Sorrell v Sorrell
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Bennet |
| Judgment Date | 29 July 2005 |
| Neutral Citation | [2005] EWHC 1717 (Fam) |
| Docket Number | Case No: FD04D01915 |
| Court | Family Division |
| Date | 29 July 2005 |
[2005] EWHC 1717 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Bennett
Case No: FD04D01915
Mr Nicholas Mostyn QC and Ms Rebecca Bailey-Harris for the Applicant
Mr Lewis Marks QC and Mr James Ewins for the Respondent
Hearing dates: 20–22 & 25–27 July 2005
This judgment is being handed down in private on Friday 29th July at 2 pm. It consists of 24 pages and has been signed and dated by the judge. This judgment may be shown to the parties immediately upon receipt by Counsel. (It may not be reported without leave of the judge.)
The Honourable Mr Justice Bennet
The substantial issue in this ancillary relief application is whether the assets, said to be of the order of £100m (gross) or £75m (net of tax) should be divided equally between Sir Martin and Lady Sorrell ("the husband" and "the wife" respectively) or whether the yardstick of equality should be departed from (and if so, to what extent) on the ground that, notwithstanding that the wife has made as full a contribution as possible, the husband's contribution was exceptional. Thus the application of the Court of Appeal's decision in Lambert v Lambert [2002] EWCA Civ 1685, [2003] 1 FLR 139, and in particular Thorpe LJ's dicta at p.158c:—
"However for the present, given the infinite variety of fact and circumstance, I propose to mark time on a cautious acknowledgement that special contribution remains a legitimate possibility but only in exceptional circumstances" is of critical importance in this case. There are other issues, but these go to the quantifications of the assets or more general points.
The short facts of the inception, course and duration, and termination of the marriage are these. On 25 April 1971 the wife, then 25 years old, and the husband, then 26 years old, married. They have three grown up sons Mark, Robert and Jonathan, two of whom are married. In 1972 they jointly purchased 3, Winnington Road, N2. That property remained their home until in July 2001 they jointly purchased 6, Walton Place, SW3. In 2003 Winnington Road was sold. In 1999 the marriage ran into difficulties. However the parties were reconciled. By the end of 2003 the marriage ended. In March 2004 the wife filed her divorce petition. It was unopposed. On 26 May 2004 a decree nisi was pronounced. On 23 November 2004 proceedings were taken by the wife under Part IV of the Family Law Act 1996 in respect of the husband's occupation of Walton Place. On 2 December 2004 HHJ Mayer, on an interim basis, ordered that the husband be allowed to occupy the basement only. On 7 January 2005 that order, by consent, was made final and the husband was ordered to pay the wife £30,000 towards her costs of the application.
The marriage lasted 321/2 years, which, by any standard, is very long. The wife is now 591/2 years old, the husband 60 years old. Both of the parties are Jewish. The husband comes from a more orthodox background than the wife. She adapted to that. She explained in her evidence how they adopted traditional rules—she the homemaker, he the breadwinner. She was very family orientated. She told me she married for "keeps" and for love. She wanted to grow old with the husband. She told me that Jewish family life is sacrosanct. The end of the marriage, I am satisfied, was very distressing for her.
Precisely why the marriage did end is of little or no relevance, but at least in part the success of the husband, and as will be seen it was a phenomenal success story, must have played some role in creating the conditions in which the marriage foundered. I shall return to the wife's evidence, written and oral, on her contribution in due course.
The husband's father, was until his death in 1989, the husband's constant mentor to whom he was deeply attached. His father ran a chain of electrical retailers. After school the husband went to Cambridge University where he read economics. Upon graduation in 1966 he went to Harvard Business School. In 1968 he completed his MBA. At the time of the marriage the husband was working for Mark McCormack in his sports and personality management agency.
In 1974 the husband began working for James Gulliver as his personal financial adviser. In 1977 the husband moved to Saatchi and Saatchi as its financial director. He left in 1985. During those 9 years he refined schemes for acquisitions one of which became known as the "earn out" technique i.e. the key personnel of the company taken over were locked in until certain profit targets were met. Then their shares or cash would be made available.
According to his affidavit of 1 June 2005 the husband played an important, if not pivotal, part in imposing strict financial discipline in an industry where financial control was generally neglected. He also had a strong rapport with financial institutions of the City of London. As he neared the age of 40 he felt he was ready to "start doing for my own company what I had done so well for others".
In 1985, together with Mr Rabl, a stockbroker, the husband found a company based in Kent that manufactured supermarket shopping baskets, pots and pans, namely Wire and Plastic Products Ltd ("WPP"). In May of that year he and Mr Rabl bought a 27% stake in WPP for £250,000 each and changed the name to WPP Group plc. In December 1986 the husband left Saatchi and Saatchi and became the Chief Executive Officer of WPP, a post he has retained ever since.
Between 1986 and 1988 WPP purchased about 18 further companies, here and in the USA, and in doing so the share price increased to £7–49 and the market capitalisation to £90m.
In 1987 WPP took over J. Walter Thompson ("JWT"), the prestigious advertising agency. According to the husband, that acquisition marked a pivotal moment in the development of WPP. WPP took over a company JWT, which was thirteen times its own size. Whilst there were other players in this takeover the husband's evidence, which I have no reason to doubt, is that he was the driving force, persuading both the board of JWT and investors that the deal was a sound one. The group's profit level of 4% rose to 10% not within 4 years the husband told investors but in about 11/2 years. He attributes that to his financial systems which he put in place.
In October 1987 came the stock market crash. By early 1989 the WPP Group share price had recovered to a peak of 694p.
In 1989 WPP took over another prestigious advertising agency, Ogilvy and Mather. The husband in his statement (paras 46 to 48) describes it. It was not an easy operation for the reasons he there sets out. However, in 1989/90 there came a real crisis with the recession that wrought so much havoc for many people. In 1989 the share price of WPP reached a peak of 672.30p. By late 1989/early 1990 it crashed by 610p to 62p, (see D208). In 1991 it went lower still to 35p. The husband explained that WPP was in real difficulties. Investors threatened to withdraw their loan facilities of c.£1.4 billion. If they withdrew, WPP was finished. Over 1991 and 1992 WPP through the husband (and no doubt, others within WPP) sought to restructure WPP's debt in negotiations with 20 banks and financial institutions. Having persuaded the institutions to swap debt for equity, WPP in 1993 went to the stock market with a rights issue of £88m. It was a success, and the corner was finally turned. The banks sold a significant tranche of their equity at a profit. The share price recovered to about 90 or 100p. In 1994 WPP's pre tax profit reached £35m.
By 1997 the husband said [para 61] that there was no trace of the difficulties of the early 1990s. WPP share price was trading around 300p.
In mid 2000 WPP purchased another agency, Young and Rubicam, in a deal worth $4.7 billion, which was the largest ever deal in the advertising and marketing sector. The deal put WPP second behind Omnicom in the table of communication and service companies based on worldwide revenue. Further takeovers followed [see para 65].
In 1999 the share price of WPP reached an all time peak of 985.50p. With the bursting of the dot. com bubble and the general decline in the stock market, its share price declined to a low in 2001/02 of 474.50p. It has by 2005 recovered to c.586p.
In 2004 WPP profits were £546 million. Currently WPP is worth over £7 billion, has a turnover of £4.3 billion, and employs 85,000 people including (associates) in 1,700 offices in 104 countries.
The husband believes that he has built one of the best businesses in the industry from scratch. He concludes his written account with these words:
"76. I believe that the creation of this wealth is without doubt an exceptional financial contribution. Of course the wealth that I have built for others (the investors) dwarfs the wealth that I have built up personally and for my family, but I do believe that a total family fortune of over £100 million (gross), of which almost all is invested in WPP, represents a spectacular contribution which can fairly categorised as "exceptional".
This does not represent the fruits of one lucky gamble, or merely dedication and determination, rather (as I hope I have illustrated above in the necessarily abbreviated account of my career) through a rare, if not unique, combination of inspiration, innovation, courage and hard work. I find it hard to see how the creation of wealth through the exploitation of an inherent gift for music, or sport or art could be qualitatively different from the creation of wealth through the exploitation of my own abilities."
Assets—capital and income
There is no dispute as to what the assets comprise. The dispute is about how some of them should be valued.
The non-WPP...
To continue reading
Request your trial
-
Wight v Wight
...EWCA (Civ.) 872, followed. (9) Minton v. Minton, ELR[1979] A.C. 593; [1979] 1 All E.R. 79, considered. (10) Sorrell v. Sorrell, [2005] EWHC 1717 (Fam.), followed. (11) Uzzell v. Uzzell, 2001 CILR N[12], applied. (12) Wells v. Wells, [2002] 2 FLR 97; [2002] EWCA (Civ.) 476, followed. (13) Wh......
-
Charman v Charman (No 2)
...All ER 481, [1992] 1 AC 599, [1991] 3 WLR 767, HL; affg [1991] 2 All ER 257, [1992] 1 AC 599, [1991] 2 WLR 1065, CA. Sorrell v Sorrell[2005] EWHC 1717 (Fam), [2006] 1 FCR 75, [2006] 1 FLR Wachtel v Wachtel [1973] 1 All ER 113, [1973] Fam 72, [1973] 2 WLR 84, CA. White v White[2000] 3 FCR 55......
-
XW v XH (no 1)
...Sharp v Sharp[2017] EWCA Civ 408, [2017] 2 FCR 766, [2018] 2 WLR 1617, [2017] 4 All ER 1046, [2017] 2 FLR 1095. Sorrell v Sorrell[2005] EWHC 1717 (Fam), [2006] 1 FCR 75, [2006] 1 FLR V v V(ancillary relief: pre-nuptial agreement)[2011] EWHC 3230 (Fam), [2012] 1 FLR 1315, [2012] 2 FCR 98. Wh......
-
Aaz v Bbz and Others
...588, [2013] 1 All ER 795, [2013] 2 WLR 557, [2013] 2 FLR 576. Salomon v A Salomon and Company, Limited [1897] AC 22. Sorrell v Sorrell[2005] EWHC 1717 (Fam), [2006] 1 FCR 75, [2006]1 FLR Traversa v Freddi[2011] EWCA Civ 81, [2011] 2 FLR 272, [2011]Fam Law 464. Van den Boogaard v Laumen (Cas......