Fz v Sz (Ancillary Relief: Conduct)

JurisdictionEngland & Wales
CourtFamily Division
Judgment Date05 July 2010
Neutral Citation[2010] EWHC 1630 (Fam)
Docket NumberCase No: FD08D03388
Date05 July 2010

[2010] EWHC 1630 (Fam)



Before: The Honourable Mr Justice Mostyn

Case No: FD08D03388

First Respondent/Husband
The Trustees/managers of the Cpl Pension Plan
Second Respondent

Philip Moor QC and Tim Bishop (instructed by Sears Tooth) for the Applicant

Deborah Bangay QC and Simon Webster (instructed by DWFM Beckman) for the First Respondent

Hearing dates: 14 – 25 June 2010


This judgment is being handed down in private on 5 July 2010. It consists of 151 paragraphs and has been signed and dated by the judge. The judge hereby gives leave for it to be reported as FZ v SZ & Others (ancillary relief: conduct: valuations).

The judgment is being distributed on the strict understanding that in any report no person other than the advocates or the solicitors instructing them may be identified by name or location and that in particular the anonymity of the children or the expert witnesses and the adult members of their family must be strictly preserved.

Mr Justice Mostyn

Mr Justice Mostyn:


In this judgment I shall refer to the applicant-wife as W and to the respondent-husband as H. The court is concerned with W's application for ancillary relief made in Form A dated 6 August 2008, which was later amended on 11 March 2010 to add a claim for variation of a post-nuptial settlement.


The Second Respondent is the trustee/manager of H's Jersey pension fund. It has played no part in these proceedings. The Third Respondent is H's sister. She has not been represented in the proceedings although she did give evidence by video-link from Singapore.


H and W are both aged 41. H was born in a country which I shall call Zenda and moved to England when aged 3. W was born in the US to parents of Zendan origin; she is now a British citizen. The parties met in 1999 and were married on 5 January 2001. They have two young children R and A, both of whom attend private day schools in London.


In July 2000 a lease of BP was purchased in H's sole name for £570,000 with a mortgage of £500,000. After living initially in H's parents' home the newly married couple moved to BP in early 2001. H alleges that it was acquired on the agreed basis that he and his sister SZA would share the beneficial interest equally, which agreement was later incorporated in an express written declaration made in Zenda in November 2004.


H has estimated that at the time of the marriage he was worth around £3m; but of this there is no evidence for £800,000.


In August 2004 H purchased the final matrimonial home at WH for £3.4m with a mortgage of £1.7m. BP was retained.


The marriage came to an end in July 2008 when W filed a divorce petition. Since then the parties have engaged in attritional warfare which has been both unedifying and shameful. I will find later that within the litigation each party has behaved exceptionally poorly. Neither party showed much if any contrition for their own conduct; rather, furious and rancorous blame was cast at the other. The parties have exhaustively litigated issues of occupation, residence and contact to the children and ancillary relief. In all they have been in court on about 40 separate days and have spent about £2m in costs of which £560,000 has been spent on W's attempts to force H to leave WH; in disputing whether there should be a sole or shared residence order; and determining the question of H's contact to the children.


Eventually H agreed to leave WH. W remains living there with the two children, her sister M (who has been there for a considerable period) and two staff members.

H's background and career


In this section of the judgment I have drawn on the narrative in Miss Bangay QC's skeleton argument which conforms to the written and oral evidence I have received.


After graduating with a law degree from University H completed a Masters at the LSE. He joined a bank where he specialised in asset financing earning approximately £300,000 p.a. including bonuses. In 1999 H joined X bank where he was employed until March 2006 and thereafter for two years on a consultancy basis.


H was exceptionally well- paid at X Bank. In his first year with the bank, in addition to a basic salary of £110,000 p.a. he received a total bonus award of £700,000 paid as a mixture of cash, stock options and pensions contributions. His remuneration increased over the years as follows:

i) 2001—£2,750,000

ii) 2002—£5,625,000

iii) 2003—£7,750,000

iv) 2004—£6,250,000


Under the 2006 consultancy agreement H was to receive:

i) A monthly retainer of £200,000

ii) A performance fee of £3.1m on 1 April 2007

iii) A performance fee of £3.1m on 1 April 2008.

A total of £11m.


On the advice of KPMG and Royal Bank of Canada, H set up in Jersey a tax efficient structure to receive the anticipated remuneration from X Bank, and he became non-resident for tax purposes in 2005/06. That greatly benefited the family financially. In the context of the divorce and his wish fully to participate in the upbringing of his children H has signified his intention to be an on-shore UK tax payer for the financial year commencing April 2010.


The tax efficient structure involved the incorporation of CPL in Jersey of which H is the ultimate beneficial owner. Also incorporated was the CP Pension Plan (CPLPP) on 22 March 2006 which was the recipient of H's existing pension fund with X Bank (£12.623m) together with an additional one-off payment of £8.65m from X Bank.


In order to undertake independent investment work H established CIPHL and under its umbrella CFI in November 2007. In that same month CPL was transferred into, and became owned 100% by, CIPHL.


In 2005 H had begun to explore investment opportunities in Zenda. He intended to “finance, operate and transfer large scale infrastructure projects” through a vehicle called T. His intention was ultimately to sell these investments into a brand new investment fund, ZF, which would be financed by independent venture capitalists.


In 2006, A, a London based equity house, carried out due diligence on ZF. By August 2007 A had in principle approved an investment of $100m into the fund subject to the agreement of further terms and conditions. The first $50m could be drawn down by the fund once $150m had been raised from other sources and the balance when the fund reached $200m.


This was the platform for H's plans in Zenda. He had by then invested in a private transport business in Zenda (“the J Business”). Later, he made a significant investment into the Zendan shipping sector through the construction of a new terminal for the movement of commodities in Y (“the P Business”). H also entered into put and call option agreements on 3 April 2008 to acquire an interest in one of the main players in the Zendan technology sector. The idea was to “flip” these investments into the fund once they were up and running.


Between November 2006 and June 2009 H (or his entities) invested US$23,608,631 into the J and P Businesses.


In July 2008, on the threshold of the global economic havoc that was to follow in the Autumn of that year, A pulled out of investing into ZF and the whole idea turned to ashes. The option agreement fell out of the money and the J Business, in the context of the sudden and dramatic recession, flagged, and may yet fail. The Z:$ rate fell into steep decline: this had a detrimental effect on the progress of the terminal construction given the increased costs.

W's background


W's father was a distinguished Zendan diplomat. Thus W was educated in various countries later completing a BSc at the LSE and a Masters Degree in the USA. She was employed as a consultant with C and latterly at the D Bank in Washington.

The litigation


W filed her divorce petition on 14 July 2008 and Decree Nisi was pronounced on 6 March 2009. It has not yet been made absolute.


No quarter has been asked or given in the subsequent litigation which has been conducted ruthlessly and at vast expense by both parties.


I am going to set out in some detail my findings in relation to the litigation history not simply because each party relies on the other's behaviour as conduct within s25(2)(g) Matrimonial Causes Act 1973 but also because the tale here leads to a number of lessons needing to be learned. The first lesson is that the initial move in a divorce can colour the whole of the rest of the case. The second lesson is, as I have said before, that every action tends to give rise to an equal and opposite reaction. The third lesson is that allegations of dishonesty should be very carefully considered before they are made.


It is clear that by the early part of 2008 there were problems in the marriage, although there is no evidence of heated disputes, let alone physical or emotional abuse. A recurrent issue seems to be W's abiding sense of financial insecurity. There were assets in abundance but very little was placed in her direct ownership, although she was a beneficiary or potential beneficiary of the Jersey pension fund I have mentioned above. W told me that she had no idea whom to call should H befall an accident.


H accepted in his evidence that he was not as open and transparent about his finances as he should have been. He stated that W knew in broad terms what he was earning. Moreover, his financial documents were kept in WH and were at all times easily accessible by W. It is plain that W neither knew, let alone was consulted, about his massive investment in the Zendan projects mentioned above. Equally, W was wholly ignorant of the option agreements entered into by H on 3 April 2008, at a time when the marriage was decidedly rocky, and which has exposed the family to massive loss.



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