CB v KB

Factual and Procedural Background

This judgment concerns a financial remedy claim made by the wife following divorce from the husband after a 19-year relationship and subsequent marriage. The parties separated in January 2017 and were divorced in 2018 by decree absolute on the wife's petition. They had six children, some of whom live with the wife and others with the husband, with the wife regarded as the parent with care for child support purposes. The husband, a bass player in a successful band, receives income from multiple music-related streams, which form the primary asset under dispute. The final matrimonial home was sold for £5.5 million. The parties' net assets, excluding the valuation of the husband's music income streams, were agreed. The court was tasked with valuing the husband's music income streams to determine the division of assets and financial provision for the wife and children.

Legal Issues Presented

1. What is the appropriate valuation of the husband's various music income streams for the purposes of financial remedy following divorce?
2. Whether the income from touring (ticketing and merchandising) constitutes a matrimonial asset.
3. What is the appropriate level of child support payable by the husband for the minor children?
4. How should the court apply the equal sharing principle and assess the wife's reasonable needs in light of the parties' assets and income streams?
5. Whether any discounts or adjustments should be applied to reflect non-matrimonial elements or legal restrictions affecting the valuation of income streams.

Arguments of the Parties

Appellant's Arguments (Wife)

• The wife’s expert argued for higher multipliers in valuing the husband's music income streams, particularly for the right to equitable remuneration and recording royalties, based on real-world transactions and industry standards.
• She contended that the husband’s income streams, excluding touring income, should be capitalised and shared equally.
• The wife proposed a child support rate of £15,000 per annum per child, although this figure was not supported by detailed evidence.

Respondent's Arguments (Husband)

• The husband’s experts were more conservative in valuing certain income streams, particularly disputing the realisability and value of equitable remuneration rights due to their legal non-assignability.
• He argued that the touring income constituted future earnings and was not a matrimonial asset subject to division.
• The husband proposed a lower child support rate of £7,500 per annum per child, which was also unsupported by detailed evidence.
• The husband contended that the valuation multipliers should reflect the legal and commercial risks associated with the income streams.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
B v S [2012] EWHC 265 (Fam)	Characterisation of income earned post-separation as earnings rather than matrimonial assets.	The court applied this principle to reject the inclusion of touring income (Stream 5) as a matrimonial asset, viewing it as earnings generated after separation.
Re TW & TM (Minors) [2015] EWHC 3054 (Fam)	Application of child maintenance formula and discretion to depart from it.	The court used this precedent to support applying the child maintenance formula as a starting point and justified the child support payments ordered.
GW v RW [2013] EWHC 3143 (Fam)	Guidance on the use of the child maintenance formula and discretion in cases of high income.	The court referenced this case to explain the approach to child maintenance calculations for high-income parents.

Court's Reasoning and Analysis

The court undertook a detailed valuation of the husband's five identified streams of music-related income, excluding touring income from capitalisation as it constituted future earnings. Expert evidence from multiple accountants and business managers with varying degrees of direct experience in the music industry was considered. The court found all witnesses credible and valued Streams 1 to 4 using appropriate methods: multiplicand-times-multiplier for Streams 2 and 4, and discounted cash flow for Stream 3.

The court rejected the argument that the legal non-assignability of the equitable remuneration right (Stream 2) justified a substantial discount, accepting expert evidence that such rights are monetised in practice. The court applied a multiplier of 14 to this stream. For Stream 3, the court adjusted the discount rate and multiplier to reflect the nature of the income and the husband's likelihood of remaining in the band, applying a 25% discount for the non-matrimonial (gratuity) element.

The court assessed the dividend tax impact on the net value of income streams held in the husband's companies. For Stream 4, the recording royalties, the court adopted a multiplier between expert opinions. The total net value of the husband's music income streams was found to be approximately £4.45 million, which, added to agreed net assets, resulted in total assets of about £10.22 million.

The court rejected the inclusion of touring income (Stream 5) as a matrimonial asset, characterising it as earnings post-separation, consistent with established precedent. The court also considered the husband's future income for child support and payment scheduling purposes, accepting that deferred lump sum payments were appropriate given his commitments.

Regarding child support, the court applied established formulae and precedents, concluding that a payment of £12,600 per annum per child was appropriate, with the husband also responsible for school fees. The court undertook a detailed needs analysis for the wife, applying the Duxbury formula for whole-life provision and considering reasonable expectations about downsizing, earning capacity, and spending patterns.

The court determined that the wife’s reasonable needs would be met by an equal division of assets, lump sum payments, and child support. The court also ruled that the £2.2 million tax liability fund raised by the husband should be borne solely by him, to preserve the objective of a clean break.

Throughout, the court gave due weight to all relevant factors under section 25(2) of the Matrimonial Causes Act 1973.

Holding and Implications

The court ordered an equal division of the parties’ total assets valued at approximately £10.22 million, awarding the wife a net share of approximately £5.11 million. To effect this, the husband must pay a lump sum of £2,355,728 in staged instalments, accompanied by periodical payments until full payment is made, at which point a clean break will occur.

The husband is required to pay child support at £12,600 per annum per minor child, as well as the children’s school fees. The court confirmed that the touring income (Stream 5) is not a matrimonial asset and thus excluded it from the asset division.

The decision directly affects the parties by providing financial clarity and a structured payment plan following divorce. No new precedent was established; rather, the court applied established legal principles and precedents to the complex valuation of music-related income streams and the parties’ circumstances.