Claim No. MC13D00142
IN THE FAMILY COURT
AT MANCHESTER
Civil Justice Centre
1 Bridge Street West
Manchester
M60 9DJ

Tuesday, 24th November 2015

Before:

HIS HONOUR JUDGE BOOTH

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Between:

MR K C
Applicant
-v-

MRS R C
First Respondent
and

GBL
Second Respondent

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Transcribed from the Official Tape Recording by
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Suite 204, Kingfisher Business Centre, Burnley Road, Rawtenstall, Lancashire BB4 8ES
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Counsel for the Applicant: MR WAGSTAFF QC and MISS TEACHER

Counsel for the First Respondent: MISS HARRISON QC

Counsel for the Second Respondent: MR CHAISTY QC

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JUDGMENT
JUDGMENT

HIS HONOUR JUDGE BOOTH:

The proceedings
1.	I have been conducting the final hearing in ancillary relief proceedings brought by K C against his wife, R C.  There is a further party to the proceedings, GBL, a company belonging to the husband’s brother Raj. The way the case has proceeded has been to focus on the wife’s claims for ancillary relief consequent upon the parties’ divorce and it is accepted that all valid claims that either party may have are properly before me for determination.  The husband has not sought relief in his own favour.
2.	The essential questions I have to resolve involve me deciding whether, as the husband alleges, he has invested in a housing development opportunity that has gone horribly wrong so that he now has nothing and whether what might have been left has been all spent on legal fees fighting this case so that the ultimate position is one where there is only debt.
3.	As I set out the evidence I will incorporate my findings where there is a dispute as to the facts. I do not propose to decide every point in dispute but only those that I need to resolve to help me find the fairest outcome of this case. For reasons that will be clear I have no confidence in anything the husband told me.
The background   
4.	The husband is 41 years of age.  He works in a business, of which he is a part-proprietor, called GE.  In that business, he is a partner with his father, his mother and his eldest brother, Ravi.  The husband’s background is in finance and banking.  He was educated to degree level and went on to obtain a master’s degree in international securities and investment.  From 1997 he had a career in banking in London until 2002 when he became a partner in GE.  He has a shareholding in a business run by his brother, Ravi, about which I will deal in more detail in due course. 
5.	The wife is 39 years of age.  She has worked as a recruitment consultant for an employment agency.  In recent times, she has worked part-time.  
6.	The parties have two children: Km, who was born on 12th June 2009, and Kn, born on 27th February 2012.  The children live with their mother in rented accommodation and have regular and frequent contact with their father.  The husband lives at a flat that was formerly the matrimonial home.  It is one of two top-floor flats in the block in which it is situated, the other being owned and occupied by the husband’s parents and Raj.  
7.	This litigation has been described as a financial disaster for these parties. That is undoubtedly the case.  The three parties to the litigation have spent £750,000 between them.  Had I acceded to requests that were made to the court for expert witnesses, the amount expended on costs would have been very substantially higher.
8.	The husband has been represented by Mr. Wagstaff QC and Miss Teacher, the wife by Miss Harrison QC and GBL by Mr Chaisty QC. I am grateful to them all for their skilful presentation of their respective cases and their written and oral submissions. 
9.	I have heard evidence from the husband, the wife, Mr B and the Director of GBL Raj.
Family support
10.	In the background of this case are questions of financial support that the parties’ families have respectively given to each of them.  
11.	The wife’s position is straightforward.  Her late father gave her a part-interest in a house that he rented out in the Bristol area where the wife’s family come from, the income from which now supports the wife’s mother.  She has received financial help from her parents in the past, most recently in 2010 when the husband purchased a house at the heart of the dispute between them, the house called Q.  It is the wife’s case that her father gave her £50,000 as a contribution towards the purchase of what was intended to become their family home.  She described this as a “blessing”. She contributed £18,000 from savings she had made from her days working before she had time off for the children.  Her mother has lent her £100,000 that has gone towards her solicitors bills and in return she has given her mother security over her part-interest in the house.
12.	The husband’s support from his parents and family is a little more complex and certainly more extensive.  When he entered the family partnership, GE, in two separate tranches, firstly, his mother and secondly, his father, transferred funds from their own capital account within the partnership to his capital account to give him funds in the business of £550,000. This was done he says as a way of avoiding inheritance tax and to provide generally for him.  The value of his capital account increased so that in 2013, the time of separation, it stood at £775,000.His evidence was that in addition he had accumulated savings.  His explanation given first during the course of the hearing was that these were from property transactions from the days when he lived in London so that, at the time of the purchase of Q in 2010, he had something of the order of £1 million pounds to his name.
13.	As a partner in GE the husband is entitled to a defined share of the profit that the partnership makes. The partnership used to be a trading company. The husband explained to me that all it does now is lend money to a company run by Ravi, GFL, which is a money lending business. GFL has a subsidiary company called GCCL. I was told that the partnership has lent money to GFL and GCCL subject to long term contracts so as to render it impossible for the husband to access any money standing to his credit in his partner’s capital account. That explanation was undermined by the husband having helped himself to the funds credited to him throughout these proceedings and spending it, including paying his legal fees. I am told it now stands at £480,000.
14.	As well as administering it’s loans to GFL and GCCL, GE is involved in the management of stock for GBL, a business belonging to the husband’s father, which operates in a warehouse also belonging to the husband’s father on the site where the husband has an office he attends daily.
15.	The husband and Raj are shareholders in GFL together with Ravi. GFL lends money to members of the public and so is heavily regulated. It is the husband’s case that although he owns 30% of the issued shares in GFL that might have a gross value of £2.82m he does so as a nominee for Ravi. The husband acquired those shares on incorporation in 1997. The husband and Raj gave evidence of being called to a meeting by Ravi in March 2007 and told to sign a document. That is said to be the nominee agreement that has been produced to the court. The husband explained that Ravi needed to have other shareholders and directors involved in the business because he was lending money to the general public. As I have not heard from Ravi as to what happened in March 2007 I have no explanation for the 2007 document. Both the husband and Raj have said that they have had no financial benefit from their shareholding in GFL and that neither has received a salary. The husband says that he was removed as a director of GFL in April 2014 when he refused to resign when Ravi objected to requests for documents relating to the affairs of GFL for the purposes of these proceedings.
16.	Given the husband’s background in finance it would make sense for him to deploy his skills in support of the business of GFL and looking after GE’s investments. Now that GE does not trade I was keen to know what it is that the husband does when he reports for work each day. The answer was that he drives a stacker truck in the warehouse next to his office stacking goods for a GDL, a company with which the husband has no association and which pays him nothing but in respect of which GE gets a management fee.  
17.	I totally reject the husband’s and Raj’s protestations that the “G” branded businesses have nothing to do with one another and are run entirely separately. It is clear from the evidence I have heard that the husband’s family treat their finances in a fluid way enabling them to maximise opportunities together. Without evidence from Ravi I cannot accept the nominee agreements at face value nor can I accept that the husband has no interest in the “G” branded businesses. Ravi cannot have it both ways: if he is required to have other shareholders and directors for the purposes of his regulated business then there needs to be a clear explanation as to how that can be achieved by nominees acting entirely under his control.
18.	The decision of the husband not to call Ravi is understandable but inevitably has consequences. He would undoubtedly have been asked questions about the mortgage application process with Nat West that I will deal with below that the husband says were Ravi’s doing. An adverse finding as to his honesty might have had repercussions for his ability to lend money to the general public. If he gave evidence to absolve himself then that might have had the effect of undermining the husband’s evidence.
19.	It is the husband’s case that his father has lent him money both to develop Q and in respect of his legal fees. He says he owes his father £205,000.
The family home
20.	The flat that the parties occupied was held in the husband’s sole name subject to a mortgage of £315,000.  The property is valued at £325,000 so there is, effectively, no equity.  However it gives the husband a suitable home for himself and for the children when they are with him.
The house known as Q
21.	The role that Q was to play in this couple’s life has been the subject of fundamental dispute, both between the husband and the wife and the husband’s brother, Raj.  Raj is the sole shareholder and director of a company called GBL.  Raj’s primary method of doing business through GBL is to purchase houses, develop them and to sell them for a profit.  He has no staff. He engages people and companies as and when needed. He had bought the house known as Q in 2007.  In 2010, it appears that he had decided to sell and he put the property in the hands of estate agents but, about that time, the husband indicated to his brother that he, the husband, would very much like to acquire Q. In 2010 he also sold a substantial house to Ravi.
22.	Q stood in the books of GBL at £1.127 million and it was advertised, I am told, at around £1.3 million.  A deal was struck with the husband that he would buy it in his sole name for £1.1 million.  The effect of that transaction was that GBL converted a book value of £1.127 million into cash of £1.1 million, leaving a small loss in the accounts.  It is the husband’s case that he was buying Q as an investment and development opportunity and that, having seen the success that his brother Raj had had in property development, he decided this was something that he should do and on which he really could not lose.  
23.	It is the wife’s case that she knew all about the plan to buy Q from the outset but that, far from this being a business and investment opportunity for the husband to make money, what was really intended was that this should be the family home.  It was clear from her evidence that the wife found it oppressive living next door to her parents-in-law and her brother-in-law and she was keen that her family should have their own family home within which she could bring up her child and any future children.  
24.	It was to that end that she made a financial contribution to the purchase of Q of £68,000 made up of £50,000 from her father by way of a blessing on their new home and £18,000 being the totality of her savings. She had the impression from her husband in what he had said to her that Q was to be paid for by his business.  She accepted she had no idea what that meant or how it was to be done but she believed, from what her husband told her, that he had the wherewithal to buy and improve this house and for it to become their home together.  
The mortgage application
25.	In order to purchase Q for £1.1m the husband needed a mortgage. He already had a mortgage on the matrimonial home with HSBC. He told me that he initially applied to HSBC for a mortgage for Q but was refused. His case is that he relied on his brother Ravi and contacts he had with Nat West to obtain mortgage finance. He told me he had a meeting with the team at Nat West (now disbanded) who were considering the application and that the focus of discussion was his capital account in the partnership and that he was not asked about his income. He says it was Ravi who provided Nat West with the detailed information they needed for the mortgage application. 
26.	A mortgage application form has been produced. The husband tells me that the figures in it have not come from him and that he did not sign that or any other form. He says there was no request for him to establish his identity for money laundering purposes.
27.	The figures in the mortgage application form are fictitious. The husband’s gross annual salary is stated as £275,000 and his net monthly income as £12,783.04. That information the husband accepts was entirely false and grossly inflated. The husband’s Form E suggested that he had income of the order of £7,200 per annum. That was not accurate either.
28.	It is the husband’s case that in 2010 Nat West was throwing money at building projects such as his and that there really was no difficulty securing the loan of £825,000 he needed to buy the house from Raj. That is at odds with the generally accepted state of building industry finance following the financial crisis of 2008.
29.	At earlier hearings I made clear to the parties that I regarded the evidence of the obtaining of the loan as potentially critical to my findings and in particular my view of the husband’s honesty and reliability. Despite this the husband chose not to call his brother Ravi to give evidence to back him up. 
30.	The only conclusions that I can come to are:
a.	that the husband and his brother Ravi together dishonestly represented the husband’s financial position in order to obtain a mortgage that the husband would not have got had the true position be presented; or
b.	alternatively, that the representations were true at least to the extent that the husband was a much wealthier man than he now wishes the court to think.
31.	I conclude that both are probably correct.
The role of GBL
32.	Raj’s case is that he had no knowledge of his brother’s financial circumstances and that, as far as he knew, his brother simply wanted to get on the bandwagon of property development in order to make money.  To that end, the brothers struck a deal. The husband had made clear to Raj that the only way he could carry out this development project was if he paid for the development costs at the end of the project.  The husband’s evidence was that he had approached a couple of builders, who laughed at the suggestion that they should wait until the project was completed before being paid when the property sold. He said he got a more favourable response from his brother.  
33.	However, the arrangement that was put in place was somewhat different from that which the husband appeared to have been proposing to builders.  Raj offered his services as a project manager rather than as a contractor to do the work thereby adding a substantial layer of management cost.  Raj tells me that his recommendation was that the husband should employ builders known to Raj, who he had worked with in the past on his own property development projects.  Working for somebody else, solely as a project manager, was something Raj had never done before.  He had never worked with contractors not of his own choosing.  
The contract between GBL and the husband
34.	At the centre of this case has been a document drawn up by Raj as an adaptation of a RICS standard form of contract.  I heard evidence from a Mr B, who has in the past worked for Raj, that in the spring of 2010, at the time that Q was being purchased by the husband from his brother, Mr B was consulted by Raj about the most appropriate sort of contract to put in place to cover the kind of services that Raj was to provide to the husband.  Although he said he had not seen the signed document, Mr B thought he had seen a draft document, an adaptation of the RICS standard document, shown to him by Raj.  
35.	What the document did was to set out the services that Raj’s company, GBL, was to provide to the husband as the other contracting party.  In return, the husband was to become liable to GBL at the rate of £9,500 a month for the full-time services of Raj as a project manager.  
The Q project
36.	The husband told me, supported by Raj, that, as originally designed, the improvements to Q were anticipated to take approximately 18 months.  Although no quotations were obtained as to how much they were to cost, it was the husband’s estimation that he was aiming towards a total cost or sale price of approximately £1.5 million and that the sale price would include a significant profit to him perhaps of the order of £200,000.  That would mean the cost of the work to the property would have to be contained within a figure of £200,000.  Raj’s fees for 18 months would use up £171,000 of the £200,000 leaving little scope for any work to be done, let alone 18 months worth.  
37.	The husband is a sophisticated man of finance.  There was no allowance for the cost of labour and materials, the cost of kitchen and bathrooms, etc.  The “plan” as outlined to me was plainly nonsense and I cannot accept it as accurate.  If the husband was undertaking this project to make money he would have had quotations for the work and materials, detailed time lines for the work and no doubt many spreadsheets. I have been told about and shown nothing by the husband.
38.	Where there is no disagreement is that the project did not go according to anybody’s plan.  There were planning difficulties. There were objections to proposed changes to the structure of the house by neighbours. There were difficulties with the builders – one firm went into administration, another firm left the site – and the works were very far from completion after 18 months.  The work has never been completed.  The house remains to this day unfinished, unoccupied, unheated but weather tight.  It never became a family home and the evidence I have is that any attempt to sell it will now produce a very significant loss.  
39.	Why has that happened?  Raj was scathing in his criticism of his younger brother.  He criticised him for failing to take his advice as to the contractors to use on the property.  He thought he was unlucky in discovering clay in the ground where there was to be the foundations for an extension so that there was extra cost and delay in removing the clay.  He was critical of his brother’s constant changes of mind and alterations to the plans.  
40.	The wife does not know whom to blame.  She told me that she had been involved, as she undoubtedly was, at the stage of choosing the kitchen but that came towards the end of the project.  She told me she had been involved in visiting the neighbours to persuade them to withdraw their objections but Raj’s assessment was similarly withering about the wife’s contribution, recounting that it was he who had visited the chief executive of the local authority to deal with the fact that there were objections and to overcome those objections to allow the project to proceed.  
41.	Raj accepted no responsibility for what went wrong.  Despite him having the expertise, his evidence was all he could do was advise his headstrong younger brother who could, and did, reject his advice, but that, had his advice been accepted, the project would have been brought in on time and had some prospect of making a profit.  The effect of Raj agreeing not to receive his costs on this project until the property was sold in the future seems, to me, to put some element of responsibility on his shoulders, not least if he was to have any prospect of recovering his fees. The effect of the project running on and on is that GBL’s £9,500 per month continued to accumulate.  In addition, towards the end of the project, he started to spend GBL’s money on materials in addition to the outlay that the husband was making.  
42.	The husband tells me that he had spent over £300,000 making payments direct to contractors for goods and services. GBL had spent a further £127,000 on goods.  Even ignoring the £9,500 per month, the prospects of a profit on a sale of £1.5 million had plainly long gone.  I find it very surprising that Raj allowed this state of affairs to develop.  He says he was owed a substantial sum of money with no prospect of recovery in sight and yet he did nothing to prevail upon his brother to get on with the project in a sensible and timely fashion.  
Mortgage repayment
43.	It emerged during the course of the husband’s evidence that it had not been him making the mortgage repayments due to Nat West in respect of the mortgage on Q. The wife’s case, denied by the husband, was that she had understood from her husband that it was “the business” that was to pay for Q and its redevelopment. 
44.	In fact GE has been throughout the life of the mortgage to date making the repayments as an expense of the business of GE before distribution of the profits and before tax. The husband says that was agreed by the partners: his father, his mother, Ravi and him. It is difficult to understand how the expense of the mortgage on behalf of the husband could be a legitimate expense of the business. It would more naturally fall as a deduction from the husband’s profit share after he had accounted for income tax. The husband was unable to explain. It is a good example of the way the family is prepared to support the husband. I accept the wife was accurate in recounting what her husband told her.
Marriage breakdown
45.	During the course of the development of Q, the parties’ marriage broke down.  It was in December 2012 when the wife left the family home with the children, acquiring her current rented accommodation in January 2013.  There were attempts at reconciliation and the husband accepts, whatever he may have said earlier, that certainly at the time of the attempted reconciliation he floated the idea with the wife that Q could become their family home.  It was after those representations from him that the wife made a number of visits with her husband to kitchen suppliers, choosing the kitchen.  
46.	In June 2013, attempts at reconciliation had failed and on 27th June 2013 the husband issued a divorce petition, based on the wife’s unreasonable behaviour.  On 5th August 2013, the husband issued an application under the Children Act for a shared residence order.  On 12th August, he served notice on GBL suspending the work at Q pursuant to the terms of the RICS form of contract.  On 19th August, the wife told the husband that she intended to relocate to Bristol with the children.  
47.	These proceedings had been initiated by the husband with a Form A filed on 28th August 2013.  
48.	In support of her contention that Q was to be a family home, the wife relied on communications with schools and nurseries in the locality, showing that the parties were making arrangements for their children to be schooled local to Q from about September 2013 when it was anticipated Q might have been finished and the family would have moved in.  None of that came to pass.
49.	It was not until 11th October 2013 that GBL wrote to the husband with a list of outstanding works necessary to complete the project and informing him that there were the following costs outstanding: firstly, £143,077 for building materials and services and, secondly, £433,200 project management costs.  
50.	There was a further attempt at reconciliation where the suggestion was floated that the couple might move together to Bristol with their children and they began a tentative search for houses costing about £500,000, but nothing came of either the reconciliation or the search for a house in Bristol.  
The GBL claim
51.	On 13th October 2013, Raj instructed solicitors on behalf of GBL to seek a charge over Q.  Those solicitors wrote to the husband requesting his consent for a second charge over Q to rank behind the mortgage that had been used to purchase the property.  On 20th October 2013, Raj wrote, in his capacity of managing director of GBL, to the husband by email requesting payment of £576,277 within seven days.  
52.	On 24th October, Form Es were exchanged in these proceedings. The following day, the husband received from GBL’s solicitors a letter seeking a charge over Q for the amount said to be due.  The amount of the debt had been disclosed in the husband’s Form E.  
53.	On 28th October 2013, the wife’s solicitors wrote to the husband’s solicitors, suggesting that the debt to GBL was not a legitimate debt.  That letter included a request that, by the following day, the husband give an undertaking that he would not deal or dispose of any assets in settlement of all or part of the alleged debt.  The same day, the 28th, the husband received a further email from the solicitors acting for GBL requesting consent for a second charge.  On the 29th, the husband’s divorce solicitors told the wife’s solicitors that GBL were seeking a charge over Q.  
54.	That same day, the wife’s solicitors requested an undertaking from the husband that he would not agree to the charge or otherwise repay the debt.  The husband’s response was to say that he was unable to give an undertaking until he had taken independent legal advice.  On 30th October 2013, the wife’s solicitors repeated their request for an undertaking.  The husband received an email requesting a signed authority for a second charge over Q and he instructed other solicitors, not his divorce solicitors, to deal with the second charge over Q. Those solicitors wrote to the solicitors for GBL on 1st November confirming the husband’s consent to the charge sought.
55.	It is noteworthy that Raj accepted that GBL had and has never raised an invoice to the husband for the sums sought. His position is that the contract has not been terminated. That leaves open the option of the work resuming.
Section 37 MCA proceedings
56.	On 4th November, the wife issued an application pursuant to section 37 of the Matrimonial Causes Act 1973 for an order preventing the husband from dealing or disposing of assets by repaying the debt to GBL and a further debt disclosed on his Form E to his parents.  That application was supported by a statement from the wife.  That statement from the wife was supplied by the husband to GBL through his brother, Raj, and GBL’s solicitors.  GBL’s solicitors wrote to the husband on 6th November 2013 by email suggesting that, in the light of the wife’s application for an injunction, “it may be … advantageous” if a second charge in favour of GBL was executed by the husband and completed that afternoon.  
57.	GBL’s solicitors wrote to the husband’s divorce solicitors  setting out their response to the allegations in the wife’s witness statement, requesting that their letter be brought before the court and asking permission “ if the matter is to continue… to be involved as an interested party.”  That afternoon, at a time suggested by GBL’s solicitors, the husband executed the charge over Q in favour of GBL, signing the document at GBL’s solicitors’ office.  On 7th November 2013, that charge in favour of GBL was registered at the Land Registry but 7th November 2013 was also the return date of the wife’s application for her section 37 application.  
58.	The husband and the wife appeared before District Judge Wallace and the judge was shown the letter, provided by GBL’s solicitors to the husband’s divorce solicitors, seeking to be involved as an interested party.  Both the husband and the wife were represented and the conclusion of the case was that District Judge Wallace granted the wife’s section 37 application purporting to restrict the ability of the husband to deal with or diminish the value of his assets in payment of the alleged liability to GBL and joining GBL as a party to the proceedings. 
59.	The husband did not tell the court, nor apparently did he tell his lawyers, that he had the previous day executed the charge, thus defeating the section 37 application before it could be heard.  Neither, of course, did the letter from GBL’s solicitors say that they had the benefit of an executed charge.  
60.	The husband accepts, as inevitably he must, that he was wrong not to bring to the attention of the court what he had been doing. More importantly and more significantly for the case I am considering, the husband made plain, by his actions, that his loyalty to his brother exceeded his loyalty to the wife and the children where what the wife was seeking within the ancillary relief proceedings was a home for herself and the children.  That episode does no credit to the husband and that is one of a number of matters which have, justifiably, caused the wife to be suspicious of her husband and all of his actions.  
61.	On 12th November 2013, GBL issued a claim in the Northampton County Court for £576,277.  It was not until 18th November that the husband disclosed the existence of the charge to the wife’s solicitors. The proceedings lodged by GBL were issued by the court on 22nd November 2013.  The husband was served the following day.  On 24th November, the husband resigned as company secretary GBL and, on 26th November, filed an admission to the claim issued by GBL.  
62.	On 27th November, the husband’s current solicitors began acting in the divorce proceedings, the change being necessitated, no doubt, because of the husband’s failures at the hearing before District Judge Wallace. 
The wife’s case on Q and “sham”
63.	The wife’s case throughout these proceedings has been that there was no contract between the husband and GBL. She does not accept that Raj was entitled to be paid for any work he did on the redevelopment of Q. That aspect of the case has been the subject of separate pleadings so as to properly identify the issue to be tried. The outcome of what turned out to be a somewhat laboured process was that the wife alleged that the RICS form of contract that I have referred to above was a sham.
64.	The classic definition of “sham” transactions was given by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at page 802:
“As regards the contention of the Plaintiff that the transaction between himself, Auto Finance and the Defendants were a “sham” it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the “sham” which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create.”
65.	The leading case on sham transactions in ancillary relief proceedings is A v A & St George Trustees [2007] EWHC 99 (Fam).  Perhaps the most important points to be taken from that judgment in the context of the case before me is that the burden of proving the transaction is a sham lies on the wife and can only be based on evidence that from the outset the parties to the transaction agreed not to be bound by the document or else subsequently arrived at an express agreement to that effect.
66.	The involvement of Mr B in the development of the document suggests that the formation of the agreement was genuine and the wife has done nothing to undermine that position. There is no evidence of a subsequent express agreement. It is inevitable that the wife must fail in her contentions.
67.	Mr Chaisty has been very critical of the wife and her legal team for the way in which they have made what amount to allegations of fraud and what is said to be the failure to properly particularise those allegations. Those criticisms are well founded. However the context has to be considered. The husband had told the wife that “the business” would meet the cost of Q and its refurbishment. That is what was to happen. The first she knew of any debt to GBL was in the husband’s Form E. The husband has never shown that he had the wherewithal to pay GBL unless Q was sold. The wife believed from what the husband said to her that Q was to be their family home and so would not be being sold. I have found she was correct to believe that. The husband then made clear his preference for promoting his brother’ interests ahead of the wife and children in the way he went about defeating the section 37 MCA application. Faced with the husband’s dishonesty and duplicity I am not surprised she struggled to find the correct legal hook on which to hang her argument.
68.	That said she is entitled to rely on the husband’s repeated dishonesty to found her suspicions that all is not what at first sight it might appear. I too struggle to accept the truth of anything that the husband tells me but in this instance I am bound to conclude that the wife has failed to establish that the contract between the husband and GBL was a sham. 
69.	In what circumstances either brother might have envisaged the other trying to enforce it I simply cannot say. As I have commented on above such is the scale of the fees payable to GBL as to render the Q project not viable to make money for the husband. The only context in which cost would be less of a factor would be if in fact Q was to be a home for the husband’s family and where any payment to GBL might be deferred or cancelled at some stage in the future. This lends support to the wife’s case that Q was always intended to be the family home that she wanted away from the husband’s parents.
70.	The husband is therefore fixed with the debt to GBL. GBL will be able to seek enforcement of its charge over Q and pursue any unsatisfied element of its judgment against the husband. However in my judgment that simply will not happen as that is not how the husband’s family operate. The wife gave compelling evidence of the central role of business in the life of the husband’s family and the secondary role she was expected to accept. Whilst the husband’s family have shown no inclination to support the wife and the children I have no doubt that support for the husband through the “G” branded businesses will continue whatever the position “on paper” appears to be.
The future of Q
71.	Both the husband and Raj were asked to explain what their plans were for Q after the conclusion of this litigation. The husband had no plan and Raj purported to have no plan. That only reinforces my view that the debt to GBL is not something he will enforce against his brother. 
72.	Q has been valued in its uncompleted state at £1.2m. The valuer was not told, for example, that the kitchen is paid for and waiting to be installed. Raj has granite waiting to be installed. I am told that the current mortgage debt is £750,000 with a penalty for early repayment of £37,500. There will be costs of sale. If Raj is to get any of the money he says he is expecting it will need to be finished and sold. Only Raj has the expertise and contacts to make that happen.
73.	If Q is sold in its uncompleted state, the mortgage discharged and GBL paid from the balance then there will be a shortfall of £200,000 that the husband will owe to GBL.
74.	In his evidence Raj repeated an offer previously made in writing that GBL would allow the wife to have a charge over Q to rank in priority to GBL’s charge in whatever amount it was decided the wife should get from the husband that the husband was unable to pay immediately. That offer only has value if Q is sold. It would only have any value to GBL if Q were sold for a price exceeding the mortgage liability plus the husband’s liability to the wife. There are two unknowns: firstly the sale price of Q which will be affected by whether it is sold in its present state or completed, and secondly, the amount payable to the wife not recovered from other resources of the husband’s. Absent a plan to finish the work to Q Raj’s offer appears likely to leave nothing for GBL unless Raj thinks that the husband will find what is needed for the wife from other sources.
The shareholder agreement and “sham”
75.	It is the wife’s case that the husband’s shareholder agreement with Ravi where the husband holds GFL shares as Ravi’s nominee is also a sham. The evidence I have dealing with this comes from the husband and Raj. The husband’s explanation was to the effect that Ravi had to have other shareholders and/or directors of his money lending company, hence the involvement of the husband and Ravi. If that is the case then it seems to me that the nominee agreement was from the outset intended to be part of a deception. The outside world was meant to believe that the three brothers were shareholders and directors whereas pursuant to the nominee agreement the shares were all owned and under the control of Ravi. It is the husband and Raj’s case that the nominee agreement was only putting into writing what had been understood from the outset when GFL was incorporated. That explanation would support the view that the whole arrangement was a sham and designed to deceive.
76.	However, I have already expressed my view that the husband’s family have a fluid approach to family wealth. Whatever may be the position on paper I am satisfied that the husband is entitled to and will share in the family wealth in the future. 
What does the husband really have or have access to?
77.	The extent of the husband’s dishonesty leads me to the inevitable conclusion that he has only been as dishonest as he has because he has something of substance to hide. What I cannot do on the evidence I have heard is to put a figure on what the husband might be worth if everything that is available to him were properly accounted for. The gross value of his shareholding in GFL might be £2.82 million.  The realisation of the value in the shares would require a sale. It is not clear who might buy the shares – it could be Ravi or the company itself. There would be tax to pay. The process would have a cost. The husband appears to work in his father’s business GDL without pay. I readily understand the family supporting one another and the expectation of future reward that might result or past reward or support being returned.
78.	The husband’s father has provided him with funds, according to the husband, for money spent on Q before the building work was stopped and to pay towards his legal fees. In addition the husband has substantially denuded his partnership capital account to pay for holidays and towards his legal costs. Despite his protestations during the course of the proceedings of his lack of liquidity he appears to have been able to access funds when he has needed them.
What do this couple have by way of assets at the end of their marriage?
79.	Prior to the purchase of Q the husband says that he was worth about £1 million. The wife had £18,000 in savings plus her interest in the tenanted house in Bristol worth £14,725.
80.	It is the husband’s case that he provided the deposit for Q of £350,000 but that included the wife’s £18,000. His evidence was that he spent some £300,000 on work and materials for Q. 
81.	The husband’s capital account now stands at £480,000. He has £40,000 in a current account. He said that he has outstanding legal fees of £30,000 and credit card debts incurred discharging legal fees of £70,000. He says that he owes his father £205,000 that his father has advanced to him that has to be repaid.
82.	If Q was sold in its existing state and GBL’s charge was paid by the husband he would have crystallised a debt of £200,000. Taking the totality of his other debts from the value of his partnership capital account would leave him with £200,000, just enough to meet the debt created by the sale of Q. His case therefore is that he has nothing.
83.	The wife’s position is even worse. All she has is the value of her interest in the Bristol house. She has a debt to her mother of £100,000 for money paid to her solicitors and a further sum of £146,000 owing for her legal fees.
What does the husband say should happen?
84.	The husband blames the wife for the expenditure on legal costs that on the face of things have consumed everything they might have had to divide between them and to support their children. On the 20th March 2015 the husband made an open proposal to end the case offering a lump sum of £300,000 (on the basis of a capital clean break), he keeping the former family home and Q and the wife her interest in the Bristol house, child maintenance at CMS rates and a nominal spousal maintenance order. This was on the basis that it was all he could extract from the GE partnership and if the offer was not accepted it would reduce pound-for-pound as he incurred legal fees fighting the case. 
85.	The value of that offer at the conclusion of the case was put at £155,000. That would cover the wife’s own legal costs outstanding but would not allow her to repay her mother. She would have no money to go towards a home. Her income would reduce as the payments from the husband for the children would be substantially less than the support he has been providing. The wife’s tax credits and other benefits would have to be recalculated to work out her income.
86.	The husband’s position was that this outcome was entirely her own fault for pursuing a case on “sham” that was unsustainable and in searching for a pot of gold that clearly was not there.
What does the wife say should happen?
87.	On the 1st April 2015 the wife countered with an offer of her own whereby she would accept £500,000 increasing thereafter pound-for-pound as she incurred further legal costs. Her costs then stood at about £150,000 so that she would have a housing fund of £350,000. She sought monthly support for herself and the children of £800 to maintain her then income position. She did not identify where the money was to come from other then from resources generally available to the husband. She lays the blame for the financial disaster that the case has proved to be at the door of the husband for lying to her and to the court.
What is the GBL position?
88.	Raj on behalf of GBL has throughout said he wanted his money. As a result of the husband acquiescing GBL has a charge over Q for £576,278. He has the ability to obtain a civil judgment against the husband on the basis of the husband’s admissions within the civil claim, subject to me releasing GBL from an undertaking not to do so pending the outcome of these proceedings. A sale of Q at the value provided for in these proceedings will leave a shortfall of £200,000 outstanding to GBL. Despite this his offer was that any lump sum payable by the husband to the wife and unpaid from the husband’s other resources could stand as a charge against Q to rank ahead of GBL’s charge. If that were the outcome GBL would get nothing.
89.	The consequences of Raj’s position have puzzled me. It seems to me that the only way GBL will recover anything like what he claims is owed to them is for Q to be completed and then sold. That would require Raj to invest some money in the project but with some real prospect of recovery. He told me he had no such plans. Whilst the mortgage is being serviced by the GE partnership the bank will not seek to reposes and sell but GBL will not recover anything anytime soon. If the wife is granted a charge then she has the option of seeking to enforce her charge by selling with the real prospect that GBL will get nothing. I regard as fanciful the idea that Raj would enforce against the husband personally for the debt so rendering the husband bankrupt. So, however this shakes out, it appears that GBL are likely to get nothing.
90.	I was told that GBL is likely to seek its’ costs from the wife and might well seek to pursue a claim against the wife on the basis of an undertaking she gave within the section 37 MCA proceedings. By that means Raj would take back from the wife much of the money she had been allowed to get by virtue of her charge over Q ranking ahead of GBL’s charge.
91.	I was left with the impression having watched him in the courtroom that Raj was enjoying playing tactical games with his former sister-in-law. In my judgment he never had any expectation of recovering for GBL money due under the contact with his brother for the development of Q. He might have hoped to get back what he spent on work and materials. He was never going to recover the management charge. That would be consistent with the house being a home for his brother’s family rather than a vehicle for his brother to make money.  If he recovers anything it will be a bonus. More likely he has created a debt that will show as unrecovered in the accounts of his business. 
What is the correct solution to this case?
92.	In determining a fair outcome I must apply section 25 of the Matrimonial Causes Act 1973 as amended. I must have regard to all the circumstances of the case and give first consideration to the welfare of the two minor children of the family.
93.	Section 25(2) sets out a checklist of specific matters I should have particular regard to. Much of that ground has been covered above.
94.	For the reasons I have explained, although it appears that these parties are in an overall position of debt, I am satisfied that I must attribute to the husband something of value that reflects the lengths he has gone to dishonestly represent his case. He has colluded with his brother Raj to put the interests of GBL ahead of the needs of his wife and children. He lied through his silence at the section 37 hearing and I am satisfied he has lied to me. I am satisfied that he has the ability to raise finance to pay to his wife sufficient to allow her to rehouse at a level similar to the family home despite what he has spent on legal costs. He will remain a partner in the GE partnership and will remain entitled to his share of the profits at no less than £40,000 per year. If he and Raj act together I am clear that there is a profit to be made from Q if it is completed and then marketed appropriately.
95.	I must record that the wealth that I attribute to the husband will in many respects have accrued to him before the marriage and at least in part from the efforts of other family members. That factor alone would justify limiting the wife’s award to the minimum needed to allow her to meet her obligations to the children.
96.	The husband talked in evidence of his future lying away from the family business. He said he might seek to qualify as a teacher. I see no reason why he could not do both. He is clearly wasting his talents driving a stacker truck.
97.	The wife is in my judgment achieving her potential as far as earnings are concerned working part-time. No doubt in due course she will be able to do more as the children become more independent but with the younger child aged 3 years that is some way into the distance. Her interest in the Bristol house should be acknowledged but otherwise ignored. It will not rehouse her.
98.	Both parents have an overriding obligation to provide for their two young children. I heard that there have been times when they have been able to co-operate and make appropriate decisions about their children and the wife had only good things to say about the husband in his role as a father to the children. I hope that when this case is behind them these parents will find the ability to restore the needs of the children for their co-operation and support to its rightful place as their first priority.
99.	The primary provision both parents need to provide for their children is a roof over their heads when the children spend time with each of them. Ideally the standard of that housing should be comparable. The husband lives in a home worth £325,000. It is reasonable, if funds allow, for the wife to look towards providing a home for the children when they are with her of a similar value.
100.	The husband has to service a mortgage of £315,000 on his home. Given her current income from part-time work the wife has no real mortgage capacity. Either she will need a housing fund of more than £300,000 or she will have to rent. First call on any cash she gets will be the repayment of her debts to her solicitors of £146,000 and to her mother of £100,000. There is no evidence that her mother is in any better position to wait for her money than anybody else in this case said to be owed money. To rehouse at £300,000 plus she will need a payment of £546,000. However in closing the wife case was put on the basis that she receives £500,000 meaning she will have to persuade her mother to either wait or to manage without repayment.
101.	The standard of living that this family enjoyed was comfortable but not extravagant. The marriage lasted for nearly 6 years. Both parties have many years of working life ahead of them and neither has any form of disability. Both parties have made and will continue to make a full contribution to the welfare of their children and I do not distinguish between them on that count. Neither party has alleged “conduct” against the other that would have any effect on the outcome of this case. The wife will lose her status as potential widow of the husband under his pension however the value of the pension is miniscule and can be ignored.
102.	Mr Wagstaff on behalf of the husband conceded at the outset of the case that the wife’s claims fall to be resolved on a “needs” basis and that the essential task with which the court was concerned was to identify the resources, if any, available to meet those needs.
103.	Section 25A of the Matrimonial Causes Act 1973 requires me to consider whether, and if so when, I can impose a clean break between the parties by terminating maintenance obligations between the parties. The husband’s claims can be dismissed immediately. It has not been argued, correctly, that I should be considering terminating the wife’s claims now or in the foreseeable future. That may fall to be considered at a later date.
What can the husband afford to pay?
104.	For the reasons I have given I am satisfied that the husband has lied throughout these proceedings and colluded with his family to put their interests ahead of the needs of his wife and children. However regrettable that might be it is not open to me to make an order to punish the husband. That is something I might have to consider when I come to the question of who should pay the costs of this litigation. I can only make a lump sum order against the husband in an amount that on the evidence or on inferences I can properly draw from the evidence I am satisfied he can pay. The conclusions and inferences I have drawn are as follows:
a.	The sale of Q properly managed has the potential to make a profit;
b.	The husband has a share in the family wealth whether represented by his shareholding in GFL, his capital account in GE or otherwise as the family members chose;
c.	The inference I draw from his dishonesty is that his interest is substantial. He claims to have been worth £1 million in 2010 without reference to anything other than cash savings and his GE capital account. His mortgage application information suggests a very substantial income. In my estimation he is probably worth something similar now to what he says he was worth in 2010. Only wealth on that scale would be consistent with the extent of his dishonesty;
d.	Even though I cannot find that the contract between the husband and GBL was a sham I do not accept that it was ever intended that Raj would recover the £9,500 per month on behalf of GBL from the development of Q. It would never have worked as a development project and I find that Q was to be a family home. Without a sale there was no money to pay GBL other than perhaps for the materials.
105.	For all of those reasons I am satisfied that the husband has the resources to pay a sum sufficient to meet the housing needs of the wife and children. He can afford to pay £500,000, the sum needed to allow her to purchase a suitable home. He may need the co-operation of family members to release funds. I expect that to be forthcoming when they remember that the primary purpose of the fund is to provide a home for the children.
The parties incomes and the need for maintenance payments
106.	The wife is able to earn approximately £465 per month net from her employment. She receives working and child tax credits and child benefit taking her income to £19,600 per annum or £1,600 per month net. The husband currently pays her £200 per week for the children (£10,400 per annum). Changes to the regimen of tax credits announced by the Government mean her income from that source is likely to go down before it goes up. 
107.	From that income she pays rent on her current home. She appears to be in receipt of housing benefit leaving her rent paid from income at £538 per month. The husband proposes that his liability to maintain the wife should be limited to a nominal sum and that he should support the children at CMS rates. Mr Wagstaff calculates that at about half what he currently pays.
108.	The husband’s share of the profit from GE for 2014 was £63,266 gross. Historically it has been lower at about £40,000. He has unused earning capacity.
109.	The income needs of the wife and children will not change when she acquires a home. Whilst she remains in rented accommodation her present needs will continue. It may take her time to find a suitable home. In order to run a home she will need to receive the full sum from the husband. Costs that were met by her landlord will fall on the wife. My decision is that the current level of support should be maintained with the wife receiving the balance of the sum paid above the CMS rate by way of periodical payments. 
School fees
110.	It had been the position of both parents that their children should be privately educated. It is the father who has been most enthusiastic and who has determined that the elder child should remain at the school he has attended since the age of 4 years. What they are not agreed on is how the school fees are to be paid.
111.	Although the court has the power to make orders in relation to school fees by way of making a periodical payments order, it seems appropriate in this case for me to direct this decision back to the parents and require them to exercise their parental responsibility and to reach agreement. If they sign a contract with a school then they have taken on a commitment they will have to meet. If they cannot afford to meet that commitment then they should withdraw the child and send him to a state school for which they will not need to pay. The children have savings in their names that ought to be jointly administered by their parents and might be a way of paying some of the school fees. 
112.	I do not propose to make an Order but will include any recording in the Order that the parties together ask me to make.
Raj’s offer on behalf of GBL
113.	I accept Raj’s offer on behalf of GBL that the wife should have a charge over Q for the unpaid balance of the lump sum. I will not release GBL from its undertaking not to enter judgment in the civil proceedings until that is in place.
114.	Once the wife has a charge ranking ahead of GBL’s charge there is no need for me to discharge the GBL charge. Had it been necessary I would have done so. GBL and Ravi were clearly in collusion with the husband in seeking to thwart the section 37 MCA application of which they had full knowledge.
Dismissal of the husband’s claims
115.	I have already indicated that the husband’s claims for periodical payments should be dismissed. I see no value in maintaining any of his other claims and so they will be dismissed as well.
Bundles
116.	I cannot conclude this judgment without expressing my disappointment that I was asked to conduct this case with multiple lever-arch files. At the final directions hearing I was told by counsel that I should trust them to produce a limited trial bundle, albeit exceeding that provided for by PD27A of the Family Procedure Rules 2010. The court relies on specialist advocates to help the court meet the overriding objective. I hope in the future the court can rely on that help. On this occasion I will not be considering making adverse costs orders as the President of the Family Division has suggested.