Neutral Citation Number: [2018] EWHC 1319 (Fam)

IN THE FAMILY COURT
SITTING IN THE HIGH COURT FAMILY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 01/02/2018
Before :
MR NICHOLAS CUSWORTH QC 
(SITTING AS A DEPUTY HIGH COURT JUDGE)
- - - - - - - - - - - - - - - - - - - - -
Between :

	AB	Applicant	
	- and -		
	AC	Respondent	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

STEWART LEECH QC (instructed by Penningtons Manches LLP) for the Applicant
JONATHAN SOUTHGATE QC (instructed by Withers LLP) for the Respondent

Hearing dates: 6th – 8th November 2017
- - - - - - - - - - - - - - - - - - - - -
Judgment Approved

This judgment was handed down in private on  1 FEBRUARY 2018. It consists of 49 paragraphs and has been signed and dated by the judge.

The judge hereby gives leave for it to be reported.

Mr CUSWORTH QC:
1.	This is the final hearing of an application for financial remedies made in divorce proceedings. Having not dealt with the application previously, I have now heard the matter over 3 days, with oral evidence from each party over one day. I have been ably assisted by leading counsel for each party, Mr Leech QC for the wife, and Mr Southgate QC for the husband. Before assessing the issues that there are between the parties which have led to this case proceeding to trial, notwithstanding their having had the benefit of a Financial Dispute Resolution hearing before Mrs Justice Roberts on 28th March 2017, I shall first set out the background to their marriage.
2.	‘The wife’ is not originally from Britain. ‘The husband’ is also not originally from Britain. They married on 24th June 1995 abroad, having become engaged the previous Christmas. There was no cohabitation before marriage, but theirs has subsequently been a long marriage spanning 21 years from celebration to presentation of the wife’s petition in 2016. The parties’ relationship in fact spans 24 years and they have pretty much remained living together despite the breakdown of the marriage. They have one child, J, now 20. 
3.	Prior to the marriage, the Husband worked initially in international management consultancy. By the time of the marriage, the Husband was 50 and it is his case that he had amassed significant pre-acquired wealth. He says that he was worth about £5m to £6.5m at that point. The Wife was 35 years old at the time of the marriage and had comparatively little by way of assets. 
4.	In his section 25 statement the Husband set out the chronology of his departure from Y company, and his subsequent establishment with a partner of X company.
5.	In June 1996, a year after their wedding, the couple had purchased their London address, which has been their principal home ever since, and is now valued at £10,000,000. To do that, the Husband sold his previous home – a maisonette in the same road, for £880,000. The initial mortgage on the new property was some £1.35m. He says in his s.25 statement that he was earning $400,000 or more at the time of the wedding. The foreign statement suggests gross earnings of $573,428 in 1994, $788,600 in 1995, and $727,387 in 1996. Before those final 3 years, they had not topped $135,000pa. This must have been a momentous time for the couple, as J was born in January 1997.
6.	Having received the frozen funds from the Y company Capital Account ($4,292,745.68), he then confirms that he set up the new firm, X. The Husband points to this fund as a further contribution of his from pre-matrimonial wealth, and the extent to which that is fair will be considered below. His case is that he invested at least $7,000,000 into X company in the start-up phase, and indeed the wife agrees that at the outset, money went in to the entity rather than came out. In addition to the property in London, the husband also points to four apartments abroad and an interest in a property investment portfolio, but with the passage of time, has little extant documentation about these assets. He says that his total wealth at the time of the parties’ marriage was some $8,000,000 to $10,000,000.
7.	In late 1999 or early 2000, the parties bought a second home, the rural address, in the countryside, for a good price (£2.5m) following a bankruptcy, with a £750,000 deposit. At the same time, they significantly extended their borrowing across the 2 properties, up to a total of £5.6m., creating liquidity to spend on works to the two properties of about £2.5m. Since then more has been borrowed, and the combined loan across the 2 properties is now some £8.1m. Their rural address itself is now valued at £4,600,000.
8.	The Husband’s equity in X company originally comprised half of the shares. More shares have since been issued. On his retirement from X company, the Husband agreed to return a proportion of his shares to the firm on the basis that he could retain the remainder for his lifetime. The value of the shares has been realised via offshore distributions of entitlements arising on profits made by X company via its private equity funds. 
9.	There have been several X company funds. Of those, the investments of L-Fund are now fully realised, M-Fund is fully invested and realised but for a few outstanding investments, but realisation of N-Fund may be many years away. The undistributed value of the shares in M-Fund is represented by a capital account which comprises both a share of realised but undistributed investment profits and a share of the carried value of unrealised investments within the Funds. The Husband has made the point that partners have no control over when realised profits are distributed to them from their capital accounts and the firm is entitled (under certain conditions) to recall funds from those capital accounts. However, it seems likely that for M-Fund, insofar as realisation is allowed by the active partners, as opposed to reinvestment of those funds in the advertised O-Fund, distribution will happen in the next 3 or so years.
10.	X company has been extremely successful, enabling the Husband to generate a lot of money which has sustained all of this borrowing. In 2008, he produced a fact finder document for Z bank stating the parties had assets of £33.22m. He added ‘business assets may sell for more/will rise by year end.’ In December 2014 he wrote out a document headed ‘net worth statement’ showing the family was worth £35.5m. On 11 November 2015 he produced a further Net Worth Statement that showed net assets of £41.86m, excluding chattels of over £2m. 
11.	Of the X company shares originally owned by the Husband, half were settled into a new entity called the K Trust in December 2008. The scheme of the Trust was that the Wife was named as the settlor and she and J were named as the beneficiaries. It was a fully discretionary Jersey trust with a professional trustee. The Husband was named as the “Power Holder” and his sister as the Protector. The Trust held a number of the X company ownership shares and subsequently acquired other assets, including a flat in R town. Following advice received during the course of these proceedings, prior to the end of the last tax year, the assets of the Trust were appointed out of the Trust to the Wife because of new legislation by which she was to become deemed domiciled for UK tax purposes after that date. 
12.	On both parties’ accounts, the family had an enviable lifestyle. Both of their Forms E set out income needs at only a little less that £500,000pa. They bought the flat in R town which the Wife would dearly love to retain and the parties spent significant sums on its renovation. It is now worth €3.273m (£2,834,652 net of sale costs). The husband, after retiring from X company, started giving away large sums of money to charities and other philanthropic entities - his foreign tax returns show he gave away $778,209 in 2014, $531,532 in 2015 and over $600,000 in 2016. The Wife had been well aware of his philanthropic projects, and indeed involved in them, but says that she was not aware of the scale of these last contributions.
13.	Had the history ended at this point, this would no doubt not have been a difficult case for which to determine a fair outcome, save perhaps for the fact that the husband’s interest post retirement in the third X company Fund that he has retained by virtue of being a partner of the firm may not be fully realised until 2024 or beyond. L-Fund is as indicated now completely paid out and M-Fund close to closing, albeit an actual date for repayment to the Husband of his capital account that reflects its value to him (around €6,000,000) has yet to be determined and is not within his control. The problems that the parties have, and the significant mistrust between them that has evidently been engendered, is all down to the very significant tax liabilities which they both now will have to bear, and which have only really become apparent during the course of this year.
14.	The Husband delayed the filing of his Form E, and full engagement in these proceedings, after these proceedings had been begun by the Wife in March 2016. Eventually, in his Form E filed at the end on November 2016, he estimated an outstanding liability to tax of some £540,000. This was said to be dating back to the tax year 2010/11, and subject to further work and negotiations. Although such negotiations have yet to begin in earnest, the accountant’s estimate for the amount of outstanding tax has spiralled progressively so that it now stands at a total of £8,787,833, of which some £1,606,872 may be reclaimed against a potential foreign tax credit, leaving some £7,180,961 to pay. 
15.	It should be stressed that both of these figures are very rough estimates. The single joint experts, Westleton Drake, in their most recent report have put the best-case scenario for the Husband’s historic liabilities at £4,131,121 before the application of any tax credit, and the worst case on the same scenario as £6,744,442. Their ‘reasonable estimate’ for this liability alone is put at £5.5m - £6m, and this upper figure combined with various property taxes and the Wife’s liabilities as settlor of the K Trust comes to the total which has now been agreed.
16.	Inevitably, this late but seismic revelation has caused consternation to the wife and her advisers. Although a share of the liability (taken at £1,026,604 but potentially less or more) is nominally hers, it is clear that the primary responsibility for the lack of reporting and payment over the years has been the Husband’s. Whilst he was clearly aware (from a disclosed note sent to him in November 2007) that as a resident nondomiciliary he was subject (as was the Wife) to income and capital gains tax on any income earned or remitted, he nevertheless remitted in the 9 years since (ie beginning with the year from 6th April 2008) capital totalling some £8,844,536. This amount averages very nearly £1,000,000pa, and prima facie should have incurred a charge to tax of some £3,189,581. The Husband says that as he was always paying foreign taxes in this period, he never thought that he should also be paying taxes here as well.
17.	Before I deal with the question of responsibility for the liability, and as to whether it has or should have any impact on the eventual outcome of the proceedings, I should set out that, taking into account the projected liabilities, the assets on the schedules as are now very nearly otherwise agreed come to some £13,838,570. The two small remaining issues around this number are as to the impact of the Husband’s foreign pension, which pays him £27,049pa, and to which the wife seeks to ascribe a capital value (£250,000), and a small investment of the husband’s in ‘F’, whose value is agreed at £166,750, but not whether it should be treated as being liquid. 
18.	With such an asset base, to determine a fair division of assets should be comparatively straightforward, even taking account of such issues as the Husband’s claimed premarital assets. That it is not is down to the combination of ill-feeling and uncertainty engendered by the late revelation of the as yet not finally quantified tax problems, and the impact that they will have for both parties on any outcome. The problems created have not however led to either party seeking an outcome that is wildly different in apparent substance. In fact they both now argue for a division of the assets on the schedule that appears at first analysis to be more or less equal. However, the differences in the detail are not insignificant. 
19.	The Husband argues that the wife’s needs will be met by an award of £7m, so he says that any award to her must be capped at that level. Apart from that he argues for equality of division of the remaining liquid assets after the entirety of the estimated sum due to tax (£7.18m) is set aside from the currently liquid assets. This will leave each party with a little under £4m in immediately available liquid assets, and just under £3m to come from the remaining interests in X company as currently constituted – that is up to the paying out of the capital account that represents the effective proceeds of M-Fund. Because of the cap that he proposes, the Wife will receive little more than that, and is unlikely to share in any substantial receipt by the Husband under the subsequent (albeit currently remote) X company Funds. He argues that this is fair in circumstances where her needs are met and no prior regard has been paid to his premarital assets.
20.	The Wife also seeks ostensible equality, but without any cap on her receipt, so that she will continue to receive a share as N-Fund pays out, perhaps 7 years hence. Further, she argues that she should now be entitled to receive the lion’s share of the available liquidity, on the basis, she says, of her greater need, the Husband’s greater financial acumen in dealing with X company into the future, and because the great reduction in liquidity has been caused by what Mr Leech QC describes as the Husband’s ‘mismanagement’ of the family’s tax affairs, and his further heavy discretionary spending on charity and lifestyle items. In return for that greater liquidity now, she concedes a smaller share of the future X company receipts, but on an uncapped basis. She also argues that the tax fund now set aside from liquid assets should be smaller - £4.7m – on the basis that the balance is met from future X company receipt unless required sooner. She therefore seeks over £5.95m in immediate liquidity – or 57% of the £10.43m that her proposal in respect of the tax fund would leave available.
21.	The only way in which any court can hope to come to a clear conclusion about the intersections of these various moving parts is to go back to the factors set out in section 25(2) of the Matrimonial Causes Act 1973, to see how each might impact on the primary consideration of fairness in this case.
22.	(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
I have dealt with the parties’ available property and other financial resources above. I do not take either party now to have any active future earning capacity, but I must bear in mind that, in addition to the amounts currently on the schedule as being in the Husband’s capital account with X company, and representing the proceeds of M-Fund, there may in future be some significant receipt from N-Fund, and even too O-Fund, into which the partners may decide to invest some of his capital interest under M-Fund. As the Husband is fully retired, there is no further endeavour required on his part to receive any of such money as may eventually come his way. What cannot be said with any certainty is when any such receipt might be expected, and if so, in what sums. However, one of the issues between the parties is the extent to which W should be entitled to share in H’s X company receipts – she says as to 35% of them effectively in perpetuity. Whilst the Husband offers a 50% share, he does so only until she has received a total of £7m, which on the basis of the agreed guesstimate that is represented on the asset schedule, will be very soon after completion of receipt of all of the fund due in from M-Fund.
23.	(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
Which, for reasons I shall explain I will take together with:
(J) the standard of living enjoyed by the family before the breakdown of the marriage; and
(d) the age of each party to the marriage and the duration of the marriage;
These areas have been the cause of much of the disagreement between the parties during the hearing. This is self-evidently because the standard of living which the parties were able to enjoy during the marriage will no longer be available to them. Both estimated their future needs in Form E at just under £500,000pa. Whilst the Wife has not revisited that number, Mr Leech QC acknowledges that it not attainable going forward. For the husband, Mr Southgate QC suggests the figure of £158,000 for each party, and this may be somewhat conservative having regard to what their available resources will be in the future. With so many imponderables still to be weighed, quite what each party should be in a position to spend going forward is quite impossible to quantify with any precision. But what can be said is that this is a case where the standard of living during the marriage will never be re-attained. And, it is worth commenting that that is as it should be, because that standard was probably only available in circumstances where for years the parties were not paying the tax that was properly due on the funds remitted to this country over the period.
24.	In capital terms the parties each wish to retain one of the properties which they currently hold. The Husband seeks to retain the rural address, which, on the basis of a splitting of the borrowing which it shares with their London address as has been proposed to leave it charged with the sum of £2,500,000, would provide a value for the equity in the property of £1,962,000. The borrowing would of course have to be serviced, and it is noticeable that no part of this is included in the husband’s reduced budget. Even if the whole £3m housing fund which he proposes were allocated to reducing the borrowing, he would still owe the bank about £1.6m. Whilst he has said that he may relocate to Switzerland, and indeed is criticised by the Wife for currently renting there, it is clear that the rural address is dear to his heart and he will retain it if he can.
25.	The Wife for her part would wish if she can to retain the apartment in R town. Although the parties have never yet lived there, this is in part because of the works that they initially commissioned in relation to the property, and in part because the ownership structure within the Trust would have required the wife to pay a stiff rent for the privilege. However, she says going forward that she would like to retain that property, R town being her home city, albeit that she would seek to retain a home in London at least for the next 10 years, she says for J’s sake. The Husband rather scoffs at that and says that J will no doubt visit both her parents, but is most unlikely to live permanently with either of them again. In her oral evidence the wife fairly conceded that, if she wishes to have a home in London, as well as in R town, she may have to choose two less expensive properties. Ultimately, given that both parties’ most likely net worth at the end of these proceedings, on either case, will be around the £7m mark, a housing fund of £3m all in for each of them seems both proportionate and sensible.
26.	The parties’ respective ages are relevant to any needs assessment in this case because of the significant age disparity between them. This means that as amplified by their different genders, any capitalisation calculation for them on the same annual lifetime figure will produce a much higher capital sum for the wife, who is in her 50s, than for the husband who is now in his 70s. By way of example, Mr Leech QC demonstrates that to produce the Husband’s suggested income figure (£158,000pa) for life for each of them, would cost £3.3m for the wife, but only £1.95m for the Husband. And if that is increased to £251,000pa (H’s Form E budget less donations, work expenses and the remittance charge), the gap only increases - £5.475m for the Wife; £3.155m for the Husband. It is thus clear that, if the parties’ respective needs are to be quantified and determined, the Wife’s figure would inevitably be larger than the Husband’s. Mr Southgate QC does not demur from this, but says that the court can and should place a cap on the wife’s receipt by reference to an overall needs assessment at £7m (although he put her actual figure at around £6.3m based on £158,000pa, and £3m for a house), and that any additional receipt by the Husband which would inevitably be well in excess of his needs at the same level, would be justified by reference to his premarital contributions, referred to above.
27.	The court is therefore faced with a number of issues of mixed fact and principle, the determination of which must form the backdrop to its decision. One of these is the extent to which any assessment of needs in circumstances such as these should be informed by the artificially inflated standard of living during the marriage. Another is whether it can be appropriate for any assessed ‘needs’ figure to be a cap, rather than a safety net. There is a real danger that such an analysis will lead to a blurring of the 2 principles of need and sharing – for if the Wife’s entitlement to share is limited by her need, is not the court returning to the old discriminatory days before the House of Lords decided White v White? Mr Southgate’s rejoinder to that would be to ask how else the court can mark his client’s premarital contribution – but if that is to be done in any meaningful way, that must surely happen in a computation that is substantially independent of any needs based assessment. Such an assessment will always trample disrespectfully over any flimsy ring-fence of matrimoniality.
28.	So, if the Wife’s needs are to be assessed that must happen absent any confusion created around the Husband’s asserted contribution. And those needs must be considered as a protective floor for the wife, and not a confining ceiling to her claim. Having said all of that, I would accept that in the highly unusual and fact-specific circumstances of this case the parties’ previous rate of spend is not a helpful guide. If the tax liabilities prove to be greater than now anticipated, as well they may, then I do not consider that the wife should be left with less than £3m for a housing fund, or an income fund which produces less than £158,000pa for her – so the wife’s receipt should not be less than £6.3m if it is to fairly meet her needs reasonably assessed in the current circumstances. To that extent I accept Mr Southgate’s figures. If her sharing claim should leave her with more than this, and this includes an amount of more than £7m, then the Wife should not be excluded from her entitlement, however.
29.	In what then is the Wife entitled to share, and in what proportion? This brings me to the 2 remaining relevant subsections of s.25(2) of the Matrimonial Causes Act 1973. These are:
(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
and
(g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;
30.	Any consideration of these subsections must begin with the recent clarificatory judgment of Moylan LJ in Hart v Hart [2017] EWCA Civ 1306, where he considered the court’s approach to matrimonial and non-matrimonial property when applying the sharing principle. I shall set out first the relevant passages from that judgment, as follow:
67.	The exercise on which the court is engaged, when applying the sharing principle in this context, is, therefore, to determine whether the current assets owned by the parties, or within the scope of section 25(2)(a), comprise the product of marital endeavour. The court must then decide how that determination should impact on the court's award. This raises (a) an evidential issue, namely a factual determination which has been described in terms of identifying whether property is matrimonial or is non-matrimonial but which, in my view, is often more nuanced than this because property can be a combination of the two; and (b) an evaluative or discretionary issue, namely the manner in which the factual determination is weighed when the court is undertaking the section 25 exercise and deciding what award to make.
68.	Put in simple terms, the court ultimately has to decide, as part of the discretionary exercise, how to weigh or reflect the existence of non-matrimonial property when determining the award.
…
84.	In my view, the court is not required to adopt a formulaic approach either when determining whether the parties' wealth comprises both matrimonial and non-matrimonial property or when the court is deciding what award to make. This is not necessary in order to achieve "an acceptable degree of consistency", Lord Nicholls in Miller (paragraph 6), or to achieve a fair outcome. Indeed, I consider that the present case demonstrates the difficulties which can arise if a court strives to adopt a formulaic approach in circumstances where that is not likely to be easily achieved because of the nature of the financial history.
85.	It is, perhaps, worth reflecting that the concept of property being either matrimonial or non-matrimonial property is a legal construct. Moreover, it is a construct which is not always capable of clear identification. An asset can, of course, be entirely the former, as in many cases, or entirely the latter, as in K v L. However, it is also worth repeating that an asset can be comprise both, in the sense that it can be partly the product, or reflective, of marital endeavour and partly the product, or reflective, of a source external to the marriage. I have added the word "reflective" because "reflect" was used by Lord Nicholls in Miller (paragraph 73) and "reflective" was used by Wilson LJ in Jones (paragraph 33). When property is a combination, it can be artificial even to seek to identify a sharp division because the weight to be given to each type of contribution will not be susceptible of clear reflection in the asset's value. The exercise is more of an art than a science.
86.	In my view, the guidance given by Lord Nicholls in Miller remains valid today and, indeed, bears increased weight in the light of the courts' experience since that case was decided. It can, as he said, be artificial to attempt to draw a "sharp dividing line". Valuations are a matter of opinion on which experts can differ significantly. Investigation can be "extremely expensive and of doubtful utility". The costs involved can quickly become disproportionate. Proportionality is critical both because it underpins the overriding objective and because, to quote Lord Nicholls again: "Fairness has a broad horizon".
…
88.	The principle which is being applied is that the sharing principle applies with force to matrimonial property and with limited or no force to non-matrimonial property. How should this principle be applied in practice when the existence of non-matrimonial property is being asserted?
89.	First, a case management decision will need to be made as whether, and if so what, proportionate factual investigation is required.
…
91.	Secondly, the court will need to make such factual decisions as the evidence enables it to make. In this context, I do not agree with Mostyn's comment in N v F that a party would need to prove the existence of pre-marital assets "by clear documentary evidence" (paragraph 24). There is no reason to limit the form or scope of the evidence by which the existence of such property can be established. The normal evidential rules apply. These include the court's ability to draw inferences if such are warranted.
92.	The court may decide that the non-marital contribution is not sufficiently material or bears insufficient weight to justify a finding that any property is non-matrimonial.
93.	Alternatively, if the evidence establishes a clear dividing line between matrimonial and non-matrimonial property, the court will obviously apply that differentiation at the next, discretionary stage.
94.	If, however, at the other end of the spectrum, there is a complicated continuum, it would be neither proportionate nor feasible to seek to determine a clear line. C v C was an example of such a case. In those circumstances the court will undertake a broad evidential assessment and leave the specific determination of how the parties' wealth should be divided to the next stage. As I have said, where in the spectrum a case lies depends on the circumstances of the case and is for the judge to decide.
95.	The third and final stage of the process is when the court undertakes the section 25 discretionary exercise. Even if the court has made a factual determination as to the extent of the parties' wealth which is matrimonial property and that which is not, the court still has to fit this determination into the exercise of the discretion having regard to all the relevant factors in this case. This is not to suggest that, by application of the sharing principle, the court will share non-matrimonial property but the court has an obligation to determine that its proposed award is a fair outcome having regard to all the relevant section 25 factors.
96.	If the court has not been able to make a specific factual demarcation but has come to the conclusion that the parties' wealth includes an element of non-matrimonial property, the court will also have to fit this determination into the section 25 discretionary exercise. The court will have to decide, adopting Wilson LJ's formulation of the broad approach in Jones, what award of such lesser percentage than 50% makes fair allowance for the parties' wealth in part comprising or reflecting the product of non-marital endeavour. In arriving at this determination, the court does not have to apply any particular mathematical or other specific methodology. The court has a discretion as to how to arrive at a fair division and can simply apply a broad assessment of the division which would affect "overall fairness". This accords with what Lord Nicholls said in Miller and, in my view, with the decision in Jones.

31.	In this case, the husband relies on his premarital contributions. I am satisfied from the evidence before me that there was such a contribution, but I am quite unable to determine its exact financial extent. It is evident that, as at the point of his departure from Y company in the summer of 1997, the Husband had built up a capital account valued at, I accept, $4,292,745.68, which was then frozen for 12 months before its distribution to him. However, it is clear that some significant portion of that account is likely to have been built up in the last 2 years before his departure, during which 2 years the parties were married, following 6 months’ engagement. It is also evident from the foreign statement that there was a sharp increase in the Husband’s salary in his last 3 full years with the firm, which is at least suggestive, if nothing more, that those years – 1994/5/6 - would have seen the most significant accretions to the account. Around half of that period may be accounted marital. 

32.	Any attempt to be specific about the respective proportions in relation to the overall account would inevitably however be more or less inaccurate – and therefore potentially unfair to one or other party. All that can be said with certainty is that there was an element here that was probably acquired before the marriage, and another element which was not. The former is, on balance, likely to have been greater than the latter, but that is as far as any finding can now go. 

33.	What is clearer is that the Husband already owned his property near to their current London address, which produced equity on its sale, as I have said, of £880,000, which money was invested into the purchase of the former matrimonial home. He says also that, in addition to assorted other smaller investments, he injected significant other cash into X company in its first years, and the Wife accepted in her evidence that initially with X company it was a case of the cash going in, before it came out. Much of that money must have been generated by him before the marriage, but not necessarily all of it. In the absence of firm evidence, I am driven to find that some significant proportion is likely to have been amassed after the start of the parties’ marital relationship. So whilst I cannot accept his figure of $8 to $10,000,000, I do accept that the husband made a contribution at the outset to the establishment of X company – which has been the basis for the wealth amassed in the marriage – from non-matrimonial funds, which I must bear in mind when it comes the discretionary exercise discussed by Moylan LJ in the passages from Hart cited above. 

34.	However, the impact of that contribution must be weighed, and Mr Leech QC rightly reminds me, against the significant mingling of funds that took place; including the placing of significant amounts into a trust structure of which the Wife and J only were beneficiaries, during the marriage; and the fact that this is a partnership now of over 20 years, in which, unlike in a case such as K v L, the significance of the premarital contribution should fairly diminish to some extent over time, although not here to the point of being extinguished. This is a case in other words where the court is left in the position envisaged at paragraph 96 of the judgment in Hart, to the effect that: ‘If the court has not been able to make a specific factual demarcation but has come to the conclusion that the parties' wealth includes an element of non-matrimonial property, the court will also have to fit this determination into the section 25 discretionary exercise.’

35.	What then of conduct under s.25(2) (g)? This has neither been formally pleaded for unequivocally advanced for the Wife as a reason for altering what would otherwise be the proportions in which the parties’ assets should be divided. Nevertheless, Mr Leech QC asks me to factor into what is already a fairly complicated equation the following: that the ‘credit’ the Husband posits in respect of money brought in at the start of the marriage should be matched by the ‘debit’ in the form of the massive amounts of money lost at its end as a result of husband’s expenditure and, in particular, his abject failure to deal with the family’s tax affairs properly. In other words, he seeks to use the Husband’s failure properly to deal with his tax affairs as a shield against his otherwise relevant argument that the premarital contribution should be taken into account. He cites the tax penalties payable by both parties, the accounting and legal costs of remedying the situation, and the further fact that the Husband carried on spending significant amounts on both lifestyle and charitable donation well into the currency of these proceedings.

36.	He also argues that, even if there is not sufficient flexibility in the figures for this to be marked in headline outcome, it should impact to a significant extent in terms of the respective liquidity that is now made available to each party from what will remain of their asset base once the tax due has been paid. It also lies, I detect, behind his submission as to the extent to which those tax funds should be set aside now, or to a degree held back to be met from future realised X company monies.

37.	Mr Southgate QC’s response to this line of argument is typically robust. He referred to it colourfully as being an attempt to ‘bring in conduct by the cat-flap’, and he referred me to the recent decisions of MAP v MFP (Financial Remedies: Add-Back) [2016] 1 FLR 70 (Moor J) and Christoforou v Christoforou [2016] EWHC 2988 (Moylan J). In an area such as this, every case has to be considered on its own factual merits, and other authority is only therefore of passing significance. Nevertheless, I agree with him that it would be wrong in this case to penalise the Husband whether in terms of his liquidity post outcome, or in terms of hard cash, because of his perceived tardiness in setting right his tax affairs. It must have been the case that the husband was at the very least peripherally aware that he should be reporting to HMRC the very significant remittances of capital into this jurisdiction. To the extent that he ‘buried his head in the sand’ about this, he has caused significant and quite unnecessary penalties to be likely incurred by both parties. I do not find that the Wife’s own bill is in any way down to any omission on her part – all of the parties’ financial arrangements were made through the Husband, and it is he who should have acted long before these proceedings prompted him into action. However, these parties still have available to them resources which will possibly finally tally somewhere close to £14,000,000, which is down, alongside the Wife’s own non-financial contribution, to the Husband’s long and successful career. It is not therefore appropriate for his conduct to shape his entitlement to share in this case.

38.	For similar reasons, I will not penalise the Husband for the extremely generous charitable contributions that he made towards the conclusion of the parties’ marriage, nor for his spending on his current partner, or on lifestyle. At the end of this process, each party will have to learn to cut their cloth according to their then circumstances, and although both will continue to be people of significant means by any sensible analysis, the discipline of the budget may be relevant to each of them in a way that it may not have been before. 

39.	I recognise that Mr Leech also advances the argument that the Wife’s needs dictate that she should receive the lion’s share of the available liquidity. Firstly, I must determine what that liquidity should be, by reference to the size of the appropriate amount to be set aside from presently available liquid funds to meet the eventual tax bill, over which the parties are currently at odds. Mr Southgate proposes to set aside now the full amount anticipated by the experts - £7.18m. I do not consider that this is quite necessary, primarily for the reason that this is almost certainly not going to be the exact amount that will ultimately be required. Whether it proves to be less or more, there is likely to be a lengthy period of negotiation whilst the eventual liability is fixed, and there is no good reason for keeping each party in a difficult cash position while that goes on. However, there does need to be a fund that is a little greater than the £4.7m postulated by the wife, especially if the projected foreign tax credit takes some time to materialise. Removing the F investment (discussed below) from that section of the joint asset schedule leaves the combined liquidity currently available to the parties at £14,976,500. I consider that the prudent amount for the parties to set aside from that is more or less £6m. This leaves just under £9m in available liquidity.

40.	Does the wife require more than half of this on a needs basis? Mr Leech seeks just under £6m for his client alone in liquid funds. I must confess that I struggle with the logic of this point slightly. Each party undoubtedly needs appropriate accommodation, and in the end neither took great issue with the notion that such could be found for the sum of £3m, and although both currently aspire to hang on for the time being to one of their current homes for as long as practicable, that very understandable wish cannot translate itself into a need, so as to justify a greater share of liquid cash in the short term. If either party wishes to lock up more in bricks and mortar now than they will ultimately be able to afford, then they will have to budget accordingly, but the other party should not be put to financial sacrifice to enable that to happen.

41.	I have said above that I have found the wife’s needs to be met in the sum of £6.3m. More than half of that is an income fund that is sufficient to release to her £158,000pa for the rest of her life. She does not need the whole of that fund in cash now, only to know that she can with confidence expect that funds in excess of that amount will be made available to her, on any sensible analysis in good time to ensure that she is always able to meet her needs as they arise. But other than that, she does not have a need for immediate liquidity that is significantly greater than the husband’s. Indeed, much of her projected income fund will be foreseeably utilised by her long after his actuarially expected death. In fact, on the basis of the outcome which I will order, both parties will (as far as can now be anticipated) receive an award in excess of their respective ‘needs’. In those circumstances, equivalent liquidity for the immediate future is both proper and fair.

42.	Mr Leech also adds that the Husband’s greater financial acumen will leave him better placed than the Wife to deal with the X company investments. Whilst this may be true, it remains the case that both sides envisage that the Wife will have a long-term interest in the value of the X company investment (and on the Wife’s case not subject to any cap), and in those circumstances I cannot see that the Husband’s greater understanding of the investment is a good reason to advance more liquidity to the Wife now. She will still have a financial interest in X company going forward in any event.

43.	I shall just finally resolve the two small outstanding issues that remain on the asset schedule between the parties. Firstly, in relation to the F investment (£166,750), it is clear from the Husband’s evidence that this is not a liquid investment, as the Wife would say, and indeed that it may never be recouped. He is content that it should remain on the schedule as illiquid, on the basis that should there be any recovery, it will be shared between them. I will treat the asset as illiquid, and discuss its disposal below. Secondly, the Husband has a small foreign pension from which he derives some £27,409pcm. Normally, this would be set off against his needs, rather than be treated as an item of capital value. However, in this case, where because of his shorter actuarial lifespan he is anyway able to live confidently at a greater rate than the wife from the same capital base, I consider that fairness dictates that I should treat it as Mr Leech QC suggests at its capital value when I consider the overall distribution of the assets at the conclusion of the discretionary exercise. Having said that, it is not a ‘matrimonial’ item, and therefore not one in which the Wife could aspire to share.

44.	How then does all of this sound in the final discretionary exercise which the court now has to undertake? If, once £6,000,000 is set aside as a prospective tax fund, there remains £8,976,500 of available liquidity, and no reason why this should not be divided equally, this suggests that each party will start with £4,488,250. Of the funds still to come from X company, a further £1,180,961 will need to be set aside for tax if the current estimate is accurate. This would leave £4,695,320 in funds still anticipated to be capable of recoupment under M-Fund, if all of the other estimates are accurate, which of course they will not be.

45.	Is there any good reason to distribute that fund other than equally, in the light of the Husband’s case about his premarital contribution? I have to remember that, given the uncertainty about the amount of available funds because of the tax position, and of course because property valuation too is an uncertain exercise, especially with the London market in its current state, the exact amounts on which I am working are estimates. So too, the actual sums to be received from X company, and the timing of those receipts cannot be known with any certainty. However, even if those sums were certain figures I would not be persuaded that the Husband’s premarital contributions justified an unequal division of that fund. These are matrimonial funds, and the undoubted product of marital endeavour, held principally in the Wife’s name. An equal division will ensure that whatever the outcome of the various issues currently in play, each will receive a fair and indeed equal amount in respect of both liquid funds and the anticipated receipts from X company M-Fund, as well as certainty in relation to their respective needs. 

46.	The husband will retain his non-matrimonial foreign pension, and the benefit of any return on the F investment. I have also considered whether there is a basis for an unequal distribution in the Husband’s favour of the more illiquid interests that he retains in the X company investments (N-Fund and Fund ‘P’), and, as the Wife herself proposes this to offset the greater liquid settlement that she seeks, and bearing in mind that her needs should be fully met from her earlier receipts by this judgment (£6.72m on current best estimates), I find that this is appropriate, and that these funds should be split 75/25 in the Husband’s favour upon receipt. These amounts are a long way off, and their eventual value extremely uncertain, but could in due course be significant. 

47.	Whilst this may seem only limited recompense to the Husband in the foreseeable future for his initial capital contribution at the outset of the marriage I consider that it is fair in circumstances where the parties’ assets have all been comprehensively mingled throughout the length of this long marriage and where on any statistical analysis of affordable lifestyle he will be able to spend at a significantly greater rate than the Wife from an identically sized fund. The adjustment in his favour is thus not significantly in hard currency (he receives around 52% of the whole pot on current figures); it cannot be, because of the uncertainties inherent in the tax investigation that is about to commence, if both parties are to have their needs met at an acceptable level with any certainty. But I also do not find that his initial contribution looked at now was such that this outcome is an unfair one to him.

48.	It is an outcome which favours him in terms of the greater spending that equivalent liquidity will afford, and in the ultimate receipts under the more illiquid parts of the X company investment. These might prove significant, but are too remote at this juncture to be considered as ‘available’ in any needs assessment. They are nevertheless ‘matrimonial’ and as such it is right that the Wife should share in them when available, albeit in a lesser proportion. 

49.	I will leave it to counsel to determine exactly how the distribution of funds after deduction of the tax funds will be implemented, and deal on paper with any other issues arising.

1st FEBRUARY 2018