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Financial Remedy & Divorce Update, January 2019

Rose-Marie Drury, Senior Associate, and Sue Brookes, Principal Associate, Mills & Reeve LLP analyse the news and case law relating to financial remedies and divorce during December 2018.

Rose-Marie Drury, Senior Associate and Sue Brookes, Principal Associate with Mills & Reeve LLP.

As usual, this update is divided into two parts:

Part A: News round-up and
Part B: Case law update.

Part A: News round-up

Six months too long to finalise a divorce, says Bar Council

In response to the MoJ's consultation on no-fault divorce, the Bar Council has questioned the need to extend the current minimum period between decree nisi and decree absolute of six weeks and one day.  The Bar Council considers the extension of six months proposed by the MoJ would be too long for childless couples or those with straightforward finances.  

Report on ADR published by Civil Justice Council

The report considers the efficacy of MIAMs but does not support their introduction in civil cases more generally.  The Master of the Rolls, as Chairman of the CJC, Sir Terence Etherton, said "The group's recommendations include the use of a judicial-ADR liaison committee, increased public awareness of ADR, peer mediation in schools, increased law faculty and professional training and a new website to act as a single umbrella source for information about ADR." In considering the questions of quality assurance and regulation of mediators, the working group concludes that "the leads set by the Family Mediation Council must be followed as far as possible."

Helicopter seized and sold in Akhmedova case

Tatiana Akhmedova, the former wife of Farkhad Akhmedov, a Russian billionaire, has secured the sale of a £4.5 million helicopter owned by her husband. The sum is the first recovered by Ms Akhmedova in partial settlement of an award of over £450 million made by the High Court in 2016. 
Mediation "starts" fall to half pre-LASPO levels

Mediation "starts" between July and September 2018 decreased by 3%, compared with the same quarter last year, and are now running at just under half of pre-LASPO levels. Mediation Information and Assessment Meeting volumes were 5% lower than in the same quarter of 2017. The numbers were disclosed in the Ministry of Justice's latest legal aid statistics. Legal aid expenditure on MIAMS and mediation was £1 million, down 5% on a year ago.

Firm fined £5,000 for misjudgement over divorce advice conflict

It has been reported that a firm which acted for a client in financial remedy proceedings, despite being advised that a conflict could arise, has been fined £5,000 and ordered to pay more than £26,000 in costs.  In an agreed outcome with the SRA, the firm accepted that it had made a professional misjudgement. It had taken advice from counsel on whether it had advised its client to "under-settle" a claim.  Counsel's advice was that the settlement was unfair to the client but that the client might still be able to resile from the settlement as it had yet to be approved by the court; however, the firm was also told that there was a conflict of interest in respect of the firm acting for the client over any attempt to resile.  The firm subsequently advised the client that he had been given poor advice and that he could either take independent legal advice or work with the firm to try and overturn the agreement.  The subsequent set aside application was dismissed and costs awarded against the client. 

LASPO review publication delayed to early 2019

The long-awaited review of legal aid reforms is due to be published "early in the New Year" due, in part, to delays caused by the number of stakeholders who have submitted evidence. 

Restore legal aid for separating couples, says Law Society

In its response to the consultation, the Law Society has warned the government that digitising the application process and hoping for the best isn't enough.  Supporting the introduction of no-fault divorce and recommending the re-introduction of legal aid for early advice, the Law Society also raises the possibility of whether digitising the divorce process could "weaponise" it, with online applications being made in the heat of the moment. 

Part B: Case law update

ABX v SBX v DX [2018] EWFC 81

H and W began cohabiting in 2005. In 2009 W was diagnosed with a disabling disease. The parties married in 2010. They were both 38 and had three young children under the age of 6 (two of whom were at school and one who would shortly commence school). DX was H's father.

The matter came before Francis J at the final hearing. His Lordship was very critical of the legal costs (almost £1.3m between H and W and DX had incurred costs of £100,000) as wholly disproportionate to the net assets of £1.5m to £5.4m, the majority of which were illiquid. He further noted with some criticism that there had also been contested occupation order proceedings regarding the FMH at a cost of some £100,000 despite H rarely using the property and there being sufficient funds for him to move out. 

His Lordship also criticised two aspects of H's litigation conduct at the outset of his judgment which he considered was not such that it would be inequitable to disregard but was likely to have exacerbated the difficulties between the parties. In particular:

1 W's case (if true) that she had first heard H considered the marriage had ended upon receiving a letter from H's solicitor with a draft petition for divorce based on her unreasonable behaviour (H indicated he had told W the marriage had ended at an earlier date). Francis J indicated that 'It will rarely be appropriate to send a draft petition at the same time as informing the surprised recipient of the shock news.  Certainly, in my judgment, it was likely to cause offence, and in the event did cause offence.'

2 H's application for Form A was issued without prior notice to W on 31 May 2016 at a time when W had agreed she would not make any application to the court for financial remedy prior to 1 June 2016 at H's request and ultimately indicated at an earlier hearing W would be treated as the Applicant rather than H

Francis J invited an explanation from H's solicitors and was told that the issuing of the financial remedy proceedings was in no way intended to upset or prejudice the wife and was merely done "to put a structure and timetable in place", and the letter proposing that neither issue proceedings before 1 June was a holding letter written without H's instructions. Whilst accepting that solicitors must act on client's instructions Francis J was critical of those actions. He indicated that he considered that, if H had insisted on issuing Form A, then at the very least he would have expected H's solicitors to contact W's solicitors and explain they were on instructions to act in a particular way. 

DX was joined to the proceedings pursuant to W's application under s37 Matrimonial Causes Act 1973 to set aside a transfer by H to DX of €344,542.69 on 1 July 2016 in repayment of a loan plus interest of €320,000 from DX to purchase the FMH.

Dealing with repayment of the loan itself W accepted that DX had provided money to purchase the FMH and there was a loan agreement dated 10 August 2013, which she accepted was not a sham. However, she asserted that the loans made by H's parents were part of wider inheritance tax planning. Francis J accepted that loans might be forgiven before formal repayment dates but, until they were forgiven, they remained due, even if they were soft loans. He was not prepared to set aside the payment on that basis and he went onto consider the issue of timing of the repayment. He noted that DX had previously made loans to H which were repaid early, DX's evidence was he expected that the loan would be repaid as soon as possible and he required early repayment to lend his daughter money to purchase a home. Francis J was satisfied that, dealing with the presumption in section 37(5), at the time of the loan repayment it could not have had the effect of defeating W's claims taking into account: H was then earning between £862,000 to £948,000; a large part of which was not subject to tax; H had about £1m in cash and equities; H was entitled to about £721,000 worth of unvested equity in Business R; H had an investment portfolio with business R of about £1.5m; and the FMH was thought to have about £1m equity at the time.

W further pursued arguments regarding add back in the sum of £762,572 comprising:

1 The costs order made against H in respect of the occupation order. Francis J agreed with H's position that this had already been dealt with by the District Judge's costs order and it should not be added back again to the schedule of assets.

2 H's loan repayments to his father. Pursuant to s 37 Francis J had declined to set aside the transaction.

3 £145,562 relating to H's expenditure since January 2015 which included a significant number of items under one hundred pounds. The biggest item of expenditure was £14,890 which H spent on a holiday with the children in February 2017. Francis J accepted that H had spent more than his Form E budget but in his judgment this fell very short of wanton or reckless expenditure and he rejected W's claim for add back of the sums. He noted though that the fact H had been willing to spend at that rate meant he could err on the side of generosity when considering his likely future remuneration and performance, the amount of current capital to apportion to W and the level of periodical payments to W.

4 A skiing holiday in February 2018 at a cost of £40,010. Whilst finding it extravagant Francis J was not satisfied that it fell into the wanton conduct category.

5 The costs of W's s37 application. That had fallen away with the dismissal of the application, although Francis J commented it fell more properly to be dealt with in an order for costs in any case.

6 A tax payment as a result of the loan repayment to DX. Having found the repayment was legitimate, Francis J concluded he could not add back the tax remittance charge.

7 W's costs incurred in Children Act proceedings. Francis J found he had no material upon which to conclude that H had behaved unjustifiably in relation to the children and it would rarely, if at all be appropriate to add back costs of Children Act proceedings.

Francis J further observed that, had he been persuaded to add back sums, he would still need to consider the needs of the parties and if he added back the sum sought by W he questioned how H would in fact pay that given the parties' assets. 

Francis J found that the parties' assets comprised of the following:

Equity in FMH 


Joint bank accounts


Husband's current realisable bank accounts and investments


Husband's investments falling in over the next five years.

Francis J found on advice both parties accepted that no tax would be payable by W if funds were paid to her offshore which she then remitted onshore).  Whilst H would have tax to pay if he remitted the funds onshore Francis J was satisfied H would pay that from future income.


Wife's bank accounts


Sums owed to the husband by C Ltd


Agreed liabilities (including costs)



W: £204,172

H: £55,052



W was employed at 70% capacity, earning £60,100 net and in recent years had received a bonus of between 30-50%. Francis J considered that, having regard to her health and childcare commitments, she was working as many hours as was reasonable to expect her to do so.

H had been employed by Business R until 2017 earning a salary of £135,000 plus deferred compensation. He had forfeited significant deferred compensation on leaving the business. He was now employed by C Ltd with a salary of £357,000 net pa.  There were requirements for H to invest in C Ltd but Francis J was satisfied he could proceed on the basis that H's net income would be £357,000 net pa. Although W sought to argue that H had changed jobs to defeat her claims, Francis J was satisfied H would not have done so but the fact that he had given up deferred compensation with Business R to secure benefits associated with C Ltd, giving rise to W having a sharing claim in relation to some of the rewards from C Ltd.

Francis J ordered that:    

1 The legal and beneficial interest in the FMH be transferred to W subject to a trust in favour of the children. If this were not possible because of the mortgagees, then the beneficial interest to be transferred to W (subject to the children's interest) with the legal interest remaining in joint names. He accepted H's undertaking to guarantee the mortgage for a period of 5 years on the basis of a sale after 3 years if W was unable to extend the mortgage without H's guarantee and H to pay the interest due until 30 September 2021.

Whilst it seemed unlikely W would be able to secure H's release from the mortgage in three years' time Francis J was satisfied that three years would give W and the children breathing space to adjust and for W to secure new employment. Given the unpredictability of the lump sums to be received over the next 3 years W might be able to reduce the borrowing to a sufficient extent to renegotiate a fresh mortgage or by that point to have received sufficient monies to enable her to purchase a property for herself and the children. Whether and to what extent H might have to fund alternative housing costs for W and the children after that would depend upon how much capital she had accrued.

H's housing needs would be met in the interim living with his partner who owned a property in London and the country. In terms of liabilities H would pay his commitments to Business R and sums due to his mother from his future income and in respect of the loan from his mother the needs of W and the children were more pressing than the need to repay this debt in the short term.

2 W to receive 60% of the gross amount received by H from assets over the next 5 years. On the basis of the assumed valuation of £1,905,023 W would therefore receive £1,143,014. H would receive £762,009 gross which after tax netted down to £419,105. He would expect W to use the lump sums towards the discharge of the mortgage on the FMH. 

Francis J considered the disparity was justified as W had a sharing entitlement in the Business R funds and C Ltd funds and H was young and would have the chance to accumulate more capital whereas W did not.

3 Periodical payments of £50,000 per annum on a joint lives basis.

A joint lives order was justified given the ages of the children and the impossibility of predicting W's future health and career pattern.

4 H to pay the nanny's salary at the rate of £41,434 until 30 September 2019 and thereafter at half that rate.

5 H to pay child maintenance at the rate of £15,000 per annum per child continuing until the end of tertiary education at half that rate.

6 H to pay the children's school fees.

Brack v Brack [2018] EWCA Civ 2862

H and W were Swedish. They lived together for 6 years before marrying in 2000. During the course of the marriage the family lived in the USA, Belgium and the UK. They had two children together and the marriage broke down in 2014.

H was a racing driver, but his career was brought to an end following a serious crash in 2003. Since the accident, his principal source of income had been from active management of his substantial asset portfolio. Following the birth of the children, W had been a homemaker.

W had no assets in her own name and was in debt to the tune of £350,000 as a result of her legal costs. The assets accumulated during the course of the relationship were a little under £11m.

There were three prenuptial agreements between the parties made in 2000. At first instance Francis J found that, whilst there was no vitiating factor, the agreements were unfair in that they failed to provide for W and the children's needs. He considered the maintenance prorogation clause (MPC) gave exclusive jurisdiction in relation to maintenance obligations to the Swedish courts, but that the English court had residual jurisdiction in relation to rights of property.

The appeal raised two issues:

1 Was there a valid MPC in the agreements depriving the English courts of jurisdiction to provide directly for W's needs in financial remedy proceedings?

2 As a matter of general principle, where there is no MPC and a court has found a prenuptial agreement has no vitiating factors but the agreement fails to adequately provide for needs, is the court limited to making only such orders as will meet needs?

Giving the lead judgment of the Court of Appeal, King LJ (with whom Lewison LJ and Peter Jackson LJ agreed) confirmed that, as a matter of principle England retained its domestic law jurisdiction in relation to "rights in property arising out of a matrimonial relationship" pursuant to Article 1 Council Regulation 1215/2012, and only maintenance could be prorogated pursuant to Article 4. Although H had argued that, where the court was limited to making orders for rights in property, it could only make declaratory orders of existing property rights, King LJ found that Francis J's conclusion that a claim for a fair share of assets of the marriage were "rights in property arising out of a matrimonial relationship" could not be faulted in light of Thorpe LJ's judgment at paragraph 71 of Moore v Moore [2007] EWCA Civ 361

Dealing with the first issue at the appeal both parties agreed, if there were a valid MPC, it could only be found in one of the prenuptial agreements, the Ohio agreement and the issue was therefore:

1 whether the requirements in Article 4 were satisfied (with the parties agreeing that the appeal should be determined on the basis Article 4 applied notwithstanding the agreements were made many years before the Regulation came into force) and;

2 if so, does the relevant clause purporting to be an MPC in the Ohio agreement fall foul of the provision in the agreement itself that, in the event of any "inconsistency, ambiguity or conflict" between the Swedish agreement and the Ohio agreement, the Swedish agreement will take precedence in which case the only relevant prorogation agreement was in the Swedish agreement in respect of property.

The parties satisfied the status criteria in Article 4, each being Swedish nationals and the agreement as a whole was in writing. King LJ noted that prorogation clauses in themselves did not require complex drafting and all that an MPC would require would be a clause saying: "The parties agree that the Courts of Sweden shall have jurisdiction to settle any disputes in matters relating to a maintenance obligation which has arisen or may arise between them." There was no such clause. Instead the clause relied upon made no reference to maintenance but left the reader to work through the prenuptial terms and include maintenance into the jurisdiction clause by inference. Pursuant to the authority of Estasis, where a prorogation clause found within the Terms and Conditions on the back of the agreement was not adequate to satisfy the requirements of Article 4 without specific reference to the clause within the agreement itself, King LJ concluded that the same must be true on the facts of this case where the critical wording must be read across from a part of the document, dealing specifically with rights and not jurisdiction. There was nothing within the Ohio agreement capable of being a valid MPC. However, if King LJ was wrong, she considered the terms of the agreement militated against the finding it contained a valid MPC as it specifically incorporated the Swedish prenuptial and prorogation agreement within it and provided that, in the event of any "inconsistency, ambiguity or conflict", the Swedish document shall take precedence. Whilst the fact the Swedish agreement did not contain an MPC was not fatal after the Ohio agreement, the parties had then gone onto sign the Gothenburg agreement which did not provide for an MPC and that agreement was clearly identified as taking precedence over the Ohio agreement.

The issue therefore arose as to the consequences of the prenuptial agreements. The parties agreed that, where a judge had found there to be no vitiating features in relation to a prenuptial agreement, he was still entitled in applying the section 25 to take into account needs, compensation and sharing.

King LJ summarised the approach of Francis J at first instance as follows:

i) He found there to be no vitiating features which would preclude the implementation of the agreement.

ii) He was aware from Radmacher that parties to such agreement are able to "contract out" of sharing.

iii) In Z v Z and Luckwell, where the agreements had been held to be valid, the courts had made only needs-based orders.

iv) He concluded that [62] "the effect of the above is that I am now to approach the case on a needs basis".

King LJ considered that Francis J had fallen into error in going so far as to conclude the effect of Z v Z and Luckwell meant that the wife lost her sharing claim by reason of the prenuptial agreement. She considered that in the ordinary course of events, where there is a valid prenuptial agreement, the terms of which amount to a spouse having contracted out of a division of the assets based on sharing, a court is likely to regard fairness as demanding that the spouse receives a settlement limited to needs. However, that outcome was not prescribed and, even where there was an effective prenuptial agreement, the court remained under an obligation to take into account all the factors found in s25 MCA 1973 which might mean an award greater than needs.

The matter was remitted to consider what order would be fair in all the circumstances of the case.

Martin v Martin [2018] EWCA Civ 2866

W appealed and H cross-appealed the decision in WM v HM [2017] EWFC 25.

The full facts and background are set out in the judgment.

H and W began living together in 1986 when H was 37 and W was 24. They married in 1989 and separated in 2015. They had two adult children together.
In 1978, H started a business with a friend. They were equal partners until 1989 when H purchased his friend's shares. Following the purchase, H owned 99% of the shares and W owned 1%. Mostyn J's award was based on the application of the sharing principle which neither party questioned. The issues before Mostyn J were that i) that the bulk of the wealth comprised of shares in a private trading company and ii) the company was founded prior to the commencement of the parties' relationship.

Mostyn J had approached matters by using the net value of the assets of the company which he equated to cash because he considered "the only difference between it (i.e. the company) and its cash proceeds is … the sound of the auctioneer's hammer".

His approach to determining the proportion of the company which was non-marital was to apply a straight line apportionment to the present value from the date the company was first incorporated rather than using the SJE's valuation of the business as at the date of cohabitation.

The effect of Mostyn J's determination was that W was awarded 40% of the total wealth, of which 26% was in business assets and the balance in cash (payable as a lump sum by instalments). H was left with 60% of the assets, 83% which were the business assets. 

The issues raised by the appeal and cross-appeal were broadly summarised as:

1 what approach should the court take to the valuation of shares in a private company when determining how to divide marital wealth (the valuation question); and

2 what approach should the court take when determining what part of the parties' current wealth is property to be defined as non-marital in circumstances where that wealth includes shares in a private company founded by a spousal prior to the date when the parties married or commenced cohabitation (the marital property question).

Giving the lead judgment, with which Coulson LJ and Simon LJ agreed, Moylan LJ referred to the authority of Wells v Wells as confirming that a) assets have different levels of risk and b) as a matter of principle the court must take this into account when applying the sharing principle. Where valuations of a private company fell within the spectrum would vary depending on the facts of the case. He noted the conclusion in Versteegh v Versteegh was to treat valuations of private companies with caution. The broad choices before a court were therefore to (i) "fix" a value, (ii) order the asset to be sold and (iii) divide the asset in specie. Even when the court was able to fix a value, including taking the mid-point of two valuations, it's the use of the valuation that is of critical importance. It does not mean it has the same weight as other assets and the court still has to determine the weight to be put upon that valuation to achieve a fair balance of risk and illiquidity between the parties.

Dealing with the marital property question Moylan LJ considered that the approach adopted by Mostyn J was not precluded by the authority of Lord Nicholls in Miller;McFarlane or Wilson LJ in Jones v Jones. The overall approach of Wilson LJ was to test the suggested award by reference to a view of overall fairness with the true essence to be to make fair overall allowance for H's introduction of the company into the marriage. He noted that Holman J's approach in Robertson v Robertson was similarly to exercise broad judicial discretion. He further noted that in Versteegh v Versteegh King LJ had concluded that the judge was entitled to give weight to the non-matrimonial assets in a more general way and his own conclusion in Hart v Hart that there is no single route to determining what assets are marital. The obligation of the court was to ensure the method selected to determine the issue led to an award which gives the weight considered appropriate in the circumstances of the case and was partly evaluative and partly discretionary.

Moylan LJ concluded that Mostyn J was entitled to adopt a straight line approach to the marital property question. Whilst it would be an improper fetter on judicial discretion to elevate this approach above others Moylan LJ agreed that there were benefits to eliminating black-letter accountancy valuations of a company many years earlier and that a straight line approach took an overarching view of the weight to be attributed to H's contributions to the business throughout its existence.  A straight line approach was also consistent with the overriding objective where the court was concerned with a broad analysis of fairness.

Dealing with the valuation question it was not established the factual determination was wrong. However, Mostyn J was wrong to state that "only difference between (Dextra) and its cash proceeds is … the sound of the auctioneer's hammer". As a result of that conclusion he had failed to consider whether his proposed award achieve a fair division of the assets. There needs to be evidence of liquidity and the timescale for payment – a judge cannot just decide. Mostyn J's award of a lump sum payment to W of £20m by June 2019 was therefore set aside and substituted with four annual instalments of £5m (as originally proposed by H). 

Finally, dealing with W's criticism that there was no mechanism for her to realise the shares awarded to her Moylan LJ confirmed there was no obligation to provide such a mechanism.

Quan v Bray (and other) [2018] EWHC 2558 (Fam)

The case is the latest reported judgement in the long running Quan v Bray case following on from Sir Paul Coleridge's judgment in Quan v Bray & Ors [2014] EWHC 3340 (Fam) and the Court of Appeal's judgement in Quan v Bray & Ors [2017] EWCA Civ 405.

At the outset of his judgment Mostyn J noted that there were similarities between this case and Joy v Joy-Morancho and Others (No 3) [2015] EWHC 2507 (Fam). He noted in particular that in Joy, Sir Peter Singer found that the trust was not nuptial, it was not a sham and there was no likelihood of reinstatement of H as a beneficiary and advancement of funds to him but that the trust could employ H at a rate of remuneration sufficient to afford periodical payments of £120,000 per annum. In this case, whilst it was impossible for either H or W to become beneficiaries or to benefit from CTSAT gratuitously there was nothing to prevent CTSAT, as it had previously, remunerating H for services rendered on a full commercial arms-length basis.

On the eve of the trial W had settled her claims with two of the Respondents, Save China's Tigers UK ("SCT-UK") and Conservation Finance Ltd ("CFL"). SCT-UK is the beneficiary of CTSAT. CTSAT is the beneficial owner of CFL. CFL owned the legal title of the FMH but W had claimed that H was the true beneficial owner. She conceded that the FMH was beneficially owned by CFL and agreed to vacate the property by 5 March 2019 or on the payment of a lump sum to her of £10,000 provided as part of the agreement, if later. The agreement was in full and final settlement of any claims W might have against SCT-UK, CFL or CTSAT, in this jurisdiction or anywhere else in the world and further that she is making no other claims over any assets/entities legally or beneficially owned (directly or indirectly) by CTSAT; that she will make no such claims of whatever nature against such assets in the future; and that neither she, nor the husband, has any beneficial interest in any assets legally owned (directly or indirectly) by CTSAT.

W therefore sought that her claims for capital provision should stand adjourned (as were W's claims in Joy) and sought ongoing periodical payments from H.

H separately sought to claim, by way of a witness statement dated May 2018, that the eighth and ninth respondents (W's brother and sister-in-law) held assets for the sole benefit of W (namely two apartments in Beijing) but that the agreement pursuant to which they were held had been breached and, as a result, the eighth and ninth respondents should be ordered to pay H $1 million plus interest of $1 million.  W did not accept there had been such an agreement or that the assets were hers beneficially. Mostyn J noted that H had not in fact made any claim against the eighth and ninth respondents and he rejected H's claim. He doubted it would succeed in any case, given that it was time-barred under the Limitation Act and the eighth and ninth respondents were not within the jurisdiction and had expressly not submitted to the jurisdiction. He further noted that if a claim were to be made in the future it should be struck out as an abuse of process under the rule in Henderson v Henderson (1843) 3 Hare 100.

However, Mostyn J was satisfied that the eighth and ninth respondents would, if asked, make the flats or their profits available to W, W having accepted if she returned to China and was in need she would expect her brother and sister-in-law to look after her in discharge of the moral duty that the donation of the flats gave rise to.

By the time of the trial, the maintenance pending suit paid to W had been reduced to £1,000 pcm by Mostyn J on the basis the order had been in place an extraordinarily long time. Following the variation H did not pay any of those sums due and there were arrears of £10,000. Mostyn J was satisfied H had the means to pay the award but had refused to do so.

Mostyn J referred to the significant success of H in generating funds for CTSAT. He noted that JAS Financial Product LLP (the operational, financial and marketing advisor to CTSAT) in which H was the ultimate beneficial owner had received fees of £533,000 in 2005, £636,000 in 2006, £600,000 in 2007 and in 2008, the year of the financial crisis, £80,000. Although H's evidence was the financial speculation opportunities in which he specialised came to an end in 2008, fees of £545,000 were paid in 2009 and in 2010 fees of £1.53 million.  Whilst Mostyn J accepted that there may be some abnormal excess in 2010 as a result of work to secure a settlement from G Bank he was not satisfied that it explained the 2009 fees and he noted that in 2011 fees of £900,000 were paid and in 2012 £950,000. From the profit element of the fees H had received nothing with his partner receiving virtually the entire profit. He found there was no convincing explanation for this.

Mostyn J noted that there was no information as to the economic activity the project had been engaged in over the last four years as H had refused to provide that information. H's argument was that the CTSAT had refused to provide the information, but Mostyn J was not satisfied with his explanation. He drew the inference from the non-disclosure and what he described as H's contemptuous and arrogant attitude that the trust had been successfully active economically, with H as rainmaker, but that he has arranged for his commercial reward to be deferred until the proceedings were concluded.

Dealing with H's earning capacity, Mostyn J found H to be an unsatisfactory witness and did not accept his evidence save where it was agreed or corroborated by contemporaneous documents. He was satisfied that H had the capacity to receive very significant fee reward on a fully commercial arms-length basis for financial advisory work for CTSAT or that he could earn comparable fee remuneration working for other clients. He noted that, since H had sold the FMH to the sixth respondent in 2008, H and W had lived there without payment of rent (with the rental value being £6,500 pcm) and that H had also been able to secure a loan in February 2015 of £200,000 from CTSAT (whilst that was secured on a property interest was rolled up rather than payable periodically).

Mostyn J found that W had a modest earning capacity of £25,000 gross. She had been out of work for many years and had applied for jobs as a PA without success. He considered that W's needs as stated were reasonable and were £30,000 per annum for rent and £54,184 for living expenses. Taking into account her earning capacity he ordered periodical payments at the rate of £64,000 per annum index-linked.

Whilst noting that the court's goal should be, wherever possible, to achieve a complete economic separation between the parties he was not satisfied that, even with an extendable term order, W would be able to adjust without undue hardship because she had no capital base at all and the Chinese assets held by her sister-in-law did not provide a sufficient safety net to mitigate the prospective hardship.

He was satisfied in the unusual circumstances W's capital claims should be adjourned since it was foreseeable that at some stage in the future H would have accumulated sufficient sums to make a proper clean-break capital settlement.

HRH Tessy Princess of Luxembourg v HRH Louis Prince of Luxembourg and L'Adminstration Des Biens De S.A.R. Le Grand Duc De Luxembourg ('the ADB') [2018] EWFC 77

The matter came before MacDonald J at a final hearing and follows his previous judgment in HRH Louis Prince of Luxembourg v HRH Tessy Princess of Luxembourg (Publication of Offer) [2017] EWHC 3095 (Fam).

H was the third son of the Grand Duke and Grand Duchess of Luxembourg. The parties had married in 2006 and had two children together aged 11 and 12. In 2009, W was recognised as a member of the Royal Family and granted her titles. The parties lived and studied in the USA between 2009 to 2011 before moving to London. The marriage broke down in 2016 and financial proceedings were commenced in 2017.

The intervenor, the ADB, was a separate legal entity to the Grand Duke of Luxembourg and the structure which held and managed, on behalf of a reigning Grand Duke: i) the elements of the Grand Duke's fortune intended to be passed on to the future Grand Dukes (GroBherzogliches Fideicommisss (in German) or the fidéicommis grand-ducal (in French)), ii)  those elements of the Grand Duke's fortune comprised of monies received by the Grand Duke from the State of Luxembourg and iii) the personal monies of the Grand Duke.

The court had to consider which persons or legal entities had provided money for various transactions and to what extent various properties, including the FMH which was owned legally by H and the Grand Duke, were purchased on trust and for the benefit of the ADB (as the ADB contended was necessary due to uncertainties as to the precise legal standing in foreign jurisdictions of the ADB).

Having considered the evidence MacDonald J was satisfied that H was not a beneficial owner of the FMH as:

1 The expert evidence confirmed that the GroBherzogliches Fideicommiss / fidéicommis grand ducal had a separate legal personality and that the ADB also had a separate legal personality.

2 W did not dispute the evidence that the funds to purchase the FMH came from the GroBherzogliches Fideicommiss / fidéicommis grand-ducal.

3 The documentary evidence before the court showed that the funds from the GroBherzogliches Fideicommiss / fidéicommis grand-ducal were paid by the ADB for the purposes of purchasing the FMH.

4 W conceded the sale of a US property had been completed and the proceeds returned to the ADB after the completion of the purchase of the FMH.

5 There was a clear distinction between the manner in which the US property had been purchased by the ADB with the 'private' funds of the Grand Duke and the manner in which the FMH was purchased, namely by the ADB with funds from the GroBherzogliches Fideicommiss / fidéicommis grand-ducal and with the completion of a compromis de vente (a sales contract).

6 W did not dispute that, upon sale of the FMH, the intention of all parties and her understanding was that the proceeds of sale would return to the ADB.

7 Following the purchase of the FMH a compromis de vente was prepared which, whilst not dated or signed by H, evidenced the intention as to how the property was to be held.

8 H did not believe he owned a beneficial interest in the FMH and did not claim to do so. His position was consistent with what he contended was his understanding of the manner in which properties in foreign jurisdictions had been purchased historically by the ADB, the intentions of those involved at the time of the purchase and the existence of the compromis de vente.

Neither the ADB nor H disputed that the FMH comprised a post nuptial settlement in circumstances where it had been purchased as a home for the husband, wife and children. MacDonald J was satisfied on the evidence that what had been created by that settlement was an interest analogous to a bare licence determinable on the giving of a reasonable period of notice. In these circumstances, on the evidence before the court, there was no basis for concluding in this case that the contents of the post nuptial settlement extended to an interest analogous to a life interest or to a term of years certain.

In terms of assets available to the parties, the majority of their liquid funds (some £500,000 had been exhausted on legal costs and by the time of the final hearing W was acting in person with a McKenzie friend and H instructed leading counsel on a direct access basis.

W contended that H had a prospect of substantial inheritance. He had already received €510,750 and he conceded that there had been mention of further inheritance monies, potentially €1M, being paid to him and his siblings if affordable but with no definite timescale. H's position was that this future inheritance was a possibility not a firm expectation. W's position was that it was much more than a possibility but she accepted no timeline regarding payment had been discussed. MacDonald J was satisfied that the future inheritance was not sufficiently certain to regard this as a financial resource. H might receive further funds by way of inheritance but it was not possible to say with certainty when he would do so or be sufficiently certain of the amount of any further payment.

W contended that H would further be able to rely on his family to provide him with funds to meet any award made by the court and there was no limit on the resources H could gain access to through his family.

H's position was that he would not be able to source further funds and his family had made clear they would only make equal provision to him and his siblings. H conceded he might be given travelling money by his father but this never extended beyond €300 five to six times per year. He accepted he had been able to secure an unsecured loan from the Bank of Luxembourg to meet his legal costs for the final hearing and he would likely be able to obtain further unsecured loans but he questioned how he would be able to meet these liabilities.

The court had separately received a letter from Le Maréchal de la Cour (the Marshal of the Court) to H written on behalf of the Grand Duke and the Grand Duchess. The letter made clear they would pay their grandchildren's school fees and their medical insurance but they did not intend to increase the funds they provided to H to meet any financial award made by the court.

MacDonald J considered that that on balance he was satisfied that it would be wrong to conclude H's family represented a financial resource on which the court could rely in determining H's ability to satisfy any award made in favour of W. The evidence of H's family that they did not intend to fulfil such a role had not been challenged and the court had to place considerable weight on the indication in the letter from Le Maréchal de la Cour in which H's parents had expressly stated they do not intend to provide such support and had given a clearly stated rationale, of historical precedent and fairness between their children.

MacDonald J was also satisfied that H's minority share in a Paris property where he lived could not be liquidated and W had not demonstrated H had undisclosed business assets

W earnt £75,000 per annum gross (although she had handed in her notice and that income would therefore be coming to an end). H's income comprised of an annual allowance of €40,000 gross paid to him by his parents. H's position was that he was expected to become financially self-sufficient in the future and he intended to do so.

W's Form E budget was £167,989.86 per annum and, in her revised Form E, £157,609.86 per annum. H proposed a realistic figure was £57,346 per annum for W. H's original budget for himself was £83,370 but in closing his counsel provided a revised budget of £25,750 per annum, taking into account expenses paid by his family.

W's sought £1.5M plus purchase costs to buy a family home for herself and the children or a life interest in a home purchased for £1.5M with a reversion to the husband's family, a "small additional lump sum" to be paid upon the disposal by the husband of his shares in Audaces Seed Investors Limited, a further lump sum of €17,500 to make provision for a car to be used by the wife and the children when in Luxembourg or an agreement that a family car is made available, periodical payments  in the sum of £10,000 per annum until the termination of the child periodical payments order or earlier re-marriage, child maintenance of £30,000 per annum per child until completion of their tertiary education or the age of 22 years old, whichever is the later, payment by the husband or his family of school fees and fees for health insurance for each child until they finish their first university degree and H to pay her outstanding legal fees together with any additional fees incurred in the implementation of the court's order.

The ADB's open position was for ADB to purchase a property at a cost of £1.5m for W and the children to be granted a formal licence to live there rent free until the date the younger child completes his full time tertiary education (limited to a first degree) irrespective of whether the wife remarries or cohabits in the interim. ADB would be responsible for capital expenditure on the property and day to day outgoings would be met by W. It was a further condition that H and W would sign a non-disclosure agreement.

H's open position referred to the ADB's offer and in addition that W's claims for spousal maintenance be dismissed and there be a clean break, H to pay child maintenance at the rate of £3,000 per annum per child until they respectively cease full time secondary education and H to transfer the family car to W.

MacDonald J ordered that:

1 To satisfy W's housing needs the court was limited to varying the post nuptial settlement to provide W and the children with a licence to occupy terminable on 6 months' notice.

2 A nominal spousal maintenance order for 6 years on the basis that at the conclusion of that period W would have further developed her career, would be able to secure housing and the youngest child would be approaching his majority.

He considered that W's income from her current employment of £51,512 net per annum represented her earning capacity (notwithstanding that she had handed in her notice and that she may struggle to secure employment) and that her budget was unrealistic having regarding to the available income.

3 Child maintenance of £4,000 per annum per child until the age of 18 or their ceasing full-time tertiary education to first degree level including a gap year, whichever shall be later. MacDonald J noted the assurance provided by H's parents regarding school fees and medical expenses. 

Addressing much of the publicity that has surrounded the case in his concluding remarks, MacDonald J further made clear that, contrary to some reports in the press where W had been labelled a gold digger and a chaser of status 'nothing could be further from the truth', that the fact she had chosen to pursue financial remedies did not equate her to such and that the manner in which W had been portrayed in the press was in his view unfair and unwarranted.