Last week, Judgment was formally handed down in relation to a hearing which took place in October, during which Michael Chapman and Grace Matthews appeared in the High Court for the final hearing of financial remedy proceedings. Abigail Bennett appeared as Counsel, led by Sally Harrison KC of St Johns Buildings.

Background

JMW were instructed on behalf of the wife in this complex high net worth financial remedy case. The parties were both in their fifties and had a long marriage, consisting of approximately 25 years with two adult children. The parties had amassed significant wealth during the marriage and enjoyed an exceptionally high standard of living commensurate with their wealth. Their assets were structured in such a way to minimise tax, this included four holding companies in the wife’s name, shareholdings in each of their names, loan notes, offshore assets and various smaller entities. The Judge noted that the business assets and corporate interests were particularly complex.

The role of the court was to determine the extent of the parties’ wealth (the wife’s case, including arguments in relation to ‘add-back’ of funds dissipated by the husband, amounted to total assets of £105m whereas the husband’s case argued for assets totalling £72m) and then to decide how that wealth should be divided. The wife’s position was that the assets should be shared equally between the parties whereas the husband sought a 60% share of the assets, with the remaining 40% to be distributed to the wife.

Computation

The parties disagreed on the valuation of most of their assets (with the wife agreeing with the single joint expert conclusions, whereas the husband did not), so the court was required to carefully consider the evidence put forward by various experts, the parties themselves, and their legal teams, to determine the value of the assets.

One of the difficulties in this case was the husband’s approach to the valuation exercise and his refusal to accept the majority of the expert evidence that had been ordered by the court.

The court had appointed a single joint expert (SJE) forensic accountant to value the business interests of the parties. The husband rejected this valuation and obtained his own valuation of the businesses. He subsequently made a Daniels v Walker application to seek permission from the court to rely on the valuation he had obtained in place of the existing SJE valuation, this application was successfully resisted by JMW, and refused by the Court prior to the final hearing, read more about this element of the case in our blog.

Notwithstanding this failed application, the husband continued to argue against the SJE  business valuation at the final hearing and gave several reasons as to why he believed the businesses should be attributed a lower value. The High Court were not persuaded and found that the husband was overplaying issues relating to the business and that this was based on a desire to reduce the value of the company. The Judge agreed with the SJE’s valuation.

Similarly, the husband sought to challenge expert surveyor evidence that had been obtained in relation to a Spanish property owned by the parties. The husband criticised the methodology use by the surveyors and once again invited the court to rely on an alternative valuation. The court did not accept these criticisms and accepted the valuation of the jointly instructed expert.

The court also considered the value of various other assets in dispute between the parties and determined that the total assets available for division in the case totalled £89.5m.

Addback

As part of the computation exercise, the wife argued that £6.7m should be added back to the asset base. This sum represented monies the husband had paid to a Mr Z in repayment of investment in an unsuccessful business venture. The court grappled with this issue, hearing evidence from Mr Z and eventually concluded that the monies were rightly owed to Mr Z and therefore should not be added back to the asset pot.

Whilst accepting repayment of the investment was a genuine obligation, the court were not persuaded that the interest the husband claimed to be due on the repayment and paid to Mr Z was similarly genuine. The husband argued that there was a further £400,000 payable to Mr Z, but the court did not accept this and ordered that the sum of £900,000 (representing £500,000 interest already paid, and the £400,000 the husband argued would fall due) should be added back to the pot.

Submissions were also made on the wife’s behalf in relation to shares sold by the husband during the financial remedy proceedings to fund the repayment to Mr Z referred to above. The wife was of the view these shares were sold at an undervalue unilaterally by the husband and that this undervalue should also be added back to the pot. Although not in agreement regarding the addback, the court did criticise the husband for failing to inform the wife of payments made until after the event and was clear that this was a serious breach of the husband’s ongoing duty of disclosure.

Distribution

The court held that the husband should retain the business interests (which was not in dispute) and there should be an overall division of the assets 55% to the husband and 45% to the wife. As discussed, the husband had sought to split the assets 60:40 but the court were satisfied that a minimal 5% departure from equality was appropriate in all the circumstances of the case. The effect of this split would be the husband would receive £49.23m and the wife, £40.28m.

The husband retained a marginally higher percentage of the asset base as he was retaining business interests that were inherently risky and uncertain. In contrast, the wife retained the more liquid and copper-bottomed assets.

This decision represents the conclusion of complicated and lengthy proceedings and highlights issues in relation to expert evidence, addback, and sharing.

Read the judgment in full at the National Archives.