Kingdon v Kingdon
| Jurisdiction | England & Wales |
| Judgment Date | 04 November 2010 |
| Neutral Citation | [2010] EWCA Civ 1251 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B4/2010/0681 |
| Date | 04 November 2010 |
[2010] EWCA Civ 1251
His Honour Judge Cardinal, Sitting as a High Court Judge
Before: Lady Justice Arden
Lord Justice Wilson
and
Lord Justice Toulson
Case No: B4/2010/0681
LOWER COURT NO: WR4D00411
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
FAMILY DIVISION, BIRMINGHAM DISTRICT REGISTRY
Mr Valentine Le Grice QC and Mr Huw Jones (instructed by Williamson and Soden, Solihull) appeared for the Appellant.
Mr Robin Rowland (instructed by Benussi &Co, Birmingham) appeared for the Respondent.
Hearing date: 11 October 2010.
Lord Justice Wilson:
A: INTRODUCTION
The husband (as I will call him notwithstanding the grant of a decree absolute of divorce in 2005) appeals against an order for ancillary relief made against him in favour of the wife (as I will call her) by His Honour Judge Cardinal, sitting as a judge of the Family Division, Birmingham District Registry, on 3 March 2010.
On 18 April 2005 a district judge of the Worcester County Court had, by consent, made an order for ancillary relief between the parties on a clean break basis. By his reserved judgment dated 3 March 2010 HHJ Cardinal (“the judge”) found that the order dated 18 April 2005 had been vitiated by material non-disclosure on the part of the husband. But the judge did not proceed to set the whole order aside. Instead he built on it. By the substitution of just one figure for another in that order, he proceeded, there and then, to make the additional provision for the wife which in his view would have been made in the event that the husband had given proper disclosure. The additional provision was a lump sum of £481,000.
So the husband's appeal is against the order for payment of a lump sum of £481,000. Mr Le Grice QC, who did not appear for him before the judge, makes four points on his behalf. The third is of some general interest but the most important and troublesome is the second. It raises the following question:
When the court finds that an order for ancillary relief was vitiated by non-disclosure, should it set it all aside and direct that the application for ancillary relief be reheard, almost certainly on a later date, on the basis of a conventional examination of all the up-to-date figures and other circumstances? Or can it – and, if so, when – proceed there and then to make the additional or different provision which in its view would have been made at the time of the order in the event that proper disclosure had been given?
B: BACKGROUND TO THE 2005 ORDER
The parties were married in 1980 and separated in 2003. They had three children, all boys, who, at the time of the order in 2005, were aged 20, 18 and 13. During the marriage the main role of the wife, who is now aged 52, was that of a wife, a mother and a home-maker. At times she also worked as a legal executive.
The husband, who is now aged 54, is a chartered accountant and has had a successful career in financial services. Initially he was in private practice. Between 1995 and 1997 he was finance director of the West Bromwich Building Society. Then he moved to work for Kensington Group PLC (“KG”), a quoted company which provided mortgage services. By the time of the separation he was the finance director of KG and was earning about £350,000 p.a. inclusive of bonus. In 2003–04 he also made £1.7m as a result of his exercise of share options in KG and of immediate sale of the shares.
On 1 October 2004 the husband ceased to be finance director of KG and became finance director of Money Partners Holdings Ltd (“MPH”), a private company. By then the wife had activated her application for ancillary relief and affidavits in Form E had been exchanged. To the wife and to the court the husband duly disclosed his move of employment to MPH. He had foreshadowed it in a brief discussion with her as early as March 2004.
MPH had been incorporated in December 2003 as a venture between KG, which held 20% of its shares, and a group of individual investors, who held the balance. The purpose of the venture was to make sub-prime mortgage loans. Such were mortgage loans at high rates, for example to mortgagors whose personal circumstances rendered their ability to service them somewhat speculative or loans by way of second mortgage. Having made such loans, MPH was to sell them for a fee to KG. In October 2004 the FSA authorised MPH to be a lender and, through subsidiaries, it began to trade.
In the proceedings for ancillary relief the husband disclosed that his annual salary at MPH would be almost half that at KG, namely only about £200,000. He also disclosed that, as a result of his departure from KG, he had foregone the right to exercise further share options. It now seems that, had he not foregone them, he could have made a modest gain – about £120,000 – on exercise in December 2004 of a small proportion of them. Whether any of the others would have proved to be of value is unclear.
C: THE 2005 ORDER
The date fixed for the hearing of the wife's application for ancillary relief was 14 March 2005. On that date, at the door of the court and with the aid of solicitors and counsel on both sides, the parties reached their agreement. On the basis of it, a consent order was subsequently drafted, filed and approved by a district judge; and, as I have indicated, it was dated 18 April 2005. The basis of the order was that the wife's application for ancillary relief should be resolved on a clean break basis by an equal division of their assets and by an additional payment to her by the husband of £200,000. The primary rationale behind the additional payment appears to have been that, even following his move to MPH, the husband was likely in the future to generate vastly greater earnings than was the wife as a legal executive.
The parties' agreement was translated into provisions of the order dated 18 April 2005 to the following effect:
(a) the husband should transfer to the wife his interest in the matrimonial home near Kidderminster;
(b) in the event of a grant of planning permission to convert to residential accommodation two barns which formed part of the curtilage of the home, the wife should pay to the husband one half of the net increase in the value of the property as a whole, to be determined by a named valuer;
(c) the wife should transfer to the husband her interest in their flat in London;
(d) the husband should pay to the wife a lump sum of £500,000, being as to £300,000 the sum necessary to achieve equality of division and as to £200,000 the additional payment;
(e) the husband's pension rights should be split equally between himself and the wife; and
(f) the husband should make periodical payments for the boys, including the school fees of the youngest, and should pay their tuition fees at university up to first degree.
The provisions of the order dated 18 April 2005 were implemented. Later in 2005 the parties secured planning permission for conversion of the barns with the result that, in accordance with the determination of the valuer, the wife paid £50,000 to the husband.
D: THE NON-DISCLOSURE
What the husband failed to disclose to the wife prior to the making of the 2005 order was that he was a member of the group of individual investors in MPH to which I have referred in [7]: on 9 July 2004 he acquired 200,000 £1 shares in MPH, being 10% of the issued shares.
The husband bought the shares at par, i.e. for £200,000, being a sum which, on the date of purchase, he borrowed from Barclays. For a time the borrowing was secured on the proceeds of the exercise of his share options at KG. But, just as he did not disclose the shares, so also he did not disclose the borrowing.
The husband's ability to sell the shares was the subject of restrictions set out in a Shareholders' Agreement. In summary:
(a) He could not sell the shares at all until 9 July 2005, being the first anniversary of the agreement, without the consent of KG and a specified individual investor.
(b) KG was given an option to purchase some of his shares during the three months following the filing of MPH's accounts for the year ended 30 November 2006, i.e. in effect in 2007, at a price to be calculated by reference to MPH's performance, and had an option to purchase the remainder two years later, i.e. in effect in 2009, at a price to be calculated similarly.
(c) From 9 July 2005 until the date of expiry of KG's first option in 2007 the husband could sell his shares but only at par, to an existing shareholder and subject to KG's options.
(a) Three weeks after he acquired the shares, namely on 3 August 2004, the husband swore his affidavit in Form E. In it he made no mention of the shares. The fact, if he is being honest in so stating, that the material to be included in the affidavit had been provided by him to his solicitors prior to 9 July 2004 is no mitigation whatever.
(b) In October 2004 the husband provided answers to questionnaire. In them he denied that he had share options in MPH. The denial was true but misleading. Nor did he disclose the shares in response to a question about incentives for moving from KG to MPH.
(c) By letter from his solicitors dated 10 February 2005 the husband reiterated that no share options in MPH were available to him.
(d) For the hearing on 14 March 2005 the husband's then counsel filed and served a position statement. Of its contents the husband was aware. Counsel wrote that “all the shares [in MPH] are held by [KG] and the venture capital investors. [The husband] will not...
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