Factual and Procedural Background
This opinion concerns an appeal by the wife and a cross-appeal by the husband from a final financial remedy order made by Judge Mostyn on 9th October 2017. The dispute centers on the application of the sharing principle to the division of substantial marital wealth, primarily comprising shares in a private trading company, Company A, founded by the husband prior to the parties' relationship. The company was incorporated in 1978, eight years before the parties began cohabiting in 1986, married in 1989, and separated in 2015. The current value of Company A represents a significant portion of the parties' total wealth. The wife challenges the judge's approach to valuing and apportioning the marital and non-marital elements of the company shares, while the husband cross-appeals aspects of the valuation methodology and payment schedule imposed by the judge.
Legal Issues Presented
- What approach should the court take to the valuation of shares in a private company when determining how to divide marital wealth?
- What approach should the court take when determining what part of the parties' current wealth is properly defined as non-marital, particularly where the wealth includes shares in a private company founded by a spouse prior to marriage or cohabitation?
Arguments of the Parties
Appellant's Arguments (Wife)
- The judge erred by applying a straight line apportionment from the date of the company's incorporation to determine the marital element of its current value.
- The judge wrongly disregarded that the husband owned only half the company when the parties began living together.
- The judge failed to provide a mechanism for the realisation of the shares awarded to the wife.
Cross-Appellant's Arguments (Husband)
- The judge wrongly treated the valuation of the company as equivalent to cash, resulting in an unfair allocation of non-risk assets to the wife.
- The judge erred in ordering £20 million of the lump sum award to be paid within two years without evidential foundation that the company could fund this payment.
- The husband seeks to uphold aspects of the judge's decision challenged by the wife on other grounds.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Hart v Hart [2018] Fam 93 |
Application of sharing principle in the context of non-marital wealth. |
Referenced as part of the framework for assessing the marital/non-marital division of assets including private company shares. |
| Versteegh v Versteegh [2018] EWCA Civ 1050 |
Guidance on valuation of private companies and treatment of non-matrimonial assets. |
Used extensively to caution on the fragility of private company valuations and the need for judicial discretion. |
| Wells v Wells [2002] 2 FLR 97 |
Fair division of liquid and illiquid/risk-laden assets to achieve fairness. |
Applied to highlight the importance of comparing like with like and balancing risk in asset division. |
| Chai v Peng & Ors [2018] 1 FLR 248 |
Consideration of illiquid assets in financial remedies. |
Referenced to support the principle that risk and liquidity affect the fairness of asset division. |
| Hamilton v Hamilton [2014] 1 FLR 55 |
Utility of including recitals in orders to clarify potential variations. |
Mentioned regarding the structuring of lump sum orders and potential for variation. |
| Jones v Jones [2012] Fam 1 |
Methodology for valuing pre-marital assets and accounting for latent potential. |
Discussed as a non-prescriptive tool for determining marital property proportions. |
| Robertson v Robertson [2017] 1 FLR 1174 |
Analytical distinction between matrimonial and non-matrimonial property and judicial discretion. |
Used to illustrate the evaluative and discretionary nature of determining marital property. |
| Maskell v Maskell [2003] 1 FLR 1138 |
Importance of comparing like with like in asset valuation, including pensions. |
Referenced to demonstrate the principle that asset quality and liquidity affect valuation weight. |
| Martin-Dye v Martin-Dye [2006] 2 FLR 901 |
Distinctions between different types of asset valuations. |
Supports the principle of differentiating between asset types in valuation. |
| Fields v Fields [2016] 1 FLR 1186 |
Recognition that business valuations can be inherently speculative. |
Cited to underline the fragility of valuations in family law. |
| Myerson v Myerson (No 2) [2009] 2 FLR 147 |
Highlighting the risk of unfairness if shares are awarded without corresponding cash compensation. |
Referenced to emphasize the need for fair balancing of risk and liquidity. |
| White v White [2001] 1 AC 596 |
Principle of comparing like with like and the absence of hard and fast rules in valuations. |
Used to critique the judge's "auctioneer's hammer" analogy and caution against rigid valuation approaches. |
| Maskell v Maskell [2003] 1 FLR 1138 |
See above; also cited for valuation principles. |
As above. |
| P v P (Financial Relief: Illiquid Assets) [2005] 1 FLR 548 |
Importance of evidence on sums withdrawable from a business. |
Referenced regarding the necessity of evidence on liquidity for payment orders. |
| Re Sunrise Radio Ltd: Kohli v Lit and others [2014] 1 BCLC 427 |
Valuation of shares in private companies under Companies Act 2006 s.994. |
Cited to support the use of valuations in family law, while distinguishing the different purposes. |
| Wann v Birkinshaw [2017] EWCA Civ 84 |
As above. |
As above. |
| Scatliffe v Scatliffe [2017] AC 93 |
Application of sharing principle to matrimonial property. |
Referenced to illustrate the ordinary application of the sharing principle. |
| Miller v Miller; McFarlane v McFarlane [2006] 2 AC 618 |
Fragility of valuations and broad judicial discretion in asset division. |
Used to support the court's evaluative approach rather than detailed accounting. |
Court's Reasoning and Analysis
The court recognized that the sharing principle governs the division of marital assets and that the principal issues relate to how to value shares in a private company and how to determine the marital versus non-marital portions of such assets. The court acknowledged that valuations of private companies are inherently fragile and must be treated with caution due to lack of market liquidity, volatility, and expert subjectivity.
The judge below valued Company A at £221 million, treating this valuation as equivalent to cash for the purpose of asset division. The court found this approach flawed, noting that the judge's analogy to the "sound of the auctioneer's hammer" was misplaced, as it was originally applied to prime agricultural land, not private company shares. The court emphasized that shares in a private company differ in quality from cash and that the division must fairly balance liquid and illiquid, risk-laden assets, citing Wells v Wells and related authorities.
Regarding the marital property question, the court upheld the judge's use of a straight line apportionment from the company's incorporation date to determine the non-marital portion. The judge's holistic evaluative approach was consistent with precedent and recognized as a permissible exercise of judicial discretion. The court rejected the wife's argument that the valuation should be based on the expert's 1986 valuation adjusted for passive growth, noting this would have disproportionately favored the wife and not fairly reflected the husband's contributions over time.
The court found the judge's treatment of the husband's co-ownership of half the company until 1989 less satisfactory but ultimately concluded that the judge had taken relevant factors into account in his evaluative assessment.
The court also found the judge's order requiring the husband to pay £20 million by June 2019 was unsupported by evidence of liquidity, as the judge had limited exploration of the company's ability to fund such payments. The court substituted this order with a schedule of four annual payments of £5 million, reflecting a fairer and more practical approach without the need for rehearing.
Finally, the court held that the judge was within his discretion in not imposing a mechanism for the wife's realisation of shares in Company A.
Holding and Implications
The court DISMISSED the wife's appeal and ALLOWED the husband's cross-appeal to the extent of varying the payment schedule for the deferred lump sum from a two-year period to four annual instalments.
The effect of this decision is that the judge's valuation approach and marital property characterisation remain intact, preserving the overall division of assets. However, the court corrected the judge's treatment of the company's valuation as equivalent to cash and adjusted the payment terms to reflect the absence of evidential support for earlier payment. No new precedent was established; the decision reinforces established principles on valuation fragility, judicial discretion in asset division, and the necessity of evidential support for payment orders in financial remedy cases.