Cooper-Hohn v Anthony Hohn

Factual and Procedural Background

This judgment concerns a financial remedy claim brought by the Wife against the Husband following the breakdown of their 17-year marriage. The parties are high net worth individuals with combined assets worth between approximately US$1.35 billion and US$1.6 billion, excluding a further US$4.5 billion donated to charitable Foundations established by the parties. The case involved complex factual and legal issues, including the valuation and division of matrimonial assets, post-separation accrual, and tax implications.

The parties separated in March 2012, with the Wife issuing a Petition for dissolution in April 2012. The proceedings included extensive voluntary financial disclosure by the Husband, without use of Form E, due to the complexity of his financial affairs. The case proceeded to a final hearing in July 2014 before a High Court Judge, who heard oral evidence from both parties and considered detailed written submissions and documentary bundles.

The Husband is a highly successful fund manager who created substantial wealth through his management of The Children's Investment Fund (TCI) and related entities. The Wife played a significant role in the operation and growth of the UK and US charitable Foundations established by the parties, acting as CEO and Chair of the UK Foundation until 2013.

The parties have four children, including triplets, and have maintained separate residences in England, Jamaica, and the United States. The case attracted significant media interest, though restrictions were placed on reporting of personal financial details.

Legal Issues Presented

1. What is the extent and value of the assets available for division between the parties (the computation issue)?
2. To what extent do the assets constitute the marital acquest versus post-separation accrual?
3. What percentage share of the total assets should each party receive, and is a departure from equality justified by post-separation accrual and/or the Husband’s special contribution?
4. Should there be Wells sharing of any goodwill or future profits arising from the TCI entities beyond their underlying asset value?
5. What are the appropriate tax considerations and indemnities relevant to the division of assets?

Arguments of the Parties

Wife's Arguments

• The Wife contends she is entitled to a full and equal share of the matrimonial assets, including the growth in value since separation, based on her substantial contributions to the marriage and the Foundation.
• She disputes the Husband’s claim that post-separation accrual and his special contribution justify a reduced share.
• She emphasizes her significant unpaid role as CEO and Chair of the UK Foundation and her caregiving responsibilities for four children, including triplets.
• She challenges attempts to value goodwill in the TCI Group entities and seeks a Wells sharing of any future profits arising from them.
• She agrees to a limited tax indemnity covering actual risks but opposes a broad, unlimited indemnity sought by the Husband.

Husband's Arguments

• The Husband submits that a significant portion of the wealth was generated post-separation, when the Wife ceased spousal contributions, justifying a departure from equality.
• He claims a special and unmatched contribution by virtue of his exceptional skill as an activist investor and wealth creator, warranting a greater share.
• He denies any formal agreement dividing roles between himself as wealth creator and the Wife as Foundation operator, asserting his active involvement in the Foundation.
• He argues that goodwill in the TCI Group entities cannot be reliably valued due to the “key man” effect and that any future value should not be shared now.
• He seeks a broad indemnity from the Wife for potential tax liabilities, including hypothetical risks extending back several years and continuing for a prolonged period.

Table of Precedents Cited

Court's Reasoning and Analysis

The court conducted a detailed and nuanced analysis of the parties' financial positions, contributions, and the applicable legal principles. The key elements of the reasoning include:

• Asset Valuation and Computation: The court accepted the voluntary disclosure process and agreed asset valuations as at 30 April 2014, excluding the charitable Foundations’ assets which are non-matrimonial. The court rejected attempts to value goodwill in the TCI Group entities beyond their net asset value, due to the "key man" risk and speculative nature of such valuation. The court included in the asset pool the Husband’s personal investments in the TCI Fund, properties, pensions, cash, and certain unallocated profits, but excluded or limited inclusion of contingent incentive fees due to their uncertain and future nature.
• Post-Separation Accrual: The court carefully distinguished between matrimonial assets and those accrued post-separation. It took March 2012 as the date of separation when the marital partnership effectively ended. It recognized substantial growth in assets post-separation (approximately US$600 million), largely attributable to the Husband’s continued investment activities. The court found that while the Wife retains an entitlement to share in these assets, a departure from equality is justified given the cessation of her spousal contributions and the Husband’s unmatched efforts post-separation.
• Special Contribution: The court found that the Husband made a special contribution to the marriage through his exceptional skill as an activist investor and wealth creator. It accepted that the scale and nature of his wealth generation qualifies as a special contribution warranting departure from the starting point of equal division. The court acknowledged the Wife’s significant contributions as homemaker, mother, and CEO/Chair of the Foundation, recognizing the parties’ joint philanthropic objectives, but concluded that the Husband’s financial genius and wealth creation merit a greater share.
• Tax Considerations: The court analyzed complex tax issues, distinguishing between actual and hypothetical tax risks. It accepted the Wife’s agreement to provide a limited indemnity for identified actual tax risks, secured by an escrow account holding 40% of her award. The court rejected the Husband’s request for a broad, unlimited indemnity. It proposed a pension sharing order to avoid pre-division tax deductions on the Husband’s offshore pension assets. For potential tax on winding up the TCI Group, the court made a partial allowance reflecting the risk and likelihood of crystallization.
• Overall Fairness and Discretion: The court emphasized that strict formulaic approaches to post-separation accrual and special contribution were inappropriate given the complexity and uncertainties. Instead, it adopted a holistic approach balancing all factors under section 25 of the Matrimonial Causes Act 1973, including needs, contributions, and future resources. It took into account the disparity in future income earning capacity and the Wife’s likely non-remunerated philanthropic role going forward.

Holding and Implications

The court made the following final decision and set out its implications:

Holding: The Wife is awarded US$530 million from the available assets (approximately 36.12% of the global resources), reflecting a significant departure from equality justified by the Husband’s special contribution and post-separation accrual. The Wife will retain the Connecticut property and receive a pension credit proportionate to her award. A tax indemnity arrangement is ordered, including an escrow account holding 40% of the cash element of her award to cover potential tax liabilities.

Implications: This decision recognizes the modern approach to financial remedy claims in high net worth cases, balancing the principle of equality with recognition of special contribution and post-separation wealth generation. The ruling confirms that:

• Post-separation accrual is a relevant factor but does not negate the Wife’s entitlement to a substantial share of matrimonial assets.
• Special contribution remains a limited but valid ground for departure from equality, particularly in cases involving exceptional wealth creation.
• Tax risks must be addressed through indemnities and escrow arrangements to achieve a clean break.
• Valuation of goodwill and future profits in closely held entities is speculative and generally inappropriate for immediate division.

No new legal precedent is established beyond the application of existing principles to the facts of this complex case. The decision underscores the importance of judicial discretion and fairness in resolving financial remedy claims involving substantial and complex assets.