K v L
| Jurisdiction | England & Wales |
| Judge | Lord Justice Wilson,Lord Justice Jacob,Lord Justice Laws |
| Judgment Date | 13 May 2011 |
| Neutral Citation | [2011] EWCA Civ 550 |
| Docket Number | Case No: B4/2010/1219 |
| Court | Court of Appeal (Civil Division) |
[2011] EWCA Civ 550
Lord Justice Laws
Lord Justice Jacob
and
Lord Justice Wilson
Case No: B4/2010/1219
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, FAMILY DIVISION, PRINCIPAL REGISTRY
MR JUSTICE BODEY
LOWER COURT NO: FD07D01254
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Martin Pointer QC and Mr Geoffrey Kingscote (instructed by Family Law in Partnership LLP) appeared for the Appellant "husband".
Miss Lucy Stone QC and Mr Duncan Brooks (instructed by Kingsley Napley LLP) appeared for the Respondent "wife".
Hearing date: 28 February 2011
The husband (as it will be convenient to call him notwithstanding the recent grant of a decree absolute of divorce) appeals against an order made by Mr Justice Bodey in the High Court, Family Division, on 13 May 2010 that the wife (as it will be convenient to call her) should make to him a lump sum payment on a clean break basis of £5m. The judge's judgment, [2010] EWHC 1234 (Fam), is reported under the title K v. L (Ancillary Relief: Inherited Wealth) at [2010] 2 FLR 1467. The husband contends that the award to him should have been in the sum of £18m. His own assets amount to £300,000.
The facts of the case, which are extreme, raise an issue about the application to non-matrimonial property of the sharing principle in the modern law of ancillary relief following divorce. We know that non-matrimonial property belonging to one spouse can be awarded to the other to the extent that the other needs it: in the present case the judge found that the wife's assets, which are entirely non-matrimonial, had a value of almost £57m and his order for payment out of them to the husband of £5m was very largely based on his assessment of the husband's needs. On his behalf Mr Pointer QC accepts that the award meets the husband's needs, generously assessed. But he complains that the judge failed to make an assessment by reference to the sharing principle. He argues that such an assessment would have yielded the sum of £18m. And he rightly reminds us that "when the result suggested by the needs principle is an award of property less than the result suggested by the sharing principle, the latter should in principle prevail": see the decision of this court in Charman v. Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246, at [73].
The parties are Israeli citizens. The wife, who is aged 52, is Jewish. The husband, who is aged 49, is of a different faith. In 1986 they began to cohabit in Israel and in 1987 they there underwent a ceremony of marriage which was invalid under Israeli law in the light of the difference in their faiths. In 1991 they moved to England, where they entered into a valid marriage and have lived ever since. They have three children, aged from 16 to nine. The marriage broke down in 2007 when, with the children, the wife left the matrimonial home. Thus, inclusive of the year of cohabitation and of the years of invalid marriage, the "marriage" in the relevant, loose sense endured for 21 years.
The mother's maternal grandfather, a scientist, had held founder shares in a company incorporated in Israel. In 1973, on the death of her maternal grandmother and in the light of the prior death of her mother, the wife, then aged 15, had inherited the shares jointly with her brother. In 1976 there had been a merger, as a result of which their holding became shares in S Ltd, which is a large public company quoted on the Israeli stock exchange and on NASDAQ. By 1999 the shares of the wife and the brother had become separated. It was, again, long before the cohabitation between the parties that the wife and the brother had also inherited two properties, which they still own; but their value is such that, in what follows, it will be convenient to refer only to the shares.
As a result of numerous bonus issues the wife's shares in S Ltd have massively increased in number; but, more relevantly, they have massively increased in value. When the parties began to cohabit in 1986, her shares (or portion of the shares) were worth £300,000; when they married in England in 1991, they were worth £700,000; when they separated in 2007, they were worth £28m; and, at the time of the hearing before the judge, they were worth £57.4m. From this figure the judge made a deduction – being the subject of a subsidiary challenge by the husband in this appeal – of £2m in respect of latent CGT payable in the UK in the event of remittance to it by the wife of proceeds of future sales of some of the shares. Even the other assets of the parties which brought the total back up to £57m – namely £1.3m held by the wife and £300,000 held by the husband – represented the proceeds of several, modest sales of shares in S Ltd on the part of the wife. So, most unusually, the entire wealth of both parties emanated from the wife's inheritances and, for present purposes, from the shares.
Throughout the marriage neither party generated any earned income. They had no need to do so. The dividends declared on the wife's shares in S Ltd, occasionally supplemented by the proceeds of sales of shares, provided more than enough for the family's needs. The wife is and has always been non-domiciled in the UK for tax purposes; and so it was only such of the income on the shares in S Ltd as she remitted to the UK which attracted UK income tax; and it was only such of the proceeds of her sales of shares as she remitted to the UK which attracted UK capital gains tax. The size of the dividends on the shares increased dramatically in 2002: the wife's gross average annual income in the eight years preceding 2002 was £38,000 and in the six years which succeeded it was £180,000. In 2008/2009 the figure was £460,000.
In comparison with the size of the wife's wealth, and of the income generated by it particularly in the later years, the parties pursued an extraordinarily modest lifestyle. From 1994 until the wife's departure from it, with the children, in 2007, the matrimonial home, which was bought by the wife and placed in the parties' joint names, was a three/four-bedroom semi-detached property in a town in the suburbs of London. The husband remains living in the home. Its present value is £225,000. The wife has transferred it into his sole name and it is therefore the principal component of the husband's total assets of £300,000. For many years until the breakdown of the marriage the parties ran the same modest motor-car. No chattel in the home was worth more than £500. Until very recently, when one of them began to attend a fee-paying school, all the children attended state schools. The judge found that, although neither party wished to spend lavishly, it was the husband, rather than the wife, who, on occasions, sought to restrain family expenditure, albeit that she readily concurred. At all events the family's average net annual expenditure during the later years of the marriage was only £79,000 excluding expenses relating to the car.
In that neither party went out to work, they both contributed fully to the life of the family at home. The judge found that in this regard they each made a valuable, and in their different ways an equal, contribution. In that the wife does not drive a car, one of the husband's functions was to do all the driving.
On her departure with the children from the home the wife bought another property in the same town, which they still occupy. It is situated close to the matrimonial home. No doubt she chose to make the home of the children there so that they could continue to attend their schools and move freely back to the former matrimonial home for contact with the husband. The wife's new home is, again, semi-detached and has four bedrooms and its present value is £345,000.
Following the separation the husband's claims against the wife for interim support, made through their solicitors, reflected the modesty of the level of previous family expenditure. In July 2007 he sought £30,000 p.a. for himself, together with £12,000 p.a. for the children when with him; in October 2008 he sought an increase to £48,000 p.a. for himself. Under the various arrangements actually negotiated for his interim support during the three years until the substantive hearing the husband subsisted with comparable, if not greater, economy.
For the purposes, however, of his substantive claim for ancillary relief the husband put forward very different proposals. He made clear that he wished to vacate and sell the former matrimonial home and, instead, to buy a property at a price of about £2m near Regent's Park. He said that he also proposed to buy a second home in Israel for £450,000 and a new car for £60,000. And he put forward an estimated budget totalling £105,000 p.a. exclusive of the costs of the children when with him. He added that, in accordance with his religious views, he would probably remarry and might well have a second family; but Mr Pointer has never argued that the award to the husband should be increased on that account.
The judge observed that his award of £5m, which was reflective of the open offer made by the wife at the hearing, would, when added to the husband's existing capital of £300,000, enable him both to buy the suggested property in central London for £2m and, according to Duxbury tables, to spend upon himself a net annual sum of £130,000, inflation-linked, for the rest of his statistical life. The judge held that, in the light in particular of the modesty of the matrimonial home and of all other aspects of the family's standard of living during the marriage, the award went further than very generously to meet the husband's needs; and the judge therefore observed in passing that an element of the award could be regarded as a top-up referable to the sharing principle. In this appeal Mr Pointer does...
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