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	England and Wales High Court (Family Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> B v B [2010] EWHC 193 (Fam) (15 January 2010) URL: http://www.bailii.org/ew/cases/EWHC/Fam/2010/193.html Cite as: [2010] Fam Law 905, [2010] EWHC 193 (Fam), [2010] 2 FLR 1214

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IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice
		15th January 2010

MR JUSTICE MOYLAN:

1. This judgment follows the hearing of the wife's ancillary relief application. The wife is represented by Mr. Johnstone and the husband by Mr. Dyer QC.
2. The principle issue in this case is the extent to which, as part of a clean break award, the wife should receive part of the wealth which has accrued from income earned by the husband since the parties separated in July 2007. That this is not a pure issue of principle is demonstrated by the fact that the parties agree the wife should receive part of this wealth and disagree only about the amount which she should receive. It is, therefore, a fact specific decision based on the circumstances of this case.
3. The wife's case is that she should receive half of the parties' wealth, to include bonuses earned by the husband for the years up to and including 2009. In total, the wife seeks approximately £9 million, based on total resources estimated by Mr Johnstone at approximately £18.4 million. He submits that this represents a fair share of the family's wealth and also reflects the wife's financial needs.
4. The husband's case is that the wife's award should reflect the fact that a significant part of the husband's resources has accrued since the parties separated and reflects bonuses earned by him during this period. He also seeks the creation of (i) a fund of £500,000 to meet future school fees and, (ii) a housing fund for the parties' youngest child. Subject to these deductions (of £800,000) the husband offers the wife, broadly, half of the wealth, including that which reflects bonuses paid and to be paid to the husband for the years up to and including the year of separation. Thereafter, he proposes that the wife should receive amounts equal to 25% of the bonus earned by him for 2008 and to 12.5% of his bonus for 2009. In addition, the husband agrees that his pension should be shared equally between the parties. On the husband's figures this would provide the wife with a total of approximately £6.5 million and the husband with just under £11 million, based on the total resources being an estimated £17.5 million after, as I have said, the deduction of £800,000.
5. The parties agree that the husband should pay maintenance for each of the children. I will deal with this and school fees at the end of this judgment.

History

6. The parties married in 1996, having commenced a relationship in 1991 and having started living together in 1993 or 1994. The wife is aged 41 and the husband is aged 43. They have three children aged 5, 6 and 11. The youngest child has special needs, and whilst both parties are positive about her future there is uncertainty about the extent to which she will be able to live independently. The parties separated in July 2007. The wife and the children have remained living at the former matrimonial home, with the children spending significant amounts of time with their father.
7. When the parties met they had no significant wealth and they were both working for the same employer in low level jobs. They both continued to work for this employer and gradually worked their way up the organisation. In 1998 the wife moved to part-time work and she then left her employment in the late 1990's or early 2000's. She has not returned to paid employment since then. The husband's position changed significantly when he had what he describes as a 'lucky break' and became a trader in 1998 and particularly from 2001 when he moved to a senior role. He was also given greater responsibilities in 2008.
8. During the course of the hearing some reference was made to the principle of compensation. I do not consider that this principle has any relevance to this case as the award which the wife will receive, even under the husband's proposals, easily eclipses what the wife herself accepts she would have been earning if she had remained in full-time employment.
9. In a previous decision of mine, P v P [2008] 2 FLR 1135, I referred to the fact that in many careers financial rewards do not follow a steady pattern, save that it is not unusual for financial rewards to increase substantially during the later part, or a particular period, of a person's career. This might be the result of more predictable factors, such as benefitting from work done and experience gained during earlier years, but can also be the result of less predictable factors, such as external and economic changes, or the particular trading circumstances or results of one year as against other years.
10. The husband's income in this case has not followed a steady pattern. There was a step change from 2001, and again from 2005, but the annual amounts in the years since 2005 have fluctuated very significantly. His income consists of a relatively modest basic salary and a discretionary performance linked bonus paid in part in cash in the following year with the balance deferred. The dramatic increase in the husband's income can be seen from the fact that in 1997/1998 he earned approximately, £40,000 gross, and in 2006 (for 2005) he earned approximately £4 million gross. The husband describes 2004 as a "watershed" year, in the sense that he earned a very substantial bonus for that year. He has continued to earn significant but variable bonuses, including for 2008, which was the husband's best year ever, when he earned a bonus of approximately £9.2 million gross.
11. The deferred element of the husband's annual bonus, which has consisted of cash/shares, is paid in instalments over three years. The husband's entitlement to payment of the deferred instalments is not entirely clear. The terms under which his bonuses have been paid have varied and their effect was the subject of some discussion during the hearing. The amounts the husband will in fact receive in 2010 and especially in respect of deferred instalments due thereafter, is, to some extent, uncertain. Both parties have proposed that any award reflecting these resources should be based on the wife receiving this part of her award by reference to a specified percentage of the actual sums received by the husband. There is, in respect of the instalments due after 2010, the added complication that if the husband leaves his employment before the sums are payable, and negotiates a leaving package, it may not be possible to identify what amounts have been paid in respect of each or any of the deferred bonus instalments.
12. The wife and the children have remained living at the former matrimonial home. In many respects the family's standard of living has not reflected the change in the level of the husband's income, save that they purchased this property in 2007.

The Proceedings

13. The petition is dated 3^rd October 2007 and Decree Nisi was pronounced on 11^th August 2008. The husband's Form A is dated 19^th September 2008. The parties have each filed Forms E and affidavits.
14. I have heard brief oral evidence from the wife and the husband. They both gave their evidence in a very moderate and sensitive manner.
15. Both counsel have made written and oral submissions, again in a moderate and sensitive manner.

Section 25 Factors

16. Financial Resources:

(a) Capital: Ignoring small differences between the parties, the currently available resources total £11.7 million, with pension funds in addition of approximately £570,000, giving a combined total of £12.3 million. Of this, the former matrimonial home is worth £1 million. In addition, £4.35 million reflects a sum paid to the husband in 2009, consisting of approximately £750,000 net in deferred bonuses for the years 2005 to 2007 and approximately £3.6 million net in respect of his 2008 bonus.

17. Illiquid future assets consist of deferred bonus instalments and the husband's prospective bonus for 2009. The husband's estimated figure for these resources is a total of just under £6 million, while the wife's is just over £6 million. This is not a material difference in the context of this case.
18. The currently deferred instalments reflected the years 2006 to 2008 inclusive. I consider it likely that the husband will receive the sums due in 2010 for these years, which will total approximately £1.2 million net. The receipt of the amounts due in future years is, as I have said, more uncertain and depends (a) on the husband's future employment path, and (b) what he might be able to negotiate with his employers. The potential total is in the region of £2 million net.
19. The husband's prospective discretionary bonus for 2009 is in the region of £3 million net, which will be payable part in cash and part in shares. I consider it likely that the husband will receive a sum in the region of £1.5 million net in early 2010 in respect of this bonus.
20. Taking the currently available resources and the amounts which I consider it likely that the husband will receive in 2010 (for 2009 and earlier years), the resources total £15 million. The total potentially due after 2010 is estimated to be in the region of £3.5 million, giving a potential combined total in the region of £18.5 million.
21. If I were to break the total down: (a) of the currently available resources totalling £12.3 million, £8.7 million reflects sums earned up to and including 2007 and £3.6 million was earned in 2008; (b) of the deferred instalments, £870,000 reflects sums earned up to and including 2007 and just over £2.3 million was earned in 2008; and (c) £3 million represents the husband's estimated bonus for 2009. It estimated that the husband will receive £2.7 million in 2010 (£445,000 from 2006, £155,000 from 2007, £630,000 from 2008, and £1.5 million from 2009).
22. (b) Income: The husband's income has derived largely from his annual discretionary bonuses. I have dealt with these earlier in this judgment. As I have indicated, the amounts have varied substantially, between approximately £1.4 million and £9.2 million in recent years.
23. At present the husband contemplates leaving his current position during the course of 2010 and is unsure about his future plans thereafter. I have no doubt that, as he says, his employment is extremely demanding and stressful. Mr. Johnstone submits that it is not objectively reasonable for the husband to stop working. In my view, the husband is entitled to leave his current position, if he decides to do so. I also consider that he is entitled to cease working altogether, if he wishes to do so. However, whether the husband in fact leaves his current position, or ceases working completely, would make no difference to my decision. My award would remain the same, as I do not consider there would be any justification for the wife receiving any further share of the wealth, even if the husband does continue to work and earn amounts even up to the significant amounts he has earned in recent years. In other words, my decision would be the same whatever the husband's future employment path.
24. Standard of Living: The parties have enjoyed, relative to the resources available to them in recent years, a comparatively modest lifestyle. They have clearly been prudent in their response to the arrival of wealth and in general terms have only gradually increased their living expenses.
25. Contributions: Each of the parties has fully contributed during the course of their relationship since 1993/1994. They will each continue to make contributions to the welfare of the family for many years into the future and probably well beyond the youngest child reaching the age of 21 in 16 years.
26. Financial Needs and Obligations:

(i) Capital: The wife intends to remain living at the former matrimonial home and the husband will buy a property for himself in the near future. The wife has additional capital requirements of approximately £100,000. I do not accept that the wife has any additional capital need in respect of the youngest child.

(ii) Income: The wife's annual budget in her Form E totalled £250,000, including expenditure for the children of £72,000. That attached to her recent statement totals £213,000, including specific expenditure for the children of £50,000. This budget was further amended during the course of the hearing and was also the subject of cross-examination.

27. The husband contends that a reasonable budget for the wife for herself is approximately £95,000.
28. Broadly assessed, I consider that the wife's future annual income needs for herself are in the region of £120,000. The husband's long-term income needs are similar to the wife's. The elder two children attend private schools and at present their school bills total approximately £21,000 per year.

Submissions

29. Mr. Dyer submits that absent needs and/or compensation, sharing ends at the end of the marital partnership. Following the end of the partnership he submits that the parties should be entitled to retain any wealth they generate, particularly where, as in this case, the husband's earned bonus, as is common, reflects the specific work undertaken in each year.
30. The husband proposes (a) the creation of a school fees fund of £500,000, and, (b) the allocation of a specific property with a net value of £300,000 for the youngest child's benefit. If these assets are deducted the currently available resources would total approximately £11.5 million (£12.3 million less £800,000). As referred to earlier in this judgment, approximately £3.6 million of this constitutes the cash element of the husband's 2008 bonus, which, if deducted, gives a net total of £7.9 million, including pension funds of approximately £570,000.
31. The husband proposes that the wife's award should comprise the following elements:

(i) The sum of approximately £4.2 million of the £7.9 million, including half of the husband's pension fund;

(ii) The sum of just over £900,000, being 25% of the cash element of the husband's 2008 bonus.

These would together provide the wife with approximately £5.1 million of the above-mentioned £11.5 million.

(iii) A sum equal to a percentage share of the deferred bonus instalments, if and when paid, of 50% for the years up to and including the year of separation, namely, 2007. The amount which it is estimated the wife would receive under this provision is approximately £300,000 in 2010 and £135,000 in 2011;

(iv) A sum equal to a percentage share of the deferred bonus instalments, if and when paid, of 25% for the year 2008. The amount which it is estimated the wife could receive under this provision is approximately £157,000 in 2010, £157,000 in 2011, and £275,000 in 2012;

(v) A sum equal to 12.5% of the total bonus received by the husband for 2009, payable when received by the husband. Broadly estimated by Mr. Dyer, this would provide the wife with an additional sum of £375,000, of which £187,000 would be payable in 2010 and the balance over the years 2011 to 2013.

32. Excluding sums potentially payable in 2011 and beyond, under the husband's proposals the wife's total award would be approximately £5.75 million out of total wealth of approximately £14.2 million. If the former, that is sums potentially payable in 2011 and beyond, are included, the husband's offer is estimated to result in an award totalling £6.5 million out of total resources on the husband's case of £17.7 million.
33. Mr. Dyer contends that such an award would meet the wife's needs and would give her a fair share of resources, reflecting the fact that a significant part has been earned by the husband since the parties separated.
34. Mr. Johnstone submits that the wife should receive half of the wealth, including the husband's bonuses up to and including for 2009. He contends that the:

"…past and future contributions to the welfare of the family, together with the huge disparity of future earnings, can only be fairly reflected and sensibly compensated by an equal sharing of all the resources earned as at the date of the final hearing".

35. Mr. Johnstone submits that physical separation is not sufficient, in itself, to justify other than equal sharing and that the award he seeks constitutes a fair division of the current assets. In his oral submissions, he appeared to be submitting that the date of trial should be the date for the application of the principle that at the end of the marital partnership each spouse is:

"…entitled to an equal share of the assets of the partnership unless there is good reason to the contrary" (paragraph 16; Lord Nicholls, Miller v McFarlane).

To be fair to Mr. Johnstone, he also submits that the authorities do not demonstrate that, to quote his submissions, a "…formulaic approach to post-separation bonuses is to be applied in substitution for achieving a fair outcome on fact sensitive considerations".

36. In respect of the proposed school fees fund, the husband considers it both prudent and reasonable for a school fees fund to be created. The wife opposes the creation of a school fees fund and proposes that the children's school fees should be met from the husband's earned income, whilst he remains employed, on the basis that the wealth is divided equally.
37. In respect of the fund for the youngest child, the husband also considers that it would be sensible for the property currently occupied by his father and step-mother to be allocated in some way for the youngest child's benefit, such as by the creation of a trust, as a start towards provision being made to meet her future needs. The wife acknowledges that financial provision will have to be made for the youngest child but does not agree that this should be made in the manner proposed by the husband. In particular, she would not want to be involved in the proposal made by the husband, in the manner as proposed by him.

Authorities

38. In a number of respects the present case engages the same issues that arose in my earlier decision of P v P. As a result, I have been referred to many of the same authorities, including M v M (Financial Relief: Substantial Earning Capacity) [2004] 2 FLR 236; Miller; McFarlane [2006] 2 AC 618, Rossi v Rossi [2007] 1 FLR 790; Charman v Charman (No. 4) [2007] 1 FLR 1246; H v H [2007] 2 FLR 548; CR v CR [2008] 1 FLR 323; and H v H [2009] 2 FLR 795.
39. In M v M Baron J awarded a wife half of the parties' capital wealth as at the date of the hearing, which included a very substantial element which had accrued since the parties had separated, but not any share referable to the husband's future earning capacity.
40. Both parties rely on Miller/McFarlane. Mr. Dyer relies in particular on the following passages from Baroness Hale's speech:

"[143] … there are many cases in which the approach of roughly equal sharing of the partnership assets with no continuing claims … is … feasible and fair".

"[144] In general, it can be assumed that the marital partnership does not stay alive for the purpose of sharing future resources unless this is justified by need or compensation. The ultimate objective is to give each party an equal start on the road to independent living".

"[154] There is obviously a relationship between capital sharing and future income provision. If capital has been equally shared and is enough to provide for need and compensate for disadvantage, then there should be no need for continuing financial provision".

41. I was also referred to [66] in Charman v Charman, in which the Court of Appeal made clear that the "sharing principle" is not confined to "matrimonial property, namely, the property of the parties generated during the marriage otherwise than by external donation". It applies to all the parties' property: "… but to the extent that their property is non matrimonial, there is likely to be better reason for departure from equality".
42. In H v H Charles J awarded a wife reducing percentages of the husband's income of a third, a sixth, and a twelfth, in the three years, effectively, from the date of separation.

Conclusions

43. Turning now to my conclusions, and dealing first with the two discrete points raised by the husband, namely, (a) the creation of a school fees fund, and, (b) the allocation of a property for the youngest child's benefit.
44. (a) I do not consider the creation of a school fees fund to be justified in this case. Having regard to the resources available to the parties, and having seen them give evidence, I am confident that there will be sufficient funds available to meet school fees without the creation of a specific fund for that purpose. I am not persuaded that it is necessary or appropriate for me to deduct such a sum from the parties' resources before determining what award to make in the wife's favour, or at all. Further, I accept the wife's submission that the husband should continue to pay the children's school fees, certainly for so long as he remains in employment, subject, of course, to the level of his earned income, and thereafter subject to what I say later in this judgment.
45. (b) It is likely that financial provision will have to be made for the youngest child's long-term future and the parties will need to address this. The issue for me is whether the measure proposed by the husband is an appropriate exercise of my powers under the Matrimonial Causes Act 1973, or is a factor I should take into account when determining my award in the wife's favour. I see no sufficient justification for a part of the family's wealth, albeit a relatively small part, being deducted for this purpose before I determine what award to make in the wife's favour, or indeed at all. I am confident that the parties will make suitable provision for the youngest child from the resources available to them.
46. Turning now to my conclusions on the parties' respective substantive submissions. I reject Mr. Johnstone's submission that the wife should be awarded half of the wealth existing at the date of the trial largely, it appeared, as a matter of policy. This is not a case in which such an approach is justified as it would, in my judgment, give insufficient weight to the fact that a substantial part of the wealth has accrued directly as a result of the husband's endeavours since the parties separated. I also do not consider that such an award is justified by Mr. Johnstone's alternative reliance on the wife's needs.
47. Mr. Dyer's broad submission that, in general, absent needs and/or compensation, sharing ends at the end of the marital partnership is based on passages in the speech of Baroness Hale in Miller/McFarlane. I accept this submission in general terms. However, as Mr. Dyer accepts, the sharing principle is not confined to "matrimonial property" but applies to all the parties' resources. The search is for "… the division of property which best achieves the fair overall outcome": [67] Charman v Charman; "…the requirements of fairness in the particular case": [9] Miller/McFarlane.
48. The current resources total £12.3 million and I have estimated that the husband will receive an additional sum of approximately £2.7 million in March 2010, consisting of deferred instalments for 2006 to 2008 inclusive, and 50% of his likely bonus for 2009. The combined total is £15 million. As there is a degree of uncertainty about the amounts which the husband will receive in respect of deferred instalments payable from 2011, in my judgment I should award the wife a sum which meets her needs from this total of £15 million.
49. Broadly assessed, I consider that the wife needs total resources of £7 million, consisting of just over £1 million in respect of her capital needs and approximately £6 million in respect of her income needs. I do not consider it appropriate to assess the latter, that is her income needs, by reference to Duxbury, but rather by reference, in the circumstances of this case, to a relatively modest assumed rate of return. I propose therefore to award the wife capital resources of £7 million out of the total resources of £15 million. In my view, this award not only meets the wife's needs but also provides her with a fair share of these resources.
50. What order (if any) should I make in respect of the future deferred instalments which could total £3.5 million? In my judgment, if the husband does receive significant additional capital in respect of these deferred instalments, the wife should receive a further capital sum in order to ensure that my award overall continues to provide her with a fair share of the total resources in this case. I propose, therefore, to award the wife a further sum, or sums, equal to 15% of all sums (net) received by the husband in respect of deferred instalments for the years up to 2009 and currently payable from 2011. If the husband were to receive the full amount due the wife would have total resources of £7.5 million and the husband would have £11 million. In my judgment, this division gives proper weight to all the relevant factors in this case, including the contributions each party has and will make to the welfare of the family and to the fact that a significant part of the wealth has accrued from income earned in 2008 and 2009.
51. I propose in addition to make a maintenance order for the children, as agreed by the parties, and also to order the husband to continue to pay the children's school fees. Because I have divided the capital unequally between the parties, and potentially significantly unequally, in my view the husband should continue to pay school fees not only for so long as he remains in employment but thereafter, subject always, of course, to the court being able to reconsider the matter in the light of the parties' actual financial positions.