G v T
| Jurisdiction | England & Wales |
| Judge | Mr Cusworth |
| Judgment Date | 02 April 2020 |
| Neutral Citation | [2020] EWHC 1613 (Fam) |
| Date | 02 April 2020 |
| Docket Number | Case No: BV18D04796 |
| Court | Family Division |
[2020] EWHC 1613 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Nicholas Cusworth QC
(SITTING AS A DEPUTY HIGH COURT JUDGE)
Case No: BV18D04796
Simon Webster QC and Thomas Harvey (instructed by Payne Hicks Beach) for the Applicant
Robert Peel QC and Laura Heaton (instructed by Farrer & Co) for the Respondent
Hearing dates: 23 rd March – 2 nd April 2020
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Cusworth QC:
This judgment concludes the final hearing of an application for financial remedies, following divorce proceedings. The first listed day of the hearing was Monday 23 March 2020, which has meant that as a result of the Coronavirus pandemic, it has not been conducted in the Royal Courts of Justice, but rather by means of a video-conferencing facility, through which the parties and the court have all engaged entirely remotely, save for the wife's evidence which she gave whilst in the same room as her Counsel and instructing solicitor, albeit at an appropriate distance. In this way I have taken the evidence of the parties, one witness who was overseas, and the Single Joint Expert, Ms Hall, as well as written and oral submissions from both leading counsel.
Background
The husband is English, and the wife is South American by birth but is now a British citizen. Both are currently 45. They met in 1998 and married in September 2000. The parties have two daughters; aged 8 and 3. The children respectively attend a fee paying school and nursery in central London.
The marriage came to an end in 2017. The parties separated in October/November 2017 and shortly afterwards the husband moved into rented accommodation; he now has a new partner with whom he has a young son, born in 2019. The wife continues to live in the former family home with the children of the marriage.
The wife presented her divorce petition in February 2018. Decree Nisi was pronounced in July 2018, and it has not yet been made Absolute. Child arrangements have not proved to be easy, and will no doubt have proved costly for the parties. That unfortunate background makes the costs of these financial proceedings merely a part of what must add up to a daunting total. Those financial costs for the husband stand at £697,903 and for the wife at £812,808. This is especially striking when one of the major issues between the parties beyond the value of their assets has been their past and future liquidity.
Shortly after the parties' marriage, in 2001, the parties moved to mainland Europe for the husband's work. The wife too worked in the financial sector whilst living there and continued to do so after the parties returned to England in 2004, until 2011. Following the birth of their first child, in 2012, the wife left formal employment and has not returned. In 2016, the parties moved with their elder daughter to live abroad where the husband's business was setting up a new office, and where their younger daughter was born. The family returned to London in 2017.
Not long after their return the marriage broke down. Given the value of the parties' assets, examined below, and their agreement that any award (within the spectrum of those contended for as fair for her under the sharing principle) will meet her needs appropriately without the need for her to consider a return to work if she does not wish to, her future earning capacity has not been a live issue between them. It should be said that, insofar as she may choose to return to work in the future, there has not been a suggestion that that should happen within a timescale that will affect her liquidity during the time period which will be necessary to enable full implementation of the court's order.
The family home, Flat A, has two bedrooms, but in fact the parties own three separate flats in the same building: Flat C is rented out, whilst Flat B is occupied by the nanny. Plans to unite the properties have been put on hold. Flat A is valued at £4.4m, with a mortgage of £3.5m secured on it. Flat C is worth £1.7m against a mortgage of £1.1m, and Flat B is worth £515,000. Accordingly, whilst all three flats have a gross value of £6.6m they only have equity of around £1.9m.
These mortgages over the three properties are inevitably expensive to maintain. In the period since separation the parties have used the liquidity available to them to meet these and other property payments. This has been because the husband's income has been significantly reduced from its previous levels and so has not been sufficient to service the family outgoings. Those costs together with living and legal expenses have reduced the investment fund held at the time of the parties' Forms E from around £4.2m to just under £1.5m now.
The husband's business (“B Ltd”)
The company was originally incorporated in offshore in 2011, but subsequently shifted its centre to an alternative offshore jurisdiction. B Ltd sits at the top of a corporate structure. The husband is one of the founder members of the business, as well as being its single largest shareholder. The business of B Ltd now takes two forms: Proprietary Trading, where employees trade in the markets and make profits/losses from those trades, and Market Making, where the business acts as a middle-man to facilitate trades. It deploys its own funds in the marketplace — it does not borrow money or use third parties' funds. The traders use B Ltd's money, so that the outcome of each trade directly impacts on the value of the shareholder's funds in the company.
The business started trading in late 2011. The husband and two other co-founders, Mr Y and Mr Z, are the directors of B Ltd: I heard evidence from Mr Y. Collectively, these three own nearly two thirds of the shares in the company. The husband holds about 1/3 of the total shares. The remaining shares are divided between the further employees, or former employees, or on their behalf.
The business now employs some 190 people, many more than the amount at the point when the parties' marriage broke down. It briefly operated in 3 areas, adding asset management to its other 2 arms in 2016. However, this proved short lived. After the departure of their main trader Mr X in late 2018 to set up a rival business, the asset management arm was closed down, and the business returned to its core activities — proprietary trading and market making.
The husband relies upon the fact that B Ltd has no underlying regular income stream. It briefly received some management fee income, but that ended when the short-lived asset management arm shut down in 2018. The traders therefore need to make substantial profits, to cover the business' operating costs, and to pay their own significant bonuses, which keep them employed by B Ltd rather than moving to rival concerns, before then turning a profit for the shareholders. However, historically they have done that very effectively.
In order to effect multiple trades, the business uses a number of prime brokers. The prime broker will deploy its own capital to place the trade and requires B Ltd to provide collateral against its own assets. It is therefore the husband's case that the value of B Ltd can be set at the end of each day, in that it represents the sum of the accumulated profit held by the business. He points out that talented staff are integral, and that selecting and retaining traders who will continually produce substantial profits for B Ltd is now a key skill of his. In particular he points to the period after the departure of Mr X towards the end of 2018, as a period when he had to work hard to maintain team morale and replace departing staff with others who would produce comparably good results going forward.
The husband acknowledges that most trading firms have a relatively short life span because of the difficulty in continuing to make substantial profits over a lengthy period in a fiercely competitive market. Eventually, like some other such businesses, he suggests that B Ltd will be wound up. However, although most trading businesses do not last much more than about 10 years – and B Ltd is now in year 9 of its life cycle – he says that he and his partners have no immediate plans to liquidate their asset. His case is that the very significant recent increase in staff numbers presages a new attempt to grow the business and increase profitability for the existing shareholders, rather than as any form of preparation for a sale or other liquidation at any price greater than the net asset value of the company.
During the brief tenure of the asset management arm of the business, the husband operated as a trader in asset management. He however stepped back from that section of the business even before its early closure. His performance is said to have suffered during the first 6 months of 2018, which his counsel Mr Peel QC describes as ‘a very difficult time for (him) personally because of the divorce and children proceedings’. I have no doubt that that was the case. He resigned from his asset management role in August 2018, just a few months before Mr X's departure and the closure of that element of the business. He continues to have oversight of the other teams.
The single most important dispute between the parties revolves around the value to be ascribed to the husband's interest in B Ltd. It is essentially the reason why the case has not been resolved before trial. Resolving that issue has generated a very significant...
To continue reading
Request your trial