S (Petitioner) v S
| Jurisdiction | England & Wales |
| Judge | Sir Hugh Bennett |
| Judgment Date | 29 April 2013 |
| Neutral Citation | [2013] EWHC 991 (Fam) |
| Court | Family Division |
| Date | 29 April 2013 |
| Docket Number | Case No: MA10D01046 |
[2013] EWHC 991 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
MANCHESTER DISTRICT REGISTRY
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Hugh Bennett
Case No: MA10D01046
Patrick Chamberlayne QC and Peter Mitchell (instructed by Irwin Mitchell) for the Petitioner
Nicholas Francis QC and Nicholas Allen (instructed by JMW Solicitors LLP) for the Respondent
Hearing date: 15 April 2013
This judgment is being handed down in private on 29 April 2013. It consists of 44 paragraphs and has been signed and dated by the judge. The judge hereby gives leave for it to be reported.
The judgment is being distributed on the strict understanding that in any report no person other than the advocates or the solicitors instructing them (and other persons identified by name in the judgment itself) may be identified by name or location and that in particular the anonymity of the children and the adult members of their family must be strictly preserved.
This is an application dated 13 February 2013 by Mrs S ("the wife") for an order that the hearing which concluded on 13 July 2012 be resumed on the grounds of material non-disclosure by Mr S ("the husband"). The husband cross-applies for the wife to show cause why the Heads of Agreement entered into on 13 July 2012 and approved by me and then converted into a court order, again approved by me, should not be made an order of the court and sealed accordingly.
Pursuant to my order of 11 December 2012 the husband swore an affidavit on 31 January 2013 making two broad points namely (1) he was not guilty of non-disclosure and/or (2) the non-disclosure was not material. Having considered the husband's affidavit the wife indicated that she intended to pursue her financial remedies and thus seek to persuade me that the Heads of Agreement/draft order were vitiated by material non-disclosure. Hence the hearing which took place before me on 15 April 2013.
The matter arises in this way. The parties married in 1993 and separated in 2010. They have 3 children, one of whom is T. The case which I heard between 9 and 13 July 2012 in Liverpool can fairly be described as a 'big money' case. The wife applied for financial remedies against the husband. I read the papers and heard the oral evidence of the wife and husband. The case was due to continue into the week beginning on 16 July but on Friday 13 July it settled after I had been asked not to sit on that day ostensibly to allow the parties to "narrow the issues". As I remarked in my judgment of 11 December, in which I gave my reasons for deciding I was not "functus" and ordering the husband to file an affidavit, it did not take an enormous leap of judicial intellect to realise that the parties wanted to try to settle the case. They did. Terms of settlement were told to me, to which I gave my approval.
The settlement gave the wife circa £10.355m of cash and properties and the husband about £5.64m worth of cash and properties. The husband is the founder, and owns circa 63% of the issued share capital, of X Co with circa 29% owned by Bank A. In addition the husband agreed to pay the wife a deferred lump sum within 14 days of receipt by him of the cash proceeds of any disposal by him of any of his shares in X Co, having first deducted costs of sale and CGT, then £4m into T's trust, then £1,714,286 to the wife absolutely, and 30% of the remaining balance to the wife. There were then agreed terms relating to transfer of properties and bank accounts, periodical payments for the children and the setting up of a trust for T. There was one area of disagreement which I resolved by email dated 24 July 2012.
By 25 July the terms of the draft order were agreed, which I approved. However, the draft order was never sealed. How that came about I recount in my judgment of 11 December 2012. I will not burden this judgment with reciting those facts, which I respectfully suggest should be read, should this matter go further.
Having decided that I was not 'functus' — the draft order never having been sealed — I next had to decide whether in the exercise of my discretion to order that the husband should file an affidavit. I was satisfied that for the reasons set out in my judgment the wife had demonstrated "exceptional circumstances" or "strong reasons" and thus made the order of 11 December 2012.
It must be remembered that, as at the date of my December judgment there was no evidence from the husband dealing with the alleged material non-disclosure. By my order of 25 September he was given an opportunity to file such an affidavit but I did not order him to do so. Thus, having found that, on the evidence I then had, prima facie the husband had failed to disclose material facts which could have affected or will materially affect the agreement I approved, and having posed the question "do the circumstances of this case justify the label of "exceptional circumstances" or "strong reasons" for ordering the husband to file an affidavit….?" I found that they did for the reasons I therein set out. It was only fair for the husband that he had the opportunity to file evidence before I proceeded to adjudicate whether he was, or was not, guilty of material non-disclosure.
At the hearing last July the broad thrust of the parties' cases was as follows. There was no dispute about the 50/50 split of all the matrimonial assets. The real battleground related to the husband's shareholding in X Co. The husband's case was that he should retain all of his shares in X Co, that after the parties' separation and in to the future the business assets were non-matrimonial in that he would be building them up until X Co was floated (i.e. IPO) or purchased outright and thus the wife should have no share in the ultimate proceeds. By contrast the wife's case was that the husband's shareholding in X Co was a matrimonial asset and that she should be entitled to 50% of the net proceeds upon disposal whenever that took place i.e. now or in the future even in 20 years time. The value of X Co was in dispute. The husband asserted that it was worth circa £50m and the wife asserted it was worth circa £75m. Thus on these figures the husband's shareholding was worth either £31.5m or £47.25m, respectively.
However, as I understand it, those valuations, certainly by Mr Dougall of KPMG on behalf of the wife, were given on the basis of X Co's future maintainable earnings leading to an EBITDA valuation. It is plain from para 5.3.9 of Mr Dougall's report of 10 February 2012 that he had been told by X Co's Chief Development Officer (CDO) that there was "currently no discussion regarding a public offering of X Co".
When the matter came before me last July in Liverpool the effect of the husband's written evidence was that an IPO, whilst theoretically possible at any stage, was most unlikely before the elapsing of 3, 5, or 7 years from July 2012, see in particular at paragraph 77 of the husband's s.25 statement. In his evidence-in-chief this was repeated — see from page 22 line 11 right the way through to page 23 line 14, where he was asked by Mr Francis:-
"In your opinion is X Co in a state to be contemplating an IPO in short to medium term?
The husband answered:-
"We are doing everything we can to make ourselves — to give that as an option but an IPO is a very dangerous place to be. I think if we had been IPO'd today, if we had been floated today, we would have been ruined if I look at the business for the last quarter, the world would lose faith with you. So we are a long way from being ready for a flotation. You have to have a great market place, you need to have a very reliable business, and you need to be absolutely sure that you can predict where you are in terms of revenue, let alone other parts."
I have no reason to alter my prima facie view expressed in my December judgment that the husband reiterated in his cross-examination the tenor of the evidence given in chief. At page 83 lines 17 et seq he said he would like to have an "exit" at the right time but he had no great desire for an exit "to-day". At page 83 line 30 the cross-examination went as follows:-
"Q. I think you said very recently only in your June statement that doing the best you can, 5 to 7 years for an exit is perhaps the likeliest time frame. Is that right?
A. Well, I thought — if you ask me on different days what I think about an exit — I mean ultimately who knows? Who knows?
Q. Well only you do in this court better than anybody, so –
A. Well, yes, I mean I have an opinion, and it really is a question of who knows. One thing is for sure — is that there's nothing on the cards today, and I would suggest that 3 years seems like a nice time at one level, and it could easily extend to 5, on the basis that you don't necessarily sell a company one day and get all the cash the following day, but at the moment I have no great appetite for anything."
Mr Francis conceded, correctly, that "I have no great appetite for anything" must include an IPO. But he contended that "there's nothing on the cards today" referred to an "exit" i.e. a disposal other than by an IPO. I reject that submission. Read with all his other evidence the extracts, both in chief and in cross-examination, must mean that the husband was telling me on oath that no IPO or any other exit was contemplated then, i.e. July 2012, or until at least 3 years hence or more likely 5 to 7 years.
In his affidavit of 31 January 2013 the husband exhibits documents running to no less than 684 pages. Mr Chamberlayne and Mr Mitchell in their skeleton argument in paragraph 4.2 demonstrate from these documents that planning for an IPO in a window between February and May 2013 began in January 2012 and was being actively pursued thereafter and in July 2012.
On 17 January 2012 X Co's Chief Financial...
To continue reading
Request your trial
-
Sharland v Sharland
...application that the wife show cause why the order reflecting the agreement should not be sealed. He gave judgment on 29 April 2013: [2013] EWHC 991 (Fam), [2013] 2 FLR 10 The husband's affidavit, filed in January 2013, continued to deny that there was any imminent prospect of an IPO of A......
-
N v N
...and the setting aside or orders for financial provision as set out in a recent decision of Sir Hugh Bennett in the case of S v S [2013] EWHC 991 (Fam). In the light of that summary, at paragraph 11, the judge described the test that she should apply to the wife's application in these terms:......
-
Sharland v Sharland
...EWCA Civ 95 IN THE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE (FAMILY DIVISION) Sir Hugh Bennett [2013] EWHC 991 (Fam) Royal Courts of Justice Strand, London, WC2A 2LL Lord Justice Moore-bick Lord Justice Briggs and Lady Justice Macur Case No: B6/2013/1328 Bet......
-
Tania Ann Davies Petitioner v Brynley L'Anson Davies Respondent
...court to make full and frank disclosure of all material facts to the other party and the Court.’ 22 At paragraph 32 inS v S [2013] EWHC 991 (Fam) when referring to Livesey, Sir Hugh Bennett reminded the parties that the reason why the courts have placed and continue to place such emphasis o......