AW (“the wife”, 55) had made an application in respect of financial remedies under the Matrimonial Causes Act 1973 together with a claim for declaratory relief. In addition to AH (“the husband”, 63), there were two further respondents: BB, a business associate of the husband’s, and C Ltd, a company registered in Hong Kong in which BB held shares. It was the wife’s case that BB was her former husband’s nominee and that in fact the beneficial interest in C Ltd and its corporate subsidiary holdings belonged to the husband.
The parties married in 2001 (the wife for the first time and the husband for the third). In 1998, at or shortly after the time when the parties began to live together, the husband sold the majority of his shares in an international business he had built up for just over £86 million, and as a consequence of this wealth the marital standard of living was ‘extremely high, if not exorbitant’ (see paragraph 7). For example, the husband bought a ‘super yacht’ for US$20 million in 1999, and then had a second yacht built to his specification three years later. The upkeep of the yachts alone cost c. US$3 million a year. The husband himself said ‘AW and I enjoyed a hugely lavish lifestyle. We spent several years just having a wonderful time, travelling and partying…I had a number of high-performance cars and a serious wine collection. We always travelled first class or by private jet’ (see paragraph 8).
However, the husband’s wealth diminished rapidly as a result of his spread-betting (through which he lost £40 million just in the summer of 2007) and several failed investments. In July 2011 he was declared bankrupt. At the time of his bankruptcy, he owed his unsecured creditors over £33 million, in addition to loans and personal guarantees held by banks. Lloyds called in just over £7.7 million of the husband’s loans, and he owed Kaupthing Bank £24 million. He was discharged from bankruptcy a year later.
In April 2011, the wife moved to Monaco after discovering the husband had had an affair. The wife said that the husband encouraged her to do so, because of the tax advantages, and he accepted that it was an important element of his strategy to ensure that both he and the wife were in a position to maximise any income he earned in a tax-free environment. Roberts J found the move to be ‘an important piece of the financial infrastructure which the husband set up in anticipation of his financial insolvency’ (see paragraph 19). After separation, the husband continued to provide the wife with voluntary financial support.
In December 2010, the husband sent the wife a proposed separation agreement. It was a clear condition that if she did not receive the parties’ large property in the South of France (which had already been gifted to her at the time of its purchase) unencumbered by debt within five years, the agreement was to have no further effect or consequence and the wife would be released from its terms. A revised version of the agreement was drawn up in 2012, which the husband unsuccessfully claimed was a forgery. In any event, since the property had to be sold because of the husband’s inability to transfer the property debt free, it was accepted by both parties that the separation agreement no longer had any effect on the outcome of these proceedings.
In rejecting the husband’s forgery claim, Roberts J referred to a ‘disgraceful episode’ in which the husband had made contact with an individual (“Martin Moodie”) whose name he had been given by a stranger he had got talking to about his divorce in a pub. At the husband’s request, Mr Moodie had obtained copies of the wife’s online account with an airline showing her flight itinerary, and had posed as a customer of the wife’s bank in Monaco seeking to ascertain that some of the wife’s missing credit card statements should be readily available to her as a customer of the bank. Roberts J found that this ‘reveals the lengths to which this husband is prepared to go in order to achieve the ends he seeks to put in place’ (see paragraph 66).
C Ltd and BB
BB claimed he had been the sole shareholder and director in C Ltd since its incorporation. He said he used the company from time to time as an investment vehicle for various projects unconnected with the parties’ divorce. Unfortunately, due to the absence of detailed company accounts for the early years of C Ltd’s operation, it was not possible to test this. There was also a total lack of any company bank statements, which BB withheld on the grounds of third party confidentiality.
Towards the end of 2016, the parties had made various proposals to each other to try to resolve their financial affairs. In October 2016, the wife asked for 50% of several companies owned by the husband. After receiving this proposal, the husband instructed his accountant to transfer to C Ltd all his shares (100%) in S Ltd. S Ltd was the company through he defrayed his personal living expenses in a tax efficient way by utilising corporate losses to offset the tax due on income he earned from other sources including from his position as director and CEO of F Ltd, and at the time of the transfer, S Ltd held $250,000 worth of options in F Ltd. This transfer resulted in C Ltd becoming the owner of all the companies in which the wife was seeking a 50% share. Roberts J had no doubt this ‘was a move which was designed to put them beyond her reach’ (see paragraph 94).
Ultimately, Roberts J had no doubt that ‘the husband retained an interest in the potential success of F Ltd throughout…notwithstanding his disposal of the S Ltd shares’ (see paragraph 93). Indeed, the husband himself admitted in October 2018 that he had retained operational control of S Ltd after BB took over its legal ownership. She reached the conclusion that ‘there was a clear agreement between the husband and BB that, once the original investors in F Ltd had been repaid and/or extracted their entitlement on any future sale, the husband would share with BB on a 50/50 basis any value accruing to C Ltd’ (see paragraph 96).
The wife sought declaratory relief in relation to the husband’s beneficial ownership of any remaining or residual value in F Ltd and the two remaining C Ltd companies. Roberts J accordingly made a declaration that the husband was, and had been, the beneficial owner of the shares in S Ltd since its incorporation in 2009, and that he was the beneficial owner of 50% of the value of the shares held in F Ltd, and three other C Ltd companies transferred to BB in 2019. However, there was no need to make further declarations in relation to C Ltd, because C Ltd no longer existed as a legal entity as it had been removed as an active company from the Hong Kong Companies Register.
The parties’ resources
Roberts J accepted that ‘for some considerable time, this husband has been living a fairly precarious ‘hand to mouth’ existence’. However, she asked ‘Is this all a contrived ‘front’ erected by him for the purposes of this litigation as a defence to his wife’s financial claims? Are others, on his behalf or for his benefit, holding significant funds or assets which he will recover from their safe-keeping after this litigation comes to an end?’ (see paragraph 103).
The wife’s financial position was as follows:
- Cash in Monaco bank accounts in the sum of just under £524,000 – however, she would need to demonstrate liquidity of €500,000 to maintain her residence in Monaco.
- R Investment funds with a combined value of £125,000.
- Personal chattels worth £35,000.
- £446,000 owed to HSBC, plus small credit card debts.
- Just under £477,000 owed to two friends.
- Pensions worth a total of £60,594.
The husband’s financial position was as follows:
- A negligible balance in his bank accounts.
- A balance of £22,204 in one spread-betting account, offset by a greater liability in another.
- Personal possessions which did ‘not amount to much’ (see paragraph 107).
- A cash balance of c. £8000 left over from the sale of wine the husband owned and which the court had directed should be sold to meet the wife’s legal costs.
- Although he was owed £489,353 by S Ltd, Roberts J found it could not be treated as a realisable asset.
- A pension with James Hay worth £135,452.
- A pension with Zurich Assurance worth just over £306,000.
The wife contended that the court should treat any residual value in shares in F Ltd held by BB through C Ltd, or in any other companies previously owned by C Ltd, as assets of the husband. However, since all the companies to which she could point were in liquidation, it seemed ‘very unlikely on the basis of the present evidence that any of these assets will produce liquid cash in the foreseeable future such as will make any material difference to the wife’s financial claims and her need for a home and an ongoing income stream’ (see paragraph 110).
Neither party had any income at the time of the hearing. The husband was about to spend some time in Vietnam, where he hoped to regain his health and mental wellbeing while living in some form of retreat. Roberts J accepted that at the age of nearly 64, he was ‘unlikely to find remunerative employment in any field in the financial or business sector which would pay him the sort of income he was earning as the CEO of F Ltd’, and said he ‘does not appear to have the means at the present time to make any effective contribution to the ongoing income needs of his former wife’ (see paragraph 113).
Meanwhile, the wife had ‘not been in paid employment for many years and has no qualifications which enable her to enter the employment market and secure the sort of income which would make her self-sufficient in terms of her income needs going forwards’ (see paragraph 113). She hoped to generate income through some sort of online business venture connected with the world of beauty or fitness, but Roberts J had ‘no means of knowing whether or not she may succeed in any such enterprise’ and said it was ‘difficult to see at this juncture how she will survive financially without the ongoing support of her close friends who have lent her money in the past’ (see paragraph 114).
It was submitted on behalf of the wife that Roberts J was entitled to draw adverse inferences against the husband. Roberts J commented that the husband’s ‘covert tactics…have placed very significant obstacles in the path of the wife’s legal team in their efforts to establish what, if anything, remains available in the context of the current proceedings’ (see paragraph 66), and said that in particular, his ‘modus operandi in terms of corporate nominee holdings has, I accept, contributed to a significant extent to the difficulties encountered by the wife’s team in establishing a clear picture of the husband’s financial circumstances (see paragraph 67).
Roberts J was prepared to accept that ‘this husband has operated aspects of his financial affairs over the course of the years to his former wife’s significant detriment’, particularly through spread-betting, which had resulted in a net loss of £3 million over and above the £40 million lost earlier in the marriage (see paragraph 118). She also bore in mind that he had drawn down some of his pension to repay a friend for a debt incurred in connection with spread-betting, without telling the wife, and that he had appropriated €985,000 from the sale proceeds of the French property, even though the property had been gifted to the wife from the outset, without telling the wife. Indeed, the wife learned about these funds through the French notaire who handled the sale. Roberts J found this was a ‘serious dereliction of the husband’s duty of full, frank and complete disclosure’ (see paragraph 119).
By the conclusion of the case, the wife sought the adjournment of her lump sum and property adjustment claims. The conclusion was reached by Roberts J that ‘despite the imperative to achieve a clean break between parties involved in this type of litigation insofar as it [is] possible following divorce, this is not a case where I can achieve a fair outcome other than by adjourning this wife’s claims for lump sum and property adjustment orders’. This was because both parties needed ‘a secure home and an appropriate income on which to run their respective domestic economies’, but there were ‘no visible liquid resources with which to meet those claims’. Roberts J was ‘entirely satisfied’ that the husband would wish to ‘claw his way back from his present predicament’ and would ‘do whatever he can to re-establish his financial base’, although she had ‘no expectation that he will secure in future a return to the scale of wealth he has previously enjoyed’ (see paragraph 120).
Roberts J noted that in Quan v Bray & Others  EWHC 3558 (Fam), Mostyn J had quoted the headnote from Joy v Joy-Marancho and Others (No 3)  EWHC 2507 (Fam) and recorded that ‘[w]hile generally capital claims should not be left indeterminately unresolved, there were hard cases such as this where fairness and justice must prevail over the normal desirability of the finality of litigation’ (see paragraph 122). Roberts J said ‘I regard that definition to capture this case. In my judgment it would be wholly unfair to leave this wife with nothing, or next to nothing, save for some substantial liabilities and a nominal maintenance order in circumstances where, on the husband’s own evidence, there is at least the possibility that he will restore a measure of financial equilibrium in the future. He may not see the return of the sort of wealth which will enable him to enjoy in retirement the lifestyle he once took for granted in earlier years but I am satisfied that there is a reasonable probability that he may entrench sufficiently to provide both himself and his former wife with a modest home and the means to sustain a reasonable standard of living’ (see paragraph 123).
However, Roberts J decided that ‘the wife’s claims should stand dismissed if, in seven years’ time when the husband attains the age of 70, his circumstances are such that he has nothing with which to meet such an award’, and until then made a nominal periodical payments order which was expressed as a joint lives order (see paragraph 124).
Regarding the parties’ existing assets and liabilities, Roberts J:
- Said she was not going to deprive the husband of his Zurich Assurance pension, although she made an order which prohibited him from dealing with or drawing down on it without notifying the wife of his intention to do so and without securing the court’s permission to do so. She noted that although it was wholly non-matrimonial, it may be required in the future to meet in part the wife’s ongoing income needs.
- Made a pension sharing order over the James Hay pension, 100% in the wife’s favour.
- Ordered that the wife would retain the R Investment already in her name.
- Regarded the HSBC loan in the wife’s name in the sum of £446,000 as the husband’s responsibility.
Roberts J was satisfied ‘that the husband’s litigation misconduct…requires reflection in a costs award in [the wife’s] favour’, and said that ‘this is a case where the husband must make a significant contribution towards those costs’ (see paragraph 130). She directed that the husband should pay 60% of the wife’s total costs incurred up to that point, assessed at £327,000. She did not require him to provide the wife with a complete indemnity because ‘he should have some incentive to restore his financial position in order that the wife’s outstanding needs will indeed be met’, and because of ‘the volume of disclosure which he has provided in the latter stages of this litigation and the consistent explanation he has given in relation to his 50% interest in F Ltd’ (see paragraph 131).
Following delivery of the draft judgment, the husband raised an issue in relation to the extent of his liability to contribute towards the wife’s costs. He asked if the £327,000 took into account the contribution he had made after the wife had previously made a successful LSPO application, which had been paid out of the proceeds of sale of some wine. Roberts J said that all the evidence pointed towards beneficial joint ownership of the wine collection, such that no part of the £90,500 already paid towards the wife’s costs could be seen as a contribution from assets held or owned by the husband. Roberts J denied the husband permission to appeal the costs order.
This judgment, together with Haskell v Haskell  EWFC 9 (for which a case summary can be found here), means that two different High Court judges, within the space of a few months, have refused to make an order based on the parties’ financial circumstances at the time of the hearing.
In Haskell, the husband claimed he was at his ‘economic nadir’ and had a net worth of minus £50 million, and said that his business ventures would need two years to be brought to profitability and liquidity. Mostyn J was satisfied that the husband would probably have sufficient funds available to him in two years’ time to make a clean break settlement in the sum of £5.18 million. In that case, neither party had argued that the claim should be adjourned.
Similarly, in this case, although there were no substantial residual assets apart from the parties’ pensions, Roberts J adjourned the wife’s capital claim because on the husband’s own evidence there was at least the possibility that he would ‘restore a measure of financial equilibrium in the future’, and she was ‘satisfied that there is a reasonable probability that he may entrench sufficiently to provide both himself and his former wife with a modest home and the means to sustain a reasonable standard of living’ (see paragraph 123).
There is therefore a pattern of arguments from parties claiming they have no money, and cannot afford to pay a penny to their ex-spouse, falling on deaf ears. Haskell and AW v AH provide recent, clear authority for a judge either to make an award based on a future probability rather than the present financial situation, or to adjourn a claim until the parties’ finances have improved. The fact that there are no funds with which to pay an award at the time of a hearing is no guarantee that the paying party will get off scot-free.
Henrietta Boyle, Pupil, 1 Hare Court