H v H
| Jurisdiction | England & Wales |
| Judge | Lord Justice Munby |
| Judgment Date | 02 February 2010 |
| Neutral Citation | [2010] EWHC 158 (Fam) |
| Docket Number | Case No: FD07D04479 |
| Court | Family Division |
| Date | 02 February 2010 |
[2010] EWHC 158 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Before: Mr Justice Munby
(now Lord Justice Munby)
Case No: FD07D04479
Mr Charles Howard QC and Mr Harry Oliver (together on 11–12 May 2009 with Miss Emma Chamberlain in relation to tax issues) (instructed by Hughes Fowler Carruthers) for the Petitioner (wife)
Mr Lewis Marks QC and Miss Hannah Baker (on 1–3, 9, 27 July 2009 Miss Katie Cowton) (together on 11–12 May 2009 with Mr Stephen Brandon QC and Miss Harriet Brown in relation to tax issues) (instructed by Manches) for the Respondent (husband)
Hearing dates: 28–30 April, 1, 7–8, 11–15 May, 1–3, 9, 27 July 2009
Lord Justice Munby:
These are ancillary relief proceedings which would be straight-forward but for three factors: the fact that vast wealth was generated during the last three years of a marriage which lasted for twenty years; the unusual nature of the business that enabled the husband, with his partners, to generate that wealth; and, as a consequence, the more than usually difficult task – assuming the task to be both relevant and feasible – of assessing the true value of the business as a prelude to determining the share (if any) of the business to which the wife can appropriately lay claim.
That said, the reality is that this is and always was a comparatively simple case which has become extended in its scope and protracted in its length almost beyond reason by the forensic enthusiasm with which it has been pursued on both sides. The trial bundles extended to 15 lever arch files. The written opening submissions ran in all to 140 pages. The written submissions in relation to certain tax issues (see below) ran to more than 60 pages. The time estimate (10 days, the first day being a reading day) soon proved to be unrealistic, for the trial, excluding the reading day, lasted for 15 days which, because of the over-run, had to be spread over the period from 28 April 2009 to 9 July 2009. Final oral submissions followed at a hearing which had to be listed at Newcastle upon Tyne, where I was then sitting, on 27 July 2009. The written closing submissions ran, in all, to more than 150 pages with almost a further 100 pages in relation to alleged litigation misconduct.
The skill with which, on both sides, all this effort was deployed was first class; whether the endeavour was really necessary is, perhaps, another matter. But in venturing this observation I emphasise how acutely I am conscious not merely of the priceless advantage of hindsight but also of the forensic experience that the inner realities of a case are often much more apparent to the judge who watches the battle played out before him than to those engaged in the fray – this, after all, is one of the consequences, as also one of the advantages, of the adversarial process.
I make these points not to criticise but to explain why in this judgment I propose to concentrate on what, at the end of the day, matters. Doing so means that I pass by in silence much of what has been put before me, whether in evidence or in submissions. I intend no disrespect to counsel but if I was to deal with every topic that was canvassed before me this judgment would extend to a length grossly excessive even by my standards and, I am satisfied, all to no useful purpose. I make it clear however that in coming to my conclusions I have, of course, had regard to all the evidence and all the submissions.
There are two other preliminary points I should make. In the first place, such is the scale of the wealth here, even taking the most pessimistic view, that there is not, generally speaking, much point in analysing the figures with an excessive degree of precision. Much of the time, and except when a greater degree of accuracy is called for, I will therefore round the figures to the nearest million or fraction of a million. Secondly, for convenience and subject only to what, in the great scheme of things is a tolerable degree of inaccuracy, I propose to refer to most amounts in £ sterling, even though significant parts of the husband's business activities are conducted and some of the assets are held in other currencies which have from time to time moved in relation to sterling. I have taken into account these exchange rate movements but, generally speaking, I need not refer to them.
The background
The husband was born in 1958, the wife in 1955. They married in 1987. There are three children born of the marriage: twins (a boy and a girl) born in 1991 and a girl born in 1996. The matrimonial home, a prestigious property in London, was acquired in 1996 for £2.4 million; a further £1.5 million was spent on refurbishment. The husband, who is by profession an accountant, began his current business (see below) in August 2004. The parties separated in March 2007, the wife remaining in the matrimonial home with the children. She issued her petition in September 2007. Both parties filed a Form A in October 2007. The decree nisi and the decree absolute were both granted in June 2008.
After much interlocutory skirmishing (including hearings before Hogg J and Baron J, an unsuccessful FDR before Coleridge J and further hearings before Baron J and Black J) the final hearing came on before me on 27 April 2009. It concluded, as I have said, on 27 July 2009. The wife was represented by Mr Charles Howard QC leading Mr Harry Oliver and, on the tax matters, by Miss Emma Chamberlain; the husband was represented by Mr Lewis Marks QC leading Miss Hannah Baker (during July 2009 Miss Katie Cowton) and, on the tax matters, by Mr Stephen Brandon QC leading Miss Harriet Brown. I am very sorry that my new commitments, which began only two days later and which in the event and partly for unforeseen reasons have been more onerous than I had initially imagined, should have delayed this judgment for much longer than I would have wished.
The background: the husband's business
The husband's business, carried on with a small number of partners, his share being 25.5%, is in what is called quantitative long-short equity trading. It takes advantage of price mismatches and predictable patterns of stock price movements over very short timescales – a few hours at most, sometimes minutes or even seconds – which typically are generated by structural imperfections in the market. The business involves huge numbers of stock market transactions every day, the massive profits which have resulted being generated, despite the often minute profits on individual transactions, by the sheer volume of the daily trading. The trading is fully automated – computerised – with almost no manual interaction. The 'cutting edge' computer systems which the business has developed have been the key to its success. Computer based strategies involving complex algorithms are used by the business, first to test against historical data whether a strategy in development will 'work' (as it was explained to me, “strategies are developed and comprehensively back-tested”), secondly, if a strategy has been demonstrated to work, to conduct the actual trading (“high speed electronic connectivity to permit fast execution of orders”) and, thirdly, to monitor the trading so as to ensure that the automated process is profitable and that unprofitable trading is automatically stopped in time.
The gross revenues of the business have been plotted on various graphs and subjected to much statistical analysis. As it happens I do not need to go into any of this in any great detail. The final version of the key graph (which I am satisfied is both factually accurate and statistically valid 1) shows the gross revenues in terms of both the actual
weekly figures and moving averages calculated over the previous 13, 26 and 52 weeks. Although, inevitably, the moving averages follow somewhat different tracks, the overall picture, so far as is relevant for present purposes, is precisely the same. From a starting point of zero in August 2004 the graph climbs fairly rapidly and steadily to a peak of between $4 million and $5 million per week in June-July 2006 (the 13 and 26 weeks moving averages), then falling equally steadily, albeit at a shallower gradient, to less then $1 million in June 2009 (the most recent figure I have), indeed reaching perilously close to the 'breakeven' figure of $410,000 required to meet the trading expenses but before the payment of staff bonuses. Calculations based on the moving averages from the peak in June-July 2006 suggest that the decline since then will, if continued at the same rate, have taken the gross revenuesbelow the 'breakeven' figure in about September 2009 and back to zero by about February 2010.The overall trajectory is clear: taking the overall period from August 2004 until February 2010, a period of 66 months, and assuming that the decline since June 2009 follows the trend over the previous three years since June 2006, the gross weekly revenues of the business increased from zero to a fraction short of $5 million (the highest actual figure) in July 2006 – a period of some 23 months – before returning to zero between then and (say) February 2010 – a period of 43 months. I might add that, consistently with this general picture, for the downward slope has been fairly constant, the gross revenues were at about $3 million per week at the time the parties separated in March 2007.
Although the downward slope has, as I have said, been fairly constant it is also clear that the business returns have tended to be more volatile (that is, the standard deviations have been greater) and therefore riskier in the second half of 2007 and since mid-2008.
The background: the matrimonial assets
By the end of the hearing the parties had largely reached agreement as to the value of the matrimonial assets,...
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