N v F

JurisdictionEngland & Wales
CourtFamily Division
Judgment Date2011
Neutral Citation[2011] EWHC 586 (Fam)
Date2011

Divorce – Financial provision – Ancillary relief – Non-matrimonial property – Parties both American – Husband having significant financial resources prior to marriage – Two children being born during marriage – Family moving to London and husband continuing to earn well as banker – Wife not working after arrival in London – Husband leaving banking and gaining employment as teacher – Marriage breaking down after 16 years – Wife seeking ancillary relief – Whether husband having alienated funds – Whether husband failing to exploit earning capacity – Whether any of husband’s pre-marital wealth to be excluded from application of sharing principle.

The parties, who were both American, met in New York and married in 1993 when the husband was 41 and the wife 29. By the time of the marriage the husband had built up significant financial resources, having joined a well-known investment bank in 1979; his assets amounted to around £2.116m. In their early years together, the wife studied psychology, obtaining a PHD in that subject. She set up a private practice in New York as a qualified licensed clinical psychologist. In 1997, the husband left his job and started up a Scandinavian brokerage firm/investment bank. The only property that was owned by the parties during the marriage was a holiday home in Connecticut. In September 2004, they moved to London, where the husband set up another office of the Scandinavian bank. By that time, the parties had two children. They rented a property for around £12,000 per month, the rent being paid by the bank. The husband’s earnings rose steadily, culminating in pay of over $1.5m for 2007. However, in March of that year, he left banking. Shortly thereafter he started work as a teacher, earning £52,000 gross. The wife did not work following the family’s arrival in London; she estimated that, had they remained in America, she would have been able to earn $40,000–$60,000 pa. The parties enjoyed a high standard of living and did not reduce their spending after the husband had left banking. A statement of the family’s source and application of funds, drawn up by the husband in July 2009, showed family expenditure of $800,000 with income to put towards it (including investment income) of only $350,000. The marriage broke down later in 2009 and the wife issued divorce proceedings in November. The total of the parties’ assets was £9.714m, with the husband’s sole assets amounting to £7.202m. His proposal was that the wife should receive £4.17m (43% of £9.714m), which would have left him with £5.544m, or £1.374m more than the wife. He submitted that such met the justice of the case, and that the sum of £4.17m met the wife’s reasonable

needs. Issues arose, inter alia, as to how the court should reflect, if at all, the property that the husband had brought to the marriage in 1993. The wife contended that there should be no departure from equality since half of £9.714m was in fact barely enough to meet her reasonable needs. In her Form E, her housing capital need was stated to be some £4.947m. Her budget was effectively stated to be £187,000, which would require a Duxbury fund of around £4.734m. Her claimed needs therefore amounted to approximately £9.682m. She claimed that it would be unfair for the husband’s pre-marital property to be given reflection in the award since that property had been converted into and merged with matrimonial property. She also submitted that the husband had ‘alienated’ certain sums during the marriage and that, since leaving the bank, he had eschewed the exploitation of a substantial earning capacity in favour of a less well paid job.

Held – (1) If a party disposed of assets to defeat another party’s claim, such a transaction could be reversed under s 37 of the Matrimonial Causes Act 1973. Similarly when there was clear evidence of dissipation (in which there was a wanton element), the dissipated sums could be added back or re-attributed. Short of that, a party could do what he wanted with his money; faint criticism falling short of either of those standards was not acceptable. Quite apart from the fact that the sums mentioned were de minimis in the context of the case, the wife’s submission that the husband had unjustifiably alienated funds therefore had to be rejected (see [39], below).

(2) If it was alleged that a party was not exploiting an earning capacity, then it was incumbent to prove that by clear evidence rather than by anecdotal scraps. In the instant case, the court would have expected evidence from an employment consultant demonstrating that the husband had indeed had a substantial earning capacity in the financial sector since 2007. The evidence relied on by the wife was no more than anecdotal scraps, which the husband had convincingly demonstrated were either misunderstood, hopelessly stale, or insubstantial. Furthermore, even if the wife had been able to show that the husband had indeed eschewed a higher earning capacity, it would be impossible to criticise him for moving into another more happy and fulfilling field at the age of 55, even if that was rather lower paid (see [42], below).

(3) Although the treatment of pre-marital property was highly fact-specific and very discretionary, the discretion had to be exercised consistently and predictably. Such property had to be taken into account since it presented a contribution made by one party unmatched by an equivalent contribution by the other. However, the longer the marriage went on, the easier it was to say that, by virtue of the mingling of that property with the product of the parties’ marital endeavours, the supplier of that property had, in effect, agreed to share it with his or her spouse. The appropriate approach was, first, for the court to decide whether the existence of pre-marital property should be reflected at all; that depended on

questions of duration and mingling. If it decided that reflection was fair and just, the court should then decide how much of the pre-marital property should be excluded (whether it should be the actual historic sum, less (if there had been much mingling), or more (to reflect a springboard and passive growth)). The remaining matrimonial property should then normally be divided equally. Finally, the fairness of the award should be tested by the overall percentage technique. Of course, that was subject to the question of need. In the circumstances, it would be wrong and unfair for none of the husband’s pre-marital wealth to be excluded from the sharing principle; it was the bedrock on which the marriage had been founded. As against that were the undoubted facts that the marriage was long and the monies were well and truly mingled with the material funds, signifying an acceptance by the husband that to a great extent the monies, or at least their growth or earnings, would be shared with the wife. Accordingly, the sum of £1m would be excluded; that satisfied the justice of the sharing principle, and the residual sum would meet the wife’s needs. But for her needs, more would have been excluded. The actual percentage of the divisible whole that the wife would receive would be 44.7%, amounting to £4.237m after payment of her debts. It was not easy to assess the wife’s needs as her only statement of needs in her Form E was completely unrealistic. However, in the circumstances, an all-in housing fund of £1.75m was appropriate. After deducting the housing fund, the wife would have a Duxbury fund of £2.487m which would produce an annual income of £104,000. She could live comfortably on that; the historic rate of expenditure was simply not sustainable for the future (see [7]–[9], [14], [45], [47]–[48], [50], below).

Cases referred to in judgment

C v C[2007] EWHC 2033 (Fam), [2009] 1 FLR 8.

Charman v Charman[2007] EWCA Civ 503, [2007] 2 FCR 217, [2007] 1 FLR 1246.

FZ v SZ (Ancillary Relief: Conduct: Valuations)[2010] EWHC 1630 (Fam), [2011] 1 FLR 64.

Gojkovic v Gojkovic [1990] FCR 119, [1990] 2 All ER 84, [1992] Fam 40, [1991] 3 WLR 621, [1990] 1 FLR 140.

H v H[2008] EWHC 935 (Fam), [2008] 2 FLR 2092.

Haldane v Haldane [1977] AC 673, [1976] 3 WLR 760, PC.

Jones v Jones[2011] EWCA Civ 41, [2011] 1 FCR 242, [2011] 3 WLR 582, [2011] 1 FLR 1723.

LKW v DD (FACV 16/2008), HK CFA.

M v M (Prenuptial Agreement) [2002] 1 FLR 654.

Mallett v Mallett (1984) 156 CLR 605, Aus HC.

Martin v Martin [1977] 3 All ER 762, [1978] Fam 12, [1977] 3 WLR 101, CA.

McCartney v Mills-McCartney[2008] EWHC 401 (Fam), [2008] 1 FCR 707, [2008] 1 FLR 1508.

Miller v Miller, McFarlane v McFarlane[2006] UKHL 24, [2006] 2 FCR 213,

[2006] 3 All ER 1, [2006] 2 AC 618, [2006] 2 WLR 1283, [2006] 1 FLR 1186.

Norbis v Norbis (1986) 161 CLR 513.

Radmacher (formerly Granatino) v Granatino[2010] UKSC 42, [2010] 3 FCR 583, [2011] 1 All ER 373, [2011] AC 534, [2010] 3 WLR 1367, [2010] 2 FLR 1900; affg[2009] EWCA Civ 649, [2009] 2 FCR 645, [2009] 2 FLR 1181; rvsg[2008] EWHC 1532 (Fam), [2009] 1 FCR 35, [2009] 1 FLR 1478.

Robson v Robson[2010] EWCA Civ 1171, [2011] 3 FCR 625, [2011] 1 FLR 751.

S v S (Non-Matrimonial Property: Conduct) [2006] EWHC 2793, [2007] 1 FLR 1496.

Smith (decd), Re, Smith v Smith [1991] FCR 791, [1991] 2 All ER 306, [1992] Fam 69, [1991] 3 WLR 646, [1991] 2 FLR 432, CA.

Vaughan v Vaughan[2007] EWCA Civ 1085, [2007] 3 FCR 533, [2008] 1 FLR 1108.

Ward v James [1965] 1 All ER 563, [1966] 1 QB 273, [1965] 2 WLR 455, CA.

White v White[2000] 3 FCR 555, [2001] 1 All ER 1, [2001] 1 AC 596, [2000] 3 WLR 1571, [2000] 2 FLR 981, HL.

WLK v TMC (FACV 21/2009), HK CFA.

Application

Subsequent to issuing divorce proceedings in November 2009, the wife sought ancillary relief following her 16-year marriage to the husband. The Family Division of the High Court considered how it should, when exercising its powers to award ancillary relief, reflect, if at all, the substantial assets which the husband had brought to the marriage in 1993. The facts are set out in the judgment of Mostyn J.

Timothy Amos QC and Daniel Bentham...

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