(Family Court, Mostyn J, 9 May 2017)
Financial remedies – Special contribution – Extent of non-matrimonial assets
The wife was awarded £73m in financial remedy proceedings.
The husband and wife were in a relationship for 29 years and they had two, now adult, children. Prior to the relationship the husband founded a business which became very successful and was now worth in the region of £182m net of latent taxes and employed 500 staff. The family owned several properties and enjoyed a high standard of living.
When the relationship broke down the wife applied for financial remedies. The husband argued for a departure from equality on the basis that the business was founded prior to the relationship commencing and that he had made a special contribution.
Applying a linear evaluation the judge determined that £44m of the business was attributed as a non-matrimonial element, representing the husband’s contribution prior to the commencement of the marriage.
While making £145m over the course of a long marriage was a highly creditable achievement it did not meet the standard of rarity needed to justify a highly discriminatory unequal division of the product of the matrimonial partnership.
It was appropriate in all of the circumstances for the wife to receive an equal share of the £182m matrimonial resources, namely £72,876,484. The husband had planned to sell the business upon his retirement which was envisaged to be in about 7 years’. The minority of the wife’s award would be met with an enlarged shareholding of the business and equated to 26% of her award which was not unreasonable.In calculating the net assets the latent tax had to be assessed on the basis that a very large dividend would be paid in order to give the husband the means to pay the wife a substantial lump sum, while at the same time allowing him to continue working in and on the business. The dividend tax rate of 38.1% was higher than the capital gains tax rate of 20%. That meant that the overall net value of the assets was slightly less that it would have been on a notional immediate sale, and that the value of the wife's share was correspondingly less but in all the circumstances that was not unreasonable.