Y v Y
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Baron |
| Judgment Date | 27 June 2012 |
| Neutral Citation | [2012] EWHC 2063 (Fam) |
| Docket Number | Case No: FD11D01679 |
| Court | Family Division |
| Date | 27 June 2012 |
[2012] EWHC 2063 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mrs Justice Baron DBE
Case No: FD11D01679
Robert Peel QC & Petra Teacher (instructed by Messrs Farrer & Co) for the Applicant
Lewis Marks QC & Katie Cowton (instructed by Messrs Manches) for the Respondent
Hearing dates: 18 – 27th June 2012
This judgment is being handed down in private on 27th June 2012 It consists of 21 pages and has been signed and dated by the judge. The judge hereby gives leave for it to be reported in anonymised format.
The judgment is being distributed on the strict understanding that in any report no person other than the advocates or the solicitors instructing them (and other persons identified by name in the judgment itself) may be identified by name or location and that in particular the anonymity of the children and the adult members of their family must be strictly preserved.
This is the claim of Mrs Y (the Wife) for Financial Remedy following upon the breakdown of her marriage to Mr Y (the Husband). The parties met in 1983 (when the Wife was 22 years old and the Husband was 24 years old). She was living and working in London. He was studying Rural Estate Management at the Royal Agricultural College, Cirencester and living in a cottage nearby. The parties married in July 1984. The Wife moved to live with her new husband at his cottage in Gloucestershire.
The Y Family and the Estate
The Husband is a member of an illustrious family with many successful forbears who managed to accumulate great wealth. In fact, his ancestors, who include prominent military commanders, made a large contribution to the life of the Nation in the 19th Century. More relevantly, the foundation of the modern family fortune was set by his grandfather who reinvested the proceeds of an earlier family business into what is now a well known merchant bank.
In about 1944 the Husband's grandparents found a country estate in Oxfordshire which they purchased as their home. The main attraction of the estate was a Grade II* country mansion (with 4 staff cottages) surrounded by 11 acres of gardens and some 138 acres of grazing/pasture. It was, in Estate Agent speak, a "gem". Moreover it was an economically viable unit because it had additional farms/farmland of some 1,500 acres running with it. In the 1940s that area was broadly sufficient. The Husband's grandfather had additional independent means through his successful investment in banking and his grandmother was also a member of a wealthy family with assets of her own. The grandparents furnished their home in great style using antique family pieces and paintings. They had one son. He was not interested in country life preferring London (where he had a home in Chelsea Square before eventually moving to Fulham). In the light of his distaste for Oxfordshire, the grandparents decided that it made sense to skip a generation and leave the entire Estate to the Husband. Consequently, tax efficient Trusts were set up in his favour. The Estate was settled in 1967 and the Husband became beneficially entitled to it in 1983 (1 year before the marriage) when he reached the age of 25.
From an early age the Husband was inculcated into the workings of the Estate because he spent most of his exeats and school holidays there. He appreciated that it was his destiny, hence his later education at Cirencester. In 1988 (4 years after the marriage) the Trustees passed the Estate absolutely to him. As it bypassed his father, the Husband is only the second member of the Y family to own the Estate which has been in the family for some 70 years.
The Estate is no longer subject to trust or settled land arrangements, rather it is owned outright by the Husband. It represents inherited wealth acquired as a result of the endeavours of previous generations. This important factor is at the forefront of my mind in the resolution of this case. I note, however, that in the past the Y family have been prepared to switch tack and move their asset base as circumstances dictated or as seemed appropriate. Thus the grandparents sold lands before basing themselves in Oxfordshire.
The Husband was, and is, absolutely devoted to the Estate and described it as "part of me". I accept that, in some ways, it means everything to him. From it he garners purpose, quality of life and status. It is his wish to retain the Estate (as intact as possible) and pass it to his son. No one is suggesting that this Court should order the sale of the entire Estate, even though, as I shall explain later, it is touch and go whether this Estate is economically viable in the current circumstances. The Husband wants to try and retain it. That is his decision and privilege.
Apart from the house and grounds (as already described) the Estate consists of:
a) A further 14 residential properties in the same village, two in a neighbouring village and one in the nearby town;
b) A farm, comprising a farmhouse, four cottages, farm buildings and 350 acres of farmland surrounding/adjoining the main Estate house;
c) 686 acres of farmland on the nearby Downs;
d) 102 acres of farmland at the eastern edge of the Estate, by the neighbouring village;
e) A Commercial Centre in the village with four commercial properties and four commercial units;
f) An Equestrian Centre in the village;
g) A pub in the village;
h) A farm and 210 acres about 2 miles north of the main Estate.
The whole Estate extends to approximately 1,495 acres. Mr Beales, the Single Joint Expert, described it thus "a high quality country Estate with an attractive substantial listed house within a parkland setting in a sought-after part of the country…The Estate is a special property and only a small number of such properties become available on the market at any time. If a property such as the Estate came to the market, I consider there would be strong interest from the small number of purchasers who actively search for such properties…".
The valuation by Mr Beales (Messrs Savills) gave values as follows:
a) The main house, with the four ancillary properties and 138 acres (i.e the central core): £16,500,000 (including 10% marriage value);
b) The balance of the main estate: £16,560,000 (including 10% marriage value);
c) The offlying areas: £2,828,000 (no marriage value applies).
The total (including all marriage value) is a maximum £35,888,000 gross. However, as a result of the Husband's deliberate management strategy, the Estate is presently encumbered with borrowings of £6.7 million which are secured against the House (with appurtenances) and surrounding parklands.
The agreed net values appear on the asset schedule. In summary, the main house and garden total £13.9 million; the cottages and parkland total £2.6 million. The remainder of the Estate totals £15.055 million with the outlying areas being £2.828 million. After costs of sale and CGT (calculated for sales on a piecemeal basis) the total is some £22.9 million.
The total rent from all the properties (residential and commercial) is a mere £451,169 pa gross. To a degree this is because some properties are occupied by retired employees and/or their families. Mr Peel QC (for the Wife) has submitted that the most recent accounts suggest that the income figure may have increased to £475,620 gross — in the broad scheme of things I do not consider that this asserted increase makes much difference to the viability of the Estate. The residential properties are let on Assured Shorthold Tenancies ending no later than 2014. The commercial properties are held on commercial leases ending no later than 2015 (except the public house lease which ends in 2024). There is a small amount of rent from paddocks, grazing licences and the like. The Husband informed me that there is good potential (over time) to increase the amount raised from this source. But, once again, I consider the sums involved to be de minimis. The farmland is not rented out, so no rental income is derived from it because it is farmed in hand.
The Husband's management policy
In the mid 1940s an estate of this kind was apparently affordable to the family. However as the 20th Century progressed and farming became less profitable, it became increasingly difficult to run this type of Estate absent substantial other capital and/or a large external income. Hence by the 1990s (when the Husband's grandmother died) the house/estate were described as rather dilapidated.
The Husband was determined to upgrade the house/buildings and manage the estate soundly. From 1990 onwards he set about maximizing value from the land/buildings — for example, by seeking extended planning permission and commercial opportunities. He was relatively successful in this endeavour but, even so, it was increasingly necessary to incur large borrowings to cover the difference between net income and outgoings. The Husband took a long-term view. He decided that, whilst land values increase over time, the value of money decreases. Accordingly he determined that borrowings could be afforded and were in one sense a shrewd investment. Of course, the basic premise behind his scheme is a truism. But to be a successful tool the time period by which it becomes an economically prudent proposition is perforce lengthy. The Husband's strategy (Mr Marks QC (who represented him) referred to it as his "gamble") was to borrow substantial amounts assuming that his maxim would hold good. The current level of borrowing is £6.7 million (increasing annually).
The Husband told me this debt was affordable on the basis of gross assets approaching £36 million with periodic sales (on uplifted values) being used to reduce the borrowing and keep it within manageable bounds. I am clear that this policy...
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