this is a fair division of the capital on the basis that the Wife continues to receive periodical payments. It also meets the parties' respective housing needs. The Wife will transfer her shares in Y Ltd to the Husband.

128. As to income, I consider that the Wife should receive periodical payments for herself at £60,000 per year, on the basis that the Husband pays £20,000 per year for the children. This total, of £80,000, is slightly below her budget which also contained no allowance for a mortgage. In my view it is sufficient to meet her needs and it reflects a fair share of the income available from the business. The Husband will have to pay the school fees (of between £45,000 and £60,000 per year, once the children leave prep school) and will also have to pay for a mortgage slightly higher than the Wife's. Taking his net income at £250,000 and deducting school fees of, say, £50,000, and maintenance for the children and the Wife totalling £80,000, the Husband will have a net income of £120,000. This reflects the fact that he is working to generate the income and the fact that he may well have a higher mortgage.

129. I will deal with any other outstanding issues, such as any unpaid bills and chattels, when I hand down this judgment on the date agreed.