B v B (Ancillary relief: Post-separation income)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE MOYLAN |
| Judgment Date | 15 January 2010 |
| Neutral Citation | [2010] EWHC 193 (Fam) |
| Docket Number | No. FD07D04827 |
| Court | Family Division |
| Date | 15 January 2010 |
[2010] EWHC 193 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Before: Mr Justice Moylan
No. FD07D04827
Mr M. Johnstone instructed by Josiah -Lake Gardiner LLP appeared on behalf of the Wife.
Mr N Dyer QC instructed by Mishcon de Reya solicitors appeared on behalf of the Husband.
(As approved by the Judge)
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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
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.
I have heard brief oral evidence from the wife and the husband. They both gave their evidence in a very moderate and sensitive manner.
Both counsel have made written and oral submissions, again in a moderate and sensitive manner.
Section 25 Factors
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.
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.
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.
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.
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.
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...
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