Wells Sharing Is Not a “Last Resort”: Fair Risk-Allocation of Illiquid Matrimonial Assets

1. Introduction

This appeal concerned whether a final financial remedy order achieved a fair distribution where roughly half the matrimonial wealth consisted of a private, illiquid, risk-bearing shareholding (shares in Colendi Holdings Limited, “Colendi”). The High Court equalised the parties’ overall capital by value, but allocated most of the illiquid/risk asset to the husband and most liquid assets to the wife. The husband argued that this produced unfair “Wells sharing” (i.e. an unfair division of “copper-bottomed” versus illiquid/risk assets), and that the judge had wrongly treated Wells sharing as something that should be used only as a “last resort” and only as a “minority element” of an award.

The Court of Appeal (Moylan LJ, with Coulson LJ and Arnold LJ concurring) allowed the appeal, holding that the judge’s approach to Wells sharing was legally flawed and that the reasons given for skewing the risk asset allocation were unsustainable. The Court substituted an equal (50/50) sharing of the value derived from the Colendi shares, and ordered sale of the former matrimonial home to implement the rebalancing.

2. Summary of the Judgment

• No rule that Wells sharing is a “last resort” or limited to a “minority element”. The judge misread Versteegh v Versteegh and treated non-binding commentary as principle.
• Unsustainable rationale for loading the husband with illiquid/risk assets. The judge relied heavily on the husband’s “non-consultation” over SETL’s sale to Colendi and on a finding that the transaction made the asset “illiquid and subject to increased risk”; the evidence did not support those conclusions.
• Fair balance required equal sharing of the Colendi risk. Given the “snapshot” nature of valuation and “significant uncertainty” in future realisation, fairness required both parties to bear the upside/downside equally.
• Orders made: wife’s entitlement increased to 50% of value received from Colendi shares (via contingent lump sums/Deed of Covenant mechanism); former matrimonial home to be sold with the husband receiving 40.4% of net sale proceeds (percentage applying whatever the achieved price).

3. Analysis

3.1 The central fairness question: balancing risk and liquidity

The Court framed the “heart of the appeal” as whether the order effected “a fair balance of risk and illiquidity” in the distribution of assets (expressly adopting the approach articulated in Martin v Martin). Although the overall headline division was 50/50 by net value, the structure was asymmetrical: about 70% of the husband’s share comprised the illiquid/risk Colendi shares, while only about 30% of the wife’s share did.

The Court reaffirmed that asset “quality” matters: there is an “obvious” difference between hard cash and an opinion-based valuation of private company shares (quoting Lewison LJ’s observation in Versteegh v Versteegh). Accordingly, even when a private company interest is “capable of being reliably valued”, the court must still assess what weight to give that valuation when structuring the award, because future realisation (timing and amount) may be uncertain.

3.2 Precedents cited—and how they shaped the outcome

(a) Wells v Wells and the concept of “Wells sharing”

The judgment returned to the core proposition from Wells v Wells that fairness in sharing requires a fair division of both “copper-bottomed assets” and “illiquid and risk-laden assets”. In modern sharing cases (post-White v White and Miller;McFarlane), this idea is often operationalised through: (i) in specie division; (ii) contingent lump sums tracking realisations; or (iii) unequal headline percentages to reflect liquidity/risk imbalance (as exemplified by Bodey J’s approach in Chai v Peng).

(b) Versteegh v Versteegh: what it did—and did not—decide

A major correction in this appeal was the Court of Appeal’s explanation that Versteegh v Versteegh does not establish any principle that Wells sharing:

• must be a “last resort”; or
• must be confined to a “minority element” of the award.

Moylan LJ traced the “last resort/minority element” language to a passage in WM v HM (Financial Remedies: Sharing Principle: Special Contribution), quoted by Lewison LJ in Versteegh v Versteegh without adopting it as ratio. The Court emphasised: caution is warranted (as King LJ said in Versteegh v Versteegh), but caution is not a rigid rule. Equally, there is no opposite rule that Wells sharing should become “standard fare” (a phrase appearing in GW v RW (Financial Provision: Departure from Equality)).

(c) Martin v Martin: “weight” and evaluative judgment

The Court relied on Martin v Martin to restate that:

(d) Clean break authorities: s.25A is important, but subordinate to fairness

The judge below was heavily influenced by clean break concerns under s.25A of the Matrimonial Causes Act 1973. The Court of Appeal reiterated that clean break is an important objective (rooted in Minton v Minton and embedded by the 1984 reforms), but it cannot be pursued at the expense of fairness, echoing:

• P v P: a clean break “cannot be imposed at the expense of fairness”.
• BJ v MJ (Financial Remedy: Overseas Trusts): “Fairness is not to be sacrificed on the altar of finality.”

Importantly, the Court also made a practical point: where a clean break is not achievable in any event, the difference between (say) 30% and 50% contingent sharing may have little “clean break” relevance.

3.3 Legal reasoning: why the first-instance approach was wrong

(a) Error of principle: treating “last resort/minority element” as binding law

The Court held the judge’s misconception of principle “significantly influenced, if not underpinned” the exercise of discretion—shown by repeated statements that the wife’s contingent element should be kept “as small as possible” and “to the minimum”. That approach skewed the risk allocation analysis from the outset.

(b) Unsustainable findings about the SETL-to-Colendi transaction

The judge justified loading the husband with more Colendi risk partly because he had “without consulting” the wife converted a major marital asset into a riskier illiquid minority interest. The Court found this reasoning could not stand:

• Counterfactual missing: even if consultation was desirable, the evidence showed the sale would have occurred anyway (SETL was running out of money; external fundraising had failed; losses were persistent).
• Not his decision alone: the husband held 46% of SETL; other shareholders held the remainder—so the sale was not purely unilateral.
• Inconsistency with conduct ruling: the judge had rejected the wife’s pleaded conduct case (s.25(2)(g)), including the “failure to disclose” the pending acquisition; it was inconsistent then to rely on the same factor as a key driver of asset-allocation.
• No evidential basis for “increased” illiquidity or risk: SETL was itself illiquid; the swap was “one illiquid asset for another”, and the evidence suggested Colendi may have enhanced (not reduced) prospects of value realisation.

(c) Fairness required equal sharing of upside/downside

Having stripped away the unsustainable justifications for asymmetry, the Court identified strong factors supporting a 50/50 division of the Colendi value:

• The Colendi shares were a fully matrimonial asset under the sharing principle.
• Valuation was a “snapshot”; future value and timing of realisation were “subject of significant uncertainty”.
• The Colendi shares comprised about 50% of total wealth; concentrating that uncertainty on one party was unfair.
• The parties’ overall needs were “broadly equivalent”; it was unfair to confine the husband’s liquid funds to a much lower housing standard.

While the wife raised “asymmetry” concerns (information dependence; the husband being “inside the tent”), the Court considered the husband’s small Colendi stake (3.6%) limited his ability to manipulate outcomes, and noted the practical obstacles to in specie transfer (including tax consequences absent a US election).

3.4 Outcome and remedial technique

The Court varied the order to increase the wife’s entitlement from Colendi realisations to 50% and required the Deed of Covenant to be amended accordingly. To implement the necessary rebalancing given other steps had already been implemented, it ordered sale of the former matrimonial home with the husband to receive 40.4% of net proceeds, applying regardless of the achieved sale price (to reduce future dispute).

The Court also confirmed that other complaint points (including the ELSA tax-loss adjustment argument) did not alter the ultimate outcome; the judge’s refusal to award an additional sum to the husband on that basis was within discretion.

3.5 Impact

• Doctrinal clarity: This is a firm appellate correction that “Wells sharing” is not governed by rigid maxims (“last resort”/“minority element”). Those phrases may describe cautionary instincts, not binding rules.
• Evidence discipline on “risk” narratives: A party arguing that a restructuring increased illiquidity/risk must establish it with evidence; courts should avoid unsupported assumptions about relative liquidity of private shareholdings.
• Consistency with conduct findings: Where conduct allegations are rejected under s.25(2)(g), the same factual complaints should not re-enter via “fairness” as a proxy sanction unless properly justified and explained.
• Implementation realism: Rebalancing risk may require sale of a major “copper-bottomed” asset (here, the home), especially where a large portion of the balance sheet is non-realisable.

4. Complex Concepts Simplified

• “Copper-bottomed assets”: assets with stable, readily realisable value (e.g., cash, readily saleable property).
• Illiquid/risk-laden assets: assets not readily saleable, where realisation timing/value is uncertain (e.g., minority shares in a private company).
• “Wells sharing”: a shorthand for sharing illiquid/risk assets fairly between spouses so one does not get the “plums” and the other the “duff”. It can be done by in specie division, or by a contingent mechanism that tracks future realisations.
• Contingent lump sum / Deed of Covenant: a payment obligation triggered by future events (e.g., when shares are sold or value extracted), often used where an asset cannot be transferred or valued with confidence for immediate distribution.
• Clean break (s.25A MCA 1973): the court must consider ending ongoing financial ties, but only if consistent with overall fairness.
• s.25(2)(g) conduct: only conduct meeting a high threshold (“inequitable to disregard”) should affect distribution; weak allegations should not distort structuring decisions.

5. Conclusion

Culligan v Rosemin-Culligan reasserts that the proper task in cases dominated by private, illiquid wealth is not to chase a clean break at all costs, nor to treat Wells sharing as exceptional by rule. The court must instead perform a fact-sensitive evaluative exercise to achieve a fair balance of risk and liquidity. Where a risk asset constitutes a large proportion of the marital balance sheet and its future value is materially uncertain, concentrating that uncertainty on one spouse will commonly be unfair absent compelling, evidenced justification. Here, once the erroneous legal constraint and unsupported factual premises were removed, equal sharing of the Colendi risk (and reward) was the only fair outcome.