Parra v Parra

JurisdictionEngland & Wales
Judgment Date2002
Date2002
CourtFamily Division

Divorce – Financial provision – Clean break – Husband seeking transfer of property jointly owned with wife – Potential for value of property to increase if planning permission obtained – Whether clean break achievable – Whether court should make claw back provision.

The husband and wife married in 1980. Through their joint efforts and skills, the couple created a business, which over recent years provided the family with a high standard of living. However, following the breakdown of the marriage, the relationship became acrimonious and both parties were keen to achieve a clean break. The two important assets were a company, which designed and supplied exhibition stands, and land known as SW. The parties were the only two directors of the company and were equal shareholders. SW was owned by the couple in equal shares. It was agreed by the parties that if planning permission for residential development could be obtained it would dramatically increase the value of SW but while the wife’s advisers were optimistic about the possibility of obtaining such permission the husband’s advisers were not. The wife argued that the parties should enter into an option agreement with a developer identified by her and sought an order for the sale of SW on that basis but the judge decided as a preliminary issue that this would not be fair and further decided that the prospects of obtaining planning permission did not warrant an adjournment for their further consideration and investigation. Accordingly, in proceedings for ancillary relief, the issue arose as to whether, given, inter alia, the potential of SW, a clean break order could be achieved. The husband argued that there should be a clean break (which the court had to consider under s 25A(1) of the Matrimonial Causes Act 1973) on the basis that the wife’s shares in the company and her interest in SW should be transferred to him and he would make a lump sum payment to her which would result in her share of the net assets being below 50% of their current net value. However, the wife argued that there should be a claw back provision which would enable her to benefit from any future large increase in the value of SW if planning permission were granted and also that the lump sum payment to her should have the result that her share of the net assets would be over 50% of their current net value.

Held – (1) The objective of the court was to achieve a fair result in all the circumstances of the case. In the instant case, there were risks that a claw back and the continued relationship thereby created between the parties

would prolong the present ill will and friction, or raise future difficulties. Therefore, there were advantages in a complete clean break. However, in the interests of fairness, a clean break order on the basis of a transfer of SW to the husband had to include a claw back, as unfairness would arise if he retained all the benefit derived from any future grant of planning permission for residential development, or the hope of such a grant. Furthermore, when considering what was fair it was relevant and important to consider the prospects and income positions of the parties following a clean break. When considering the respective future positions of the parties, particularly regarding remuneration and benefits in kind during their working lives, it was important to remember that the company (the platform for the husband’s future prospects) was created by the joint efforts of the parties, and that by reference to the history of the marriage and business it was obvious that fair provision on divorce should result in equality between the parties. The conclusion that the company was likely to return to making good profits from the platform created by the joint efforts of the parties, and the consequential conclusions as to the income by way of remuneration, other benefits the husband would receive as director of the company and the increase or potential increase in the capital value of the company, had the consequence that in all the circumstances, to achieve a result that met the yardstick of equality, the wife should be paid a lump sum of £925,000, which gave her more than 50% of the net assets on the agreed values; White v White[2000] 3 FCR 555 applied.

(2) (Judgment relating to costs) In the instant case, although the wife had been successful on the issues as to claw back, the prospects of the company and the amount of her lump sum, she could not seek to avoid her responsibility for failing to raise the issue of claw back earlier by saying that the husband could have raised it. Accordingly, the wife’s conduct should be reflected in the order for costs against her; A v A (costs: appeal) [1996] 1 FCR 186 applied.

Cases referred to in judgments

A v A (costs: appeal) [1996] 1 FCR 186, [1996] 1 FLR 14.

Cowan v Cowan[2001] EWCA Civ 679, [2001] 2 FCR 331, [2002] Fam 97, [2001] 3 WLR 684, [2001] 2 FLR 192.

Dharamshi v Dharamshi[2001] 1 FCR 492, [2001] 1 FLR 736.

N v N (financial provision: sale of company) [2001] 2 FLR 69.

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

Application

During ancillary relief proceedings, a dispute arose between the parties, Pepe Parra and Yvonne Parra, as to whether a clean break order could be achieved. The facts are set out in the judgment.

Jeremy Posnansky QC for the husband.

Jonathan Cohen QC for the wife.

Cur adv vult

22 May 2002. The following judgment was delivered.

CHARLES J.

[1] The parties to these ancillary relief proceedings are Pepe Parra (Mr Parra) and Yvonne Parra (Mrs Parra). They are now aged 43 and 44 respectively. They married when they were both 22 in November 1980. They have two children, a son, who is nearly 17, and a daughter, who is 15. Both children are day pupils at public schools. It is reasonable to expect that both children will go on to higher education when they leave school.

[2] Through very hard work, their joint efforts and skills, Mr and Mrs Parra have, from effectively nothing, created a business which over recent years has provided the family with a high standard of living.

[3] A sad feature of this case is that since the breakdown of their marriage acrimony has developed between Mr and Mrs Parra. They are both keen to have a clean break. A central issue in this case is whether the nature of their assets permit this to be done fairly.

[4] The two most important assets are the following. (i) A company called 2 Heads Global Design Ltd, whose principal activity is, and has been, the design and supply of exhibition stands. The only directors of the company are Mr and Mrs Parra and they are equal shareholders each holding 5,000 shares. They acquired the company ‘off the shelf’. (ii) Land known as Star Works, Kit Lane, Checkendon, Oxfordshire which is owned by Mr and Mrs Parra in equal shares. Mr and Mrs Parra also own their respective homes. The equity in Mrs Parra’s home is also a substantial asset.

[5] The company trades from Star Works but it was common ground before me that it has no interest in the land (or should be treated as having no such interest in the land).

[6] Subject to issues relating to planning permission the value of Star Works with vacant possession has been agreed at £1,500,000. It has also been agreed that it has an open market rental value of £135,000 per annum. The value of the company, assessed by reference to its average earnings multiplied by a PE ratio is agreed at £876,100. These figures are gross figures.

[7] This case was set down for hearing on the basis that issues relating to the chances of obtaining planning permission for residential development of Star Works (and related issues) should be determined as preliminary issues. By the first day of the hearing there had been some changes in the respective positions of the parties as to the procedure to be adopted but I decided that the appropriate course was to deal with these issues first. Having done so I announced my conclusions thereon with a short outline of my reasons and then went on to deal with the claim for ancillary relief as I indicated I would

when announcing my decision on the issues relating to the prospects of obtaining planning permission for residential development of Star Works. I set out my findings and reasoning more fully on those issues in this judgment.

Star Works—the potential for residential development

[8] Mr and Mrs Parra bought Star Works in 1993 from a company in the Tilbury Group for £432,000. It was transferred into their joint names. It is approximately 4·7 acres and has its principal frontage on Kit Lane. It is near Stoke Row to the South, Checkendon to the West and Nuffield/Nettlebed to the North. It is in South Oxfordshire.

[9] There is a bank running from the frontage to Kit Lane to the rear of the site. On the higher land there are two cottages one at the front of the site and one at the rear (respectively Mill Cottage and Star Cottage). The industrial buildings are on the lower part of the site. They include a large detached warehouse with ancillary offices and a range of storage buildings. There are also extensive surfaced and unsurfaced parking areas.

[10] There are some council houses to the west of Star Works and thus on the far side of Star Works to the village of Stoke Row (which is the nearest village).

[11] Mr and Mrs Parra saw the land advertised and first went to look at it on an outing with the children. On seeing the site they immediately saw its potential for their business and their primary reason for buying the land was so that it could be occupied by their company and thus their business. An advantage of the site for the purposes of the business is that it enables all the necessary buildings and parking to be on one site. Additionally, the site gives the business a distinctive and attractive location.

[12] However it seems to me that anybody who was at all commercially minded (and this clearly includes both Mr and Mrs Parra)...

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1 cases
  • Parra v Parra
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 20 December 2002
    ...2 FLR 981, HL. AppealThe husband, Pepe Luis Parra, appealed against the order of Charles J, dated 22 May 2002 ([2002] EWHC 877 (Fam), [2002] 3 FCR 513) whereby he had granted to the wife, Yvonne Katrina Parra, 54·3% of the total family assets. The facts are set out in the judgment of Thorpe......

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