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Finance & Divorce Update July 2015

Edward Heaton, Principal Associate and Jane Booth, Associate, both of Mills & Reeve LLP analyse the financial remedies and divorce news and cases from June 2015

Edward Heaton, Principal Associate and Jane Booth,  Associate, both of Mills & Reeve LLP 

This update is divided into:
1 News in brief
2 Case law update

Property boom leading to divorce settlements being re-opened
The improving economy and the increasing value of assets, such as property and shareholdings, have triggered an increase in couples seeking to re-open settlements, especially those settlements that were never formalised by a court order.  High Court figures show the number of applications effectively to re-open settlements has doubled in the last year from just under 14,700 to more than 29,000.  This is dramatically higher than the number during the economic downturn when the value of property and other assets, such as pension investments, was weaker and applications only totalled 3,600. 

You can read more here

40% of divorce petitions returned due to mistakes
Alarmingly, HMCTS has indicated that 40% of divorce petitions are being returned to solicitors unissued due to fundamental flaws in drafting or procedure.  These include failure to include issue fees, lack of signatures and missing or incorrect information. 

To read more, see here

Are dads treated fairly?
Recent research from the University of Warwick and the University of Reading (funded by the Nuffield Foundation) has concluded that fathers involved in private law children disputes are not discriminated against by the Family Court along gender lines.  The project examined 200 contact and residence cases from five areas that took place in a six month period in 2011.  Researchers looked at the type of applications that came to court, the role of the court in adjudicating such disputes and the different types of timeshare arrangements reached by parents during the court process.

The key findings were: 

• the court plays a necessary role in adjudicating private child law disputes and should remain available as a viable option for parents;

• the court shows no indication of gender bias in contested cases about where a child should live;

• the court actively promotes as much contact as possible, even in cases of proven domestic violence, which was often combined with welfare concerns or strong opposition from older children; and

• 12% of the sample of private child care disputes involved non-parents such as grandparents or other relative carers. In such cases, private law orders were being used as an alternative to public law proceedings.

For further details click here

The full report can be found here

Divorce processing centres update – and the new FRU and High Court certificates
HMCTS and members of the judiciary have provided further information on the operation of the new divorce processing centres and the Financial Remedies Unit (FRU), which will hear complex as well as local cases at the Central Family Court.  This includes:

• an updated Q&A document and a list of the divorce and financial remedy hearing centres. The Q&A document confirms that work is currently being undertaken to amend the Form A to include a box to state the applicant's preferred hearing venue. The divorce petition is likely to be amended in the same way by the early autumn, with a box added to indicate the applicant's preferred court if a hearing is necessary;

• a divorce application checklist; and

• confirmation that, from 20 July 2015, all London work will be transferred to Bury St Edmunds. 

Munby P has approved the new certificate of complexity which must be completed for complex financial remedy proceedings that are issued directly at the Central Family Court. Cases from areas that are local to the Central Family Court may also be heard there, but should be issued at the divorce centre for London and the South East in Bury St Edmunds. 

The statement on the efficient conduct of financial remedy hearings before High Court judges has also been revised.  Whilst much of the original statement remains the same, the guiding principles of allocation have been amended meaning that "a case should only be allocated for hearing by a High Court judge if it is exceptionally complex or there is another substantial ground for the case being heard at that level and that allocation to that level is proportionate. Such allocation is rarely likely to be proportionate unless the net assets exceed £7.5m".  The key points are as follows:

• the statement sets out how to determine whether the governing principle is satisfied, particularly with regard to the value of the overall net assets (which should exceed £15m) or overall net earned income (which should exceed £1m). For lower value cases (those where the overall net assets are under £15m but over £7.5m), a substantial allegation and/or issue, or a novel and important point of law, needs to be certified.  Examples include non-disclosure, substantial assets held offshore, reliance on a nuptial agreement or significant third party interests;

• if deemed appropriate, there is potential for a final hearing date to be fixed at the First Appointment;

• Financial Dispute Resolution hearings will be listed with a time estimate of one day unless the parties certify (with written reasons) why a lesser period is sufficient and the FDR judge gives written permission; and

• the revised statement also incorporates an updated certificate with the list of potential allegations / issues arising.  "Expert accountancy evidence will be required" has been removed.  A certification section has been added.

Gadhavi v Gadhavi [2015] EWCA Civ 520

Financial remedy proceedings came before HHJ O'Dwyer in December 2013.  The parties had enjoyed a long marriage (1978 -2008) before separation.  Their assets were as follows:

• £300,000 in the former matrimonial home, net of costs of disposal;
• Comparable net income; and
• A small pension.

Therefore, the case fell entirely into "needs" territory.

The issue in the case was property in which the husband may or may not have had an interest in India.  HHJ O'Dwyer weighed up the evidence and concluded [paragraph 28 of the original judgment] that:

"The finding I make, therefore, is intended to be a finding that accurately reflects the reality of the position: that there are in the mother's name funds which have been originally almost entirely provided by the husband from the family income of Mr and Mrs Gadhavi in this country. These funds are available to the husband by reason of his position in the household and he is able to cause them to be paid or distributed as he may deem appropriate. I have stopped short of finding, however, that the husband has a definable property interest as understood under English law but I am satisfied that it is a resource available to the husband should he so choose."

As a consequence, HHJ O'Dwyer ordered a sale of the former matrimonial home and the wife to receive the first £200,000 of the £300,000.  The remaining balance was to be divided equally.  The judge found that each party required £200,000 to meet their respective housing needs, and that the husband could, if he so chose, access funds from India.

The husband appealed on two grounds:

1.  the court should not have taken into consideration the property in India; and

2.  even if that resource was available to him, its value was never quantified.

Lord Justice Ryder determined that the actual issue for him to consider was "whether the judge fell into an error of fact or law in coming to the conclusions (a) that the husband was the head of the family in India and (b) in that position the husband was able to request that monies be made available to him or that the property be sold and, (c) that as a consequence, the property should be treated as a financial resource available to the husband".

Ryder LJ considered the principles arising from Thomas v Thomas [1995] 2 FLR 668 at paragraph 678, and TL v ML [2005] EWHC 2680 at paragraphs 86 and 88.  He concluded that HHJ O'Dwyer had not erred in law or fact in concluding that the Indian property was a financial resource for the purposes of section 25(2)(a) MCA 1973.

Ground 2
The appeal was allowed.  There was no valuation adduced in relation to the Indian property that would satisfy the requirement of FPR 2010 which replicate rule 2.61(D)2(b) on the 1991 rules. 

The matter was to be remitted to HHJ O'Dwyer "for an urgent hearing at which directions as to valuation evidence must be made.  The matter must then be set down for a rehearing on the question of valuation upon which the quantification of the terms of the new order will depend".

Liaw v Lee (Recognition of divorce) [2015] EWHC 1462 (Fam)
This was a case which considered the recognition of overseas divorce proceedings.  Both parties were acting in person. Mr Justice Mostyn refused recognition under s.51(3) Family Law Act 1986 of a Malaysian decree nisi and absolute as the husband had filed a "knowingly false" and secret petition in Malaysia.

The case is highly fact specific but, by way of background, the parties married in Singapore in 2001.  They had a daughter in December 2005.  They lived in various jurisdictions but the final matrimonial home was in London. The parties separated on 3 November 2010.  The wife issued a petition for divorce in the Clerkenwell and Shoreditch County Court on 23 November 2010.  It was based on the husband's conduct and, in accordance with the usual practice, the behaviour was very lightly pleaded.  The wife merely referred to frequent lengthy arguments.

The English petition was served on the husband and he signed the statement of arrangements for the child.  On 11 April 2011, the court wrote a letter to the wife saying that the allegations of behaviour were insufficiently pleaded. However, the petition was not dismissed.  The wife had the option either to (i) ask that her petition be listed for a hearing under the old procedure, or (ii) amend her petition to plead the husband's behaviour more strongly.  She did neither.

On 15 November 2013, the wife emailed the husband's solicitor in Malaysia asking what his address was for service of the divorce and related papers. On 30 January 2014, the wife filed an amended petition in the Clerkenwell and Shoreditch County Court. The petition alleged desertion by the husband for at least two years.

On the 9 December 2013, the husband had taken steps to "obtain a high-speed and completely secret divorce in Malaysia" stating, in the petition, that "there are no proceedings continuing in any country outside Malaysia which are in respect of the marriage or capable of affecting its validity or subsistence".  This was not true.  Mr Justice Mostyn indicated that "had the truth been stated it is reasonable to suppose that the court in Malaysia would have adopted a very different course".  The husband swore an affidavit in which he did not ask for an order for substituted service.  He simply asked for service to be waived.

On 1 April 2014, the husband had also applied for the waiting period before decree absolute to be reduced to nothing. The application had been granted and decree nisi made absolute on the same day.  Mr Justice Holman found that "the effect of the abridgement was that the wife was deprived of the hiatus during which she could have applied to set aside the decree nisi and to defend the proceedings, or alternatively to seek that they be stayed in favour of this jurisdiction as the one where proceedings were already pending and which was the forum conveniens."

The husband had not informed the wife of these events until 19 August 2014, when he had emailed the Decree Absolute to the wife's hotmail address.

Meanwhile, the wife (being unaware of this) had successfully petitioned for an English divorce, Decree Nisi being granted on 1 September 2014.  Her Form A had been lodged in July 2014.

Mr Justice Mostyn explained that he had "no hesitation in concluding that the wife was not given reasonable notice of the Malaysian proceedings or a reasonable opportunity to participate in them.  She was given no notice or opportunity at all. The divorce in Malaysia was given in default of her appearance.  She was not served in sufficient time and in such a way as to enable him to arrange for her defence. She has not accepted the Malaysian decrees at all let alone unequivocally".

Mr Justice Mostyn deplored the actions that the husband had taken and, on the facts, refused to recognise the Malaysian divorce.  The stay on the English proceedings was lifted and the wife was granted Decree Absolute and was free to pursue her financial claims in this jurisdiction.

Davison v Davison & Ors [2015] EWCA Civ 587
This was a wife's appeal against a financial remedy order involving complicated tax issues. Matters were made more complicated by the death of the original trial judge, Mrs Justice Baron, between the final hearing and the appeal.

The husband had died on 2 September 2011.  His estate was the first respondent in the appeal.  The second and third respondents were BVI companies, who owned the parties' former matrimonial home ("The Farm").  The Ivy Trust, a Jersey based discretionary trust, was the sole shareholder of the BVI companies.

The husband had purchased The Farm in about 1973 in his and his first wife's joint names but, when the husband and wife had subsequently met in about 1989, the property had become occupied and owned solely by the husband.

The husband and wife had subsequently married on 16 November 1994 and The Farm had become the family home.  There had been two children of the marriage, which had come to an end by July 1999.

In about 1993, the husband had permitted the illegal tipping of waste on land at The Farm. He denied receiving any financial benefit for this but HMRC did not accept his position.  Stop notices and enforcement notices were served on him by the council.  Baron J found, at first instance, that the husband had transferred The Farm to offshore entities to avoid enforcement.  After a number of complex transactions, The Farm had finally ended up being owned indirectly by the trust. 

Baron J found that the husband had been the settlor of the trust and that, until the start of the financial remedy proceedings, there had been no nominated beneficiaries.

Baron J's judgment
Baron J had found that:

a) the illegal tipping and subsequent enforcement actions had reduced the value of The Farm by between £1.5million and £3.2million gross;

b) the trust was a nuptial settlement capable of variation, and could provide the wife with a lump sum of £756,000 plus maintenance arrears and costs, all to be paid by 23 April 2010;

c) if the lump sum was not paid, The Farm was to be sold; and

d) the husband had been guilty of litigation misconduct which had caused both substantial delay and an unjustifiable increase in the costs incurred.

The costs at trial had amounted to over £500,000 against assets of no more than £3.2million and against which potential tax of £2million had to be offset. The husband had been unhelpful to Baron J in trying to compile a schedule of assets to accommodate a realistic figure of the tax he owed to HMRC.

Baron J had further found that:

a) there should be no deduction for any tax referable to the income received from allowing the tipping.  (If that income had not been received, as the husband had maintained, then no tax would be due, and the calculations would be unaffected.  If it had been received, it would be for the husband to pay the tax, interest and penalties.);

b) there should be a deduction in respect of tax and interest due in respect of legal income received by The Farm (from which the wife had benefited).  Related penalties were added back to the husband's side of the schedule as they had been incurred as a result of his "deliberate actions";

c) there should be a deduction of £1.09million to cover CGT and corporation tax on the sale of The Farm.  A figure for CGT had only been provided very late in the day.  The husband's solicitors had produced an in-house note indicating that £1.09million might be a combined figure for CGT and corporation tax.  Baron J believed that the husband would try to reduce this figure to the minimum.  If the tax payable was less than £1.09million, any surplus would be paid to the parties 45/55% in favour of the husband.

The figure of £756,000, which Baron J concluded was to be paid to the wife, represented 45% of the assets.  This was, of course, a short marriage of only 4 years and, although there were children, all of the assets had been owned by the husband prior to the marriage.  Baron J's reasoning was that, had it not been for the husband's actions in relation to tax, there would have been a further substantial sum available for distribution between the parties.  If that sum was added back in, the wife's award would have been about 26% of overall assets, which Baron J concluded would have been fair, given the length of marriage.

The husband neither appealed nor complied with the terms of the order.  The Farm was sold and the wife received her lump sum.

Issues relating to implementation
Baron J had made it very clear, in her judgment and her order, that her intention had been to ensure that, if the tax payable on The Farm proved to be less than £1.09million, the wife would benefit from the surplus in the same proportion as had been determined to be fair in relation to the overall division of assets.

When the husband had failed to pay the lump sum, The Farm had been sold.  The trustees had negotiated with HMRC in relation to the outstanding tax to crystallise the figure due to the wife. 

HMRC had produced a schedule, divided into seven sections, showing outstanding tax of £2,290,917.  None of the seven sections, however, had represented the CGT that had been anticipated by Baron J in her order.  As the husband had died, no CGT or corporation tax had in fact become payable. Instead, an IHT charge had been assessed by HMRC at £393,653 on the lump sum received by the wife as a result of the money having been brought onshore and paid to her in the UK. 

A compromise had been reached between HMRC and the trustees in the sum of £850,000 in full and final settlement of all taxes, interest and penalties, but this had failed to specifically take into account the IHT charge, although it was subsequently included in the compromise order filed at court on 23 January 2013.

The compromise order had not apportioned the amount between the various liabilities but had made specific reference to "any inheritance tax due under Part 3 of the Inheritance Act 1984 arising from the making of any payment to any person pursuant to the order of Baron J dated 23 October 2009 in the ancillary relief proceedings"'.

The hearing before Moor J
Moor J was asked to interpret the relevant part of Baron J's order and to assess what, if any, sum was due to the wife. Counsel for the wife suggested the following:

i) start with a figure of £2.29million (the amount due excluding the IHT charge);

ii) using HMRC's schedule, deduct the categories of tax which Baron J decided should be the husband's sole responsibility;

iii) express the resulting total of tax to be deducted as a percentage of £2.29million;

iv) apply the resulting percentage to £850,000, producing a figure which could be deducted from the £1.09million

v) award the wife 45% of the difference.

Moor J felt uneasy that he did not know to what extent HMRC were accepting that the £850,000 should be spread proportionately across the different items.  He concluded that the wife had a clear claim for an additional payment of £108,000.  This represented 45% of the difference between £1.09million and £850,000.  In arriving at this conclusion, he did not take into account the tax which Baron J decided the husband should be responsible for, and he also did not included the wife's IHT liability. 

The Appeal
The wife appealed.  She submitted that, on a strict interpretation of the judgment, she should receive 45% of £1.09million, as no CGT was due.  However, she accepted that this would not produce a fair outcome to the trust. 

An alternative approach was to argue that, as no CGT was payable, the relevant paragraph in the judgment had no role to play and the wife should receive no additional payment.  This would mean that the wife shared responsibility for the tax which Baron J had decided should be H's liability.  Moor J agreed that neither approach would reflect Baron J's intended outcome.

King LJ disagreed with Moor J's conclusion that the only appropriate approach was to deduct the £850,000 from the £1.09million and award the wife 45% of the difference.  In her view, Moor J had fallen into error in declining to attempt an apportionment exercise in relation to the figures on the HMRC schedule.

Kind LJ did not go into detail about the calculations put before the court by the wife, but awarded the wife an uplift of £212,467.  Allowing for a payment on account of £108,000 (together with interest of £35,933), a further payment was due to the wife of £104,467 plus interest.

Kaur v Randhawa [2015] EWHC 1592 (Fam)
This case concerned an application for general enforcement of a lump sum.  A third party debt order was sought over the husband's brother's bank account.  The wife also sought the husband's committal to prison but that application was adjourned generally.

On 11 October 2013, an order was made by DJ Hess requiring the husband to pay to the wife a lump sum of £80,000 by 5 February 2014.  In default, the order provided for a property to be sold and gave directions for the sale, including provision for the joint instruction of estate agents and conveyancers. The sale proceeds were to be applied to discharge the mortgage, to meet the costs of sale, to pay to the wife the lump sum and any interest with the balance being paid to the husband.

The property in question was held in the names of the husband's late parents. They had left the property to him in their wills. Although their estates had not been fully distributed by the time of the order, the property was unquestionably the husband's, beneficially, and that was why the order was framed in the way that it was.

The wife said that, by 5 February 2014, the husband had not paid any part of the lump sum. The husband said that he had met the wife at a Pizza Express in Slough and had paid to her £40,000 in cash which she had previously agreed would be in satisfaction of her entitlement under the order.  He said that she had agreed to the cash payment so as not to disturb her benefits and had agreed that her "charge" over the property being lifted.  The wife denied this and said that the last time that she had met the husband had been in 2011.

The husband's case was that he had borrowed the £40,000 from his brother. He said that his brother had gone with him to meet his wife, as had another person who would act as a witness. He said that he had taken photographs of him handing over the money on his telephone but that he had since the telephone in question. He had not obtained a receipt, despite his brother having advised him to do so, and he had Facebook messages which would prove that the wife had received the money.

The husband's brother said that he had had £40,000 in his safe or alternatively he had withdrawn it from a casino. He said that he had accompanied the husband to Slough but had not seen him hand over the money and could not remember if anyone else had accompanied them.

Mostyn J had no hesitation in rejecting the evidence of the husband and his brother.  He said "I am certain it is false. Not only is it implausible in the extreme but it is not corroborated by contemporaneous documentary evidence or subsequent events".

Significantly, when the husband had spoken to the wife's solicitor on 12 February 2014, he had said that he "was not going to comply with the order". He had not mentioned that he had paid the wife £40,000 in cash two months earlier, and Mostyn J found it "inconceivable that he would not have mentioned this if it had happened".

The wife's solicitors had taken steps to enforce the order. On 22 May 2014, the property had been sold by the husband and his brother.  £281,295.75 had been received by the husband's brother into a Lloyds account. This sum had unquestionably been the husband's money.  His brother had either been a nominee or a bare trustee for him.  Over the following week, the husband's brother had transferred just over £130,000 into another Lloyds bank account, leaving a balance of £150,000.  A freezing order had been made on 24 September 2014 capturing £110,000.  A further £40,000 of the sale proceeds had therefore disappeared.

The husband's brother had transferred £70,000 of the £130,000 into the husband's Santander account in various transactions.  The husband maintained that this money had been spent, largely on gambling. The husband's brother said that the balance had been withdrawn as cash via a casino and given to the husband.  The husband said that he had received it but that it, too, had been spent, largely on gambling.  The husband and his brother maintained that the sum of £110,000 that was frozen belonged to the brother because they had agreed, prior to the sale, that the husband owed him £100,000.

Mostyn J rejected the husband's explanation as being entirely fictitious.  He made a final third party debt order against Lloyds bank in respect of £108,854.28, being the £80,000 lump sum and £8,454.28 statutory interest from 5 February 2014 to 2 June 2015.  The balance of £20,400 related to the wife's capped costs under her legal aid certificate of £17,000 plus VAT.

Mostyn J made an indemnity costs order against the husband and his brother as a result of their disgraceful conduct. This entitled the wife's solicitors to relinquish their legal aid certificate and be paid on a private basis.

Mostyn J also directed that the judgment and the court bundle be sent to the DPP for consideration as to whether proceedings for perjury should be brought against the husband and his brother.

Fields v Fields [2015] EWHC 1670 (Fam) 
This is financial remedy case where there were significant assets but the parties had not been able to settle without having to resort to a public hearing.  The case threw up issues about the parties' respective needs, the needs of the children and the treatment of performance payments and businesses with a minimal value but with the potential to be a "bonanza" in the future.

The husband was an American lawyer aged 59½.  The wife was Russian who had become a British citizen.  She was 42½.  The parties had two children, a son aged 7 and a daughter aged 5. The parties had been in a relationship for about 9½ years with the effective breakdown of the marriage being in April 2011. 

Although the parties had a wealth of approximately £6million, both leading counsel agreed that it was a "needs based" case.  The asset schedule, which was substantially agreed, showed so-called liquid assets of about £3,285,000 after provision for all the legal costs.  Mr Justice Holman described it as "so-called" because the figure included the equity in the Manhattan apartment of about £727,000, but the husband did "not wish to sell that apartment and in [Mr Justice Holman's] view should not be required to do so".  The so-called illiquid assets were valued in the asset schedule at a further £2,952,000.  These included the wife's flat in Moscow and some shares in a company called Immunoscience. The husband's gross income was $2.1million per annum (about £1,377,000).  The husband was entitled to tax relief in respect of court ordered payments of alimony to his wife or former wife (but not to his children), so his net income would be influenced by the actual level of such payments.

The parties accepted that there would be insufficient resources for the wife to re-house herself and the children appropriately if the assets were shared equally, so the wife needed to receive more. Mr Justice Holman indicated that he should give "first (although not paramount) consideration to the welfare of the two children while they remain minors" and that he "must strive to reach an overall outcome which is fair to each party and to their children".

Mr Justice Holman expressed dismay that the case had not been settled as he felt there was more than enough to provide adequately for each party.  The parties had, at the time of the hearing, already spent £1million on legal costs.  Mr Justice Holman declined to hear the reasons why the marriage had broken down because "the marriage ended, and it no longer matter[ed] why or in what circumstances". 

Both parties suffered from ill health which was a factor in the case.  The wife had a range of health issues and disabilities such that she sought a flat rather than a house as she could not easily cope with stairs.  She was unable, realistically, to work and she needed considerable help from nannies and staff as she could not lift her children and objects (such as cases and bicycles).  The parties' daughter also had specific health and educational requirements, such that a full time nanny was required in addition to the wife as the primary carer.  Mr Justice Holman indicated that "the financial contribution of the husband [was] self-evident. The caring contribution of the wife not only require[d], but deserve[d], to be equally recognised and weighted".  Mr Justice Holman did not accept that the W should be expected to work or generate a marginal income.

Mr Justice Holman assessed the wife and children's housing needs as requiring a lift, more than one bathroom, and a relatively central London location. She would require not less that £2,550,000, inclusive of SDLT and moving costs.  The wife had £1,352,000, so the husband was ordered to pay a lump sum of £1.2million.  The husband already owned his flat in New York and would have no SDLT or equivalent tax to pay.

Mr Justice Holman found that the wife's budget (at £400,000 p.a.) was very high, but it was set against what was spent during the marriage. Due to the wife's age, Mr Justice Holman accepted that she had a need for "stockpiling" to meet her future needs as she was likely to outlive the husband, and the children would still be in their minority. Mr Justice Holman explained that this provision should be "saved and in some way ring-fenced, so that it [would be] available for future needs and [could] be identified and taken into account if or when the husband's income drop[ped] and he [sought] to reduce the level of periodical payments or discharge them altogether".  Mr Justice Holman further indicated that "investing the element of stockpile in a mortgage would, in [his] view, be an acceptable and indeed wise way of saving and ring-fencing it".

Mr Justice Holman found that, within the wife's budget, at least £80,000 p.a. was directly referable to the children, including costs of nannies, private medical insurance, medical expenses and therapy costs for the daughter etc. The children had an available income from the Parfenova Trust which was sufficient to meet their school fees in addition to paying £80,000 p.a. to the wife.

Mr Justice Holman indicated that the stockpiled annual amount should be £100,000, enabling the wife to build up a fund of £1million over ten years plus any return on the funds incrementally invested over that period.

Mr Justice Holman explained that there should be global periodical payments of £370,000 per annum (£270,000 assessed as the wife's current needs and expenses plus the £100,000 stockpile).  This included £25,000 p.a. for each child (in addition to their own incomes from the Parfenova Trust).  Mr Justice Holman was satisfied that, after making those payments, the husband would have sufficient net income to meet his own needs.

Mr Justice Holman found that it was neither necessary nor justifiable for the wife, in addition to the above periodical payments, to share in any performance fees which the husband might later receive from his business.

The parties agreed that any later "bonanza" from Immunoscience would be equally shared. 

The wife was to transfer her interest in the New York flat to the husband, and they were both to retain their current shares.

M v M [2015] EWFC B63
This case related to a 22 year marriage and a period of 4 years between separation and the commencement of divorce and financial remedy proceedings.  HHJ Wildblood QC had to determine (i) the extent to which a lump sum order should be made in W's favour, despite a financial agreement having been reached between the parties and implemented post separation and (ii) how the parties' pensions should be deal with, a potentially complicating factor being W's ill health.

The parties married in 1986, when H was 42 and W was 29.  They separated in 2008, by which time all of the children of the family (including one daughter and two further children from H's prior marriage) were grown up.

By agreement, the former matrimonial home was sold in 2008 and the proceeds were divided in approximately equal shares, enabling the parties to buy new homes and move on with their lives.

W took legal advice for the first time in 2013 and filed both a petition for divorce based on 5 years' separation and an application for a financial remedy in October of that year.  In early 2014, however, W was diagnosed with ovarian cancer.  The initial prognosis was, to use the Judge's terminology, "gloomy".  By the time of the final hearing, however, it had improved, although it remained very likely that W's life expectancy had been greatly reduced.

By the time of the hearing, it had been nearly six years since the sale proceeds from the former matrimonial home, and the parties' respective circumstances had changed considerably.  H had been made redundant and, at the age of 70, had (it was agreed) no earning capacity.  He had, therefore, taken a lump sum from his pensions and was drawing down pension income.  W had also been made redundant, on two occasions, and had then had to stop work due to ill-health.  She too, therefore, had no earned income.  The parties' capital positions, come the time of the hearing, were very different from each other, however, due to W's greater expenditure (in respect of which the Judge was not critical).

W's case was not presented on a needs basis but rather on an entitlement (sharing) basis.  It was W's position that, since separation, H had had recourse to significant amounts of capital (£459,365) and that she had a claim to a lump sum of £124,767 in respect of that capital and on the basis of unpaid maintenance (which should have been "sought, offered or ordered" during the period of separation).  In relation to the pensions, W initially sought a pension sharing order of £538,479 before reducing that amount to £403,530 by the time of closing.  This equated to 50% of the cash equivalent values, excluding W's state pension entitlement (W being unlikely to live to receive it).  W did not wish to invest in annuities as she wanted to take advantage of the recent pensions changes to enable her to leave her pensions to her children.

By the time of closing, it was H's position that he should make a lump sum payment to W of only £25,000 and that there should be a pension sharing order of £250,000, which could be quantified, in broad terms, in any one of three different ways:

(i) by equalising pension funds but applying a significant discount for H's pre-marital accrual;

(ii) by equalising pension incomes with W taking an enhanced annuity and drawing her state pension; or

(iii) by equalising pension incomes based on a reduced life expectancy for W of 10 years.

The Judge was clear that neither party had felt that financial matters had all been resolved in 2008.  They had just wanted to move on with their lives, and neither of them had wanted to deal with any other issues at the time.

The Judge recorded a number of legal principles in respect of which the parties were in agreement.  These included, among others, the following:

(i) "No claim between (ex) spouses is statute barred however in exercising its discretion the court may take into account any delay as one of the circumstances of the case";

(ii) "Where need is less than sharing the latter will prevail in the distributive award"; and

(iii) "No person can be discriminated against on the grounds of disability."

In relation to the last of the above points, whilst the Judge was clear that no person should suffer discrimination on the grounds of disability ("to say otherwise would be outrageous and illegal"), the Judge also referred to the court's obligation to consider any disability within the context of the discretionary exercise demanded by s25 Matrimonial Causes Act 1973.  In a case to be determined on the basis of sharing rather than needs, however, there was no reason for there to be any discount or uplift based on disability.
On the issue of delay, the Judge quoted H's counsel's submissions:

"There is clear authority to the effect that a party cannot come before the court after a delay of this length and seek to be treated as if they had brought their application promptly…the issue must be whether a party was given the impression (as H was) that [he] could carry on with his financial affairs without facing the challenge now made."

The Judge ordered a lump sum payment of £25,000.  This represented 50% of savings held by H at the time of separation.  In respect of the rest of the capital to which H had had recourse, W had already received a compensatory payment in relating to the pension lump sum and the sale of some shares, the severance payment that H had received had been applied to cover liabilities and living expenses (without there being any suggestion of reckless expenditure) and W had no entitlement to any post separations share gains made by H.

In relation to the pensions, the Judge found that the appropriate way forward was to "look at a fair division of cash equivalent values and then to consider whether the income effect of that solution need[ed] to be adjusted in fairness and with a particular reference to need".  Accordingly, he ordered that there be a pension sharing order in W's favour of £291,575.  This amount had been calculated to include a discount of around £40,000 in recognition of H's pre-marital accruals and was, the Judge was satisfied, sufficient W's needs.  It would then be a matter for W to determine how she applied her pension funds.  

15 July 2015