Goddard-Watts v Goddard-Watts
| Jurisdiction | England & Wales |
| Judge | SIR JONATHAN COHEN |
| Judgment Date | 03 February 2022 |
| Court | Family Division |
Financial remedies – Rehearing – Consent order set aside for non-disclosure – Final order sealed following contested hearing – Again set aside for non-disclosure of negotiations to sell shares at substantially higher value than expert valuation – Whether wife entitled to increased value in company post-separation – Treatment of wife’s gifts to family – Contribution in form of all care for children – Costs.
The husband and wife were in a relationship for about 22 years in all. They had three children. The husband (and his family) had been successful in business. By 2010, when the divorce took place, the husband had moved to Switzerland. The wife had remained in England, living in the former matrimonial home.
In June 2010, the first financial remedies order was made by consent, on the basis that the wife would receive 40–45 per cent of the disclosed assets. The former matrimonial home (valued at about £3.25 million) was to be transferred to the wife and the husband was to pay her a lump sum of £4 million in instalments; the final £1 million was to be paid at the rate of £10,000 per month (over eight years and four months). The husband had valued his interest in his business at £6 million. The wife later discovered that the husband had failed to disclose two valuable trusts of which he was the principal beneficiary. She successfully applied in 2015 to have the consent order set aside on the basis of non-disclosure.
In the second set of proceedings, the SJE assessed the 2010 value of the husband’s share in his business at about £6.7 million (within about 10 per cent of what the husband had said in 2010) and at about £16.1 million at the time of the assessment. It was known that there was a company (FED) interested in purchasing the husband’s business for £82.6 million, net of debt, with various caveats, but the husband’s evidence was that FED were no longer proceeding with this offer. On 28 October 2016, the High Court judge circulated his judgment, in which he explained that he would be adopting the approach set out in Kingdon v Kingdon [2011] 1 FLR 1409, addressing only the assets that had not been disclosed. The day before the judgment was handed down on 23 November 2016, an agent acting for the husband emailed FED with an offer to sell 25–30 per cent of the husband’s holding for £25 million to £30 million in cash (which suggested an enterprise value for the business of £125 million). This offer was not disclosed in the proceedings and the order made by the court provided for the husband to pay a further lump sum of £6.42 million, on the basis that this was half the marital element of the undisclosed trusts, with certain adjustments.
In January 2018, FED purchased 25 per cent of the total shares, being 25 per cent of the husband’s total shares and 25 per cent of the total shares held by the children’s trust. The husband received £20.45 million and the settlement £4.45 million. The sale contract provided that FED had an option exercisable in or before January 2021, to buy the residue of the shares for £75 million. In the event FED did not exercise its option. The contract also gave the husband an option for two years, beginning in January 2021, to buy back the shares at the sale price. The husband’s unchallenged evidence was that commercially he needed either to float or to sell some or all of the company, so that he could repay FED £25 million.
In 2018 a different High Court judge held that if the judge who had heard the second set of proceedings had known about the FED offer, he would have delayed handing down his judgment while the full and true facts were ascertained, so that the wife and her advisers could take stock. The judge found that the non-disclosure of the FED offer had deprived the wife of ‘a real prospect of doing better at a full hearing’ and that the wife was accordingly entitled to re-open the case.
Prior to this hearing the wife had offered to settle her claim for £3 million. In November 2019, this offer was repeated, with an additional requirement that the husband pay her legal costs of £660,000. On 4 February 2021, the wife increased her required sum to £5 million plus costs. These offers were all rejected by the husband. On 12 January 2022, the wife offered to settle for £13.4 million, to be paid by 31 January 2024 or any earlier realisation of the husband’s shares in the company. The husband replied with a proposal that the wife receive nothing, on the basis that he would not seek his own costs.
The third set of proceedings (the second re-hearing of the wife’s financial remedies claim) came before yet another High Court judge in January 2022. The husband now owned 61.3 per cent of the business, FED 25 per cent, and the children’s trust 13.6 per cent. In November 2020 the new SJE valued the husband’s interest in the business at £2.9 million but in 2021, in a second report, she revised this to £56.4 million, partly because of a reduction in the company’s debt but mostly because a substantial increase in projected maintainable earnings. In May 2021, at the judge’s direction, the husband filed and served a sworn statement providing full details of, among other things, any discussion with any third party in relation to any sale or potential sale of all or part of the business.
Despite having received over £10 million cash so far in the financial remedies proceedings, the wife now only had about £3 million outside the value of her home to meet her income needs. She was going to have spent about £2.5 million on legal costs (she had recovered about £800,000 of this so far from the husband). She had also bought each of the three children a home in London, at a total cost of £2.4 million. She had also gifted £360,000 to members of her family. The value of her own home was still apparently about £3.25 million. She put her income needs at £346,000 per annum.
The husband owned homes with a combined equity of about £6.4 million. He had bank accounts with about £900,000 in them and cars, boats and watches worth about £5.1 million. Taking into account his outstanding costs and loans, his net assets, excluding the company and a related service-level agreement, were about £9.7 million. He had pension funds worth about £1 million. He put his own income needs at about £1.8 million per annum but his actual income was only about £200,000 per annum (he had been making up the difference using the sale proceeds of various assets).
At a late stage of the proceedings, the husband proposed that the children’s trust make a payment to the three children to enable them to repay the wife the purchase cost of their flats. The wife rejected that offer.
Held, awarding the wife £1.1 million on a needs basis—
(1) In many cases the court would have considered it appropriate for the wife’s gifts to the children and her family members to be added back into her resources, particularly given the husband’s offer to refund. On these facts, however, this was not appropriate. Given the extent of the husband’s expenditure, the relatively modest expenditure by the wife to provide each of their children with a starter home had not been inappropriate and neither had her payments to other family members. Because of the lack of communication between the family members, it was understandable that the wife had done what was necessary or desirable for the children without reference to the husband. The husband could have made his offer in relation to the children’s trusts very much earlier than he had done and if it were to be taken up it would simply mean less being available for the children at a later stage, including the three of the husband’s four children from his second relationship who were also beneficiaries (see [65]–[67], below).
(2) The court’s starting point was that it was adjudicating upon the wife’s claim de novo, albeit against the background of financial remedy orders made in the past. Bearing strongly in mind the husband’s litigation conduct, which had deprived the wife of the opportunity to consider the resolution of her claims with full knowledge of the asset base, the approach the court should adopt now, consistent with the approach taken in 2016, was, nonetheless, the approach taken in Kingdon v Kingdon[2010] EWCA Civ 1251, [2011] 1 FCR 179. In adopting this approach, the court took into account all the facts, including the husband’s ‘turpitude’. This was not an all (complete rehearing) or nothing (sharing having already taken place) case. Each case deserved its own bespoke treatment (see [72], [73], [86], below).
(3) The wife had received her fair share of the non-disclosed trusts in 2016 and her share of the other assets in 2010. The single issue in this third set of proceedings had been the value and realisation of the husband’s shares in the business. However, the husband’s disclosure of the value of the business in 2010, which had formed part of the basis of the parties’ agreement at that time, had not been challenged. It followed inevitably that the wife had received her share of the business in 2010. Since then, the wife had made no further contribution to the marital partnership, the husband had not been trading with the wife’s funds, and she had not been bearing any of the risk. If the business had gone bust, the husband would not have been able to resuscitate a claim against the wife. It was well established law that changes in the value of an asset after an order effecting sharing had been made would not justify reopening the capital claims. The wife claimed that if she had known the full picture and prospects of the business she might have insisted that she receive some of the husband’s shareholding in the company as part of the settlement. The court rejected this as a rewriting of history. It would never have been in the wife’s contemplation to seek an interest and nor would it ever have been awarded. It would not in general terms be appropriate or fair for the wife to share in the increase in the value...
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