AP v ALP
| Jurisdiction | England & Wales |
| Judge | MOOR J |
| Judgment Date | 02 February 2018 |
| Court | Family Division |
Financial relief – Wanton dissipation – Very large sums from sale of business invested in new businesses and largely lost – Dishonest presentation of financial situation – Whether hidden assets to be inferred – Status of assets transferred to son from previous marriage – Wells sharing proposal – Indemnity – Education costs – Practical arrangements for transfer of Belgian property.
The Russian husband and wife married in Russia in 1991; they had two children together and the husband had two older children from his first marriage. The husband’s very successful Russian insurance business, owned by the husband and wife equally, was sold in tranches between February 2007 and November 2008. After accounting for certain expenses, the husband’s total net receipts in respect of the insurance business were in the region of $284 million. The husband used this money to invest in a number of new Russian businesses; the wife unsuccessfully opposed the setting up of the main business, involved in food and wine. Between 2009 and 2013 a large home was created in Paris, through a company in the wife’s name. In 2010 a villa in Italy was purchased. There were, in addition, some properties in Belgium. In 2011, the husband gifted various business assets to his eldest adult son, in order to avoid potential seizure of these assets in commercial litigation. His relationship with his eldest son later broke down completely and he lost any role in the relevant businesses. At the same time he transferred various assets to his second adult son, although he later claimed that this was for a different reason, which was that the second son was taking over the running of the relevant projects. His relationship with his second son remained good.
In April 2012, the wife entered into a ‘marriage contract’ with the husband, on the husband’s initiative, on the understanding that this was required for tax purposes. She had no legal advice before signing the contract, which provided for a separation of property regime. In August 2012, the family moved to London and began to occupy their substantial property there. In March 2014 a Belgian property and the Paris property were sold; the husband retained the proceeds, although, under the marriage contact, the wife was entitled to those relating to the Paris property. In October 2015, the London property was re-mortgaged, releasing equity of £4.8 million; in November 2015 the husband attempted to remove £2 million from the joint account, but was unsuccessful because the day before the wife had instructed the bank to freeze the account. The wife petitioned for divorce and a decree nisi was pronounced in February 2016.
In January 2016, the couple reached an agreement that on an interim basis the husband would pay the mortgage on the London property and the service charges, plus £15,000 pm to the wife. Forms E were exchanged in March 2016. The wife’s form set out assets in her name of £5.6 million, and income needs of £770,776 pa (relying on the family’s exceptionally high standard of living during the marriage). The husband’s form (subsequently acknowledged to have been incorrect and deficient) showed assets in his name of £14.3 million and only a modest standard of living; at this time he was arguing that the separation of property ‘contract of marriage’ should be determinative of the wife’s claim. He was claiming that he had received only $90 million for the insurance business. In April 2016 the husband’s solicitors wrote to the wife’s solicitors to say that the husband had run out of money and that no further financial support would be provided to her. In the meantime, various of the husband’s Form E assets were sold and some additional assets were transferred to the husband’s second son.
The judge made a maintenance pending suit order of £15,000 pm from 21 July 2016, plus £84,000 per quarter for the mortgage interest instalments on the London property and its annual service charge. The husband was to pay arrears of £45,000 by November 2016. The husband refused to do so. At a hearing in April 2017, the judge directed that the joint account be used to pay £143,035 to the husband’s solicitors and £270,925 to the wife’s solicitors; thereafter, each firm was to receive £10,000 pm. (Later further lump sums of almost £600,000 were authorised to be paid to the solicitors.)
In October 2017 the wife made an open offer on a clean break basis, suggesting that she retain the non-Russian assets (with an estimated value of over £10 million) plus an additional lump sum of £13 million. She was seeking an indemnity in relation to tax on the sale of the Paris property and proposed that contents of the house (transferred to a warehouse when the property was sold) should be sold to provide a fund for the education of the children. She was asking for £25,000 pa in respect of the youngest child, who was still at school, and her costs. The husband now indicated that he would not be relying on the marriage contract (under the contract, he would have owed the wife €15 million, which he now said he did not have). His own open offer was equal division of the joint account and of the equity in the London property and the Italian villa, with all other assets to remain with the person who currently owned them.
The single joint expert indicated that the husband had invested €172.4 million in his various businesses; he valued the husband’s interest in the food and drink business (the main remaining business) at $3,593,000. The wife argued that the husband had either been guilty of non-disclosure, or that there had been reckless dissipation of assets. The husband denied this, arguing that he had lost money following problems in the Russian economy and had had some assets confiscated by the Russian authorities. In evidence the husband accepted that some information relating to the businesses, especially the main food and drink business, had not been shared with the single joint expert, and his second son admitted that the accounts of one of the other businesses had been fabricated. At a late stage, the husband offered the wife one half of his Russian business assets and the value of any loans he recovered.
Held– (1) Given that the husband had misled the court as to his current financial position, the court would be entitled to infer hidden assets, but could only do so if such an inference could properly be drawn. In the court’s view there was no hidden pot of money of game-changing proportions (see [109], [111], below).
(2) The court would not treat the husband’s investments in his Russian businesses, most made long before the breakdown of the marriage, as wilful dissipation of assets. Applying MAP v MFP[2015] EWHC 627 (Fam), a wife had to take her husband as she found him. She could not take advantage of his entrepreneurial abilities to share in any projects that were valuable, whilst refusing liability in relation to any that were unsuccessful. If the main Russian business had made huge sums of money, the wife would have been entitled to share in those profits. In any event, if the court had found wilful dissipation, it would have had to consider the husband’s needs, so such a finding would not have advanced the case very much (see [116], [119], below).
(3) Equally, the court was not satisfied with the husband’s presentation of his Russian assets, in particular in relation to the transfer of assets to his second son, and was entitled to draw inferences as to the state of those businesses from the evidence. There had been good reasons for the husband’s failure to disclose some information and, given that some of the business accounts were fiction, the court was minded to accept that, overall, the Russian group was profitable and financing both the husband and his second son. The main asset that had been transferred to the husband’s second son in 2011 was either a resource belonging to the husband, which the son had a moral obligation to return to him, or there had indeed been a wanton dissipation. The evidence showed that the husband was still able to maintain himself to a good level. The quantification of the true value of the Russian properties was an almost impossible task but the court was satisfied that there was value there. If there was not, given the sums invested in the group, the husband only had himself to blame (see [116], [120], [121], [126], below).
(4) It would be profoundly unfair on the wife in the circumstances of this case to order any form of Wellssharing. There would be very significant costs of policing any such order and, given the husband’s presentation in court as to the state of those businesses, the wife would never see any benefit. The husband’s own admission that he was prepared to transfer assets to his oldest son to avoid enforcement proved the point of itself. This was reinforced by his second son’s admission as to fraud in business accounts. Further, the family had not been dependant on the fortunes of the food and drink business whilst they were happily married and it was a business that had been opposed by the wife, in which she had had absolutely no say. The husband had chosen to invest in it and he must now take the consequences of that. A Wellssharing order would be completely impractical and totally inappropriate (see [129], below).
(5) The family’s liquid/property assets amounted to £14,946,700 gross, including properties and chattels in Russia, but the husband had a significant liability and needed £2,683,752 to pay off a loan; both parties also owed money to lawyers. The court ascribed a value of about £8 million to the husband’s illiquid Russian business assets. The husband was to retain these, to provide him with an income, plus his own Russian property assets and significant chattels, which would enable him to house himself. The husband’s need to pay off significant debt would be met by giving him half the equity in the Italian villa, with the wife to have the remaining half. The wife was...
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