WC v HC (Financial Remedies Agreements) (Rev1) [2022] EWFC 22

Family Court, 22 March 2022, Peel J

Charles Howard QC and Joshua Viney, instructed by Hughes Fowler Carruthers, for the wife; James Ewins QC and Janine McGuigan, instructed by Stewarts Law, for the husband.

The husband was a national of country B, who had grown up in Switzerland as a member of a very wealthy family. The wife was a UK national. They met in 2001; at the time the wife was a PA at Goldman Sachs and the husband was working in the City. They started living together in 2002 or 2003, and married on 3 September 2004. Prior to the marriage, on 12 August 2004, the couple entered into, and fully executed, a pre-marital agreement, followed thereafter by a supplemental agreement dated 2 September 2004 concerning child maintenance, as well as two Swiss agreements also dated 2 September 2004, which mirrored the English pre-marital agreement. The husband’s wealth at the time (all non-marital in nature) was put at £4,317,754. Pursuant to the agreement, upon marriage the husband transferred into their joint names his pre-owned London property, and transferred into a joint account £1.3m of his own resources. The pre-marital agreement made sliding scale provision for the wife in the event of divorce up to 1 September 2014, but was silent as to provision thereafter. It provided for a review “if requested by either party on ten years elapsing from the date of the marriage” but no such review ever took place.

The couple had two children together; the wife stopped work when the first child was born. The husband left the City in 2005 and started to work in the family business, helping to manage his father’s wealth and sitting on the board of one of the companies. The husband spent increasing amounts of time in Switzerland, which was where the family office was run and in 2009 bought a property there. In 2010, the wife and children moved to join him. From about 2015 onwards, the parties discussed and by 2017 had agreed, that the children should attend school in England. The intention was for the wife and the children to live in England, initially at the London property, although there was an expectation of frequent travel to and from Switzerland where the husband would continue to be based. In June 2017, the husband raised with the wife the idea of entering into a post-marital agreement. The wife was opposed to the idea, but both parties engaged lawyers, a first draft agreement was prepared by the husband’s solicitors in July 2017, and a without prejudice meeting was held in early August 2017 at the offices of the wife’s solicitors. On 22 August 2017 agreement appeared to have been reached and arrangements were made for the document to be signed on 29 August 2017. In the event, however, the wife declined to sign, although her solicitor had signed the relevant Certificate Annexe.

Broadly, the post-marital agreement provided for the wife to receive a total of (updating the figures to take account of inflation), about £7.1m plus provision for the children. It recorded the husband as having over £10 million net in assets, as receiving £500,000-£600,000pa from his father and as having inheritance prospects in excess of €100m. It recorded the wife as having over £2 million net. Thus, under the agreement the wife’s entitlement in the event of divorce was about 56% of combined net assets of £12,574,292 (excluding the prospective inheritance).

The wife, having decided not to sign the agreement, left Switzerland the next day to take the elder child to a school induction day in London. They both returned at the weekend. A day or two later, the wife and both children travelled to England where they resumed living in the London property. The husband lived in Switzerland but at weekends during term time flew to London. During holidays, the wife and children joined the husband in Switzerland. The family was using three properties at this stage, with two main family homes, in London and Switzerland. The wife claimed that thereafter there had been continuing discussions (which she described as negotiations) in respect of the post-marital agreement.

In January 2019, , the husband’s father transferred assets worth about €23m into a trust of which the father was the principal beneficiary and the husband was a discretionary beneficiary; the trust was intended to benefit the husband, his siblings and their issue in due course on his father’s death. The marriage came to an end in 2019 and the wife and children moved into rented accommodation in London. In January 2020, the wife’s English divorce petition was served. On 21 February 2020, the assets in trust were transferred back to the husband’s father pursuant to an instrument of partial revocation. The husband had received no distributions or loans from the trust.

The two children, who were based primarily with the wife, were aged 16 and 13 by the date of the trial of the wife’s financial remedies claim. The elder child had been diagnosed with ‘A’ syndrome and had only recently been able to undergo full school days; he saw a psychotherapist every fortnight and a consultant at ‘A’ institute. The younger child experienced severe anxiety, including panic attacks, and had a history of self-harming issues; she saw a psychologist every fortnight. Both required particular care and attention, including attending frequent medical appointments. Both children attended independent day schools in London. There were ongoing child arrangements proceedings relating to the younger child.

During the marriage the family’s standard of living was very affluent, but not of the extravagant super-rich variety. The expenditure schedules demonstrated, broadly, that in 2019 the total family budget on everything (in England, Switzerland and elsewhere, and including all children’s costs) exceeded £600,000. This lifestyle was largely funded by the generosity of the husband’s father, acknowledging that annual gifts were a tax efficient way of rewarding the husband for his work. Although the sums varied from year to year, the husband’s Form E stated that “Over the course of the last three years I have received from my father donations totalling £1.17m“, about £370,000 pa (it had been noted as £500,000 to £600,000 in the post-marital agreement). The husband claimed that his father had now ceased the previous annual payments to him, and side-lined him from his role in the family office. The family’s current net assets were in the region of £12.5 million. The husband had a modest earned income: his non-executive director salary was €49,000pa net, and in 2021 his dividend share was €15,600 net. The wife had no meaningful earning capacity.

The husband’s father, now 89, had formed a relationship with a woman who was 38 years younger than him, to whom he had given about £8 million. The husband and his sisters were now barely on speaking terms with him. They believed that their father was incapacitous when with his new partner, manipulated and controlled by her and that he might jeopardise the family wealth and their future inheritances. They had instituted legal proceedings in France and Switzerland in a claim akin to a Court of Protection action. The husband’s father had ceased any support for the husband’s sisters as well as for the husband. His life expectancy according to At A Glance was 4.5 years. He appeared to be worth not less than €400m, all of which appeared to be in his name rather than held via trust arrangements. He had made no direct threat to disinherit the husband.

The High Court judge awarded the wife £7.45m net.

5. i) By order at the Pre-Trial Review, the parties’ s 25 statements had been limited to 20 pages of narrative. Para 5.2 of PD27A mandated that narrative statements, among other documents, were to be typed in “a font no smaller than 12 point and with 1 1⁄2 or double spacing“. The husband had complied with this. The wife’s statement had purported to comply, in that it consisted of 20 pages, but because it used smaller font and spacing it had been, in fact, about 27 pages compressed within the 20 page limit provided for. The consequence was that her statement was about 33% longer than the husband’s. This was completely unacceptable, and the wife’s legal team should not have permitted it to happen. Court Orders, Practice Directions and Statements of Efficient Conduct were there to be complied with, not ignored. The purpose of the restriction on statement length was partly to focus the parties’ minds on relevant evidence, and partly to ensure a level playing field. Why was it fair for one party to follow the rules, but the other party to ignore them? Why was it fair for the complying party to be left with the feeling that the non-complying party had been able to adduce more evidence to his/her apparent advantage?
6. ii) By para 11 of the High Court Statement of Efficient Conduct of Financial Remedy Proceedings, s 25 statements must only contain evidence, and “on no account should contain argument or other rhetoric“. In this case, the wife’s over long statement had crossed the line and descended into a number of personal, and prejudicial matters, directed at the husband which, in the court’s view, had been irrelevant to the matters at hand. Parties, and their legal advisers, might be under the impression that to describe the other party in pejorative terms, and to seek to paint an unfavourable picture, would assist their case. It was high time that parties and their lawyers disabused themselves of this erroneous notion. Judges would deal with relevant evidence, and would not base decisions on alleged moral turpitude or what had been described disapprovingly (albeit in a slightly different context) as a “rummage through the attic” of the marriage in G v G [2002] EWHC (Fam) 1339.

iii) Approximately 1 week before the trial, the court had been notified of a bundle issue. The wife, in putting together the first draft of the bundle index, had included a 102 page section of her narrative comments and fresh property particulars, directed towards the issue of her housing needs. No notice had been given to the husband, who had objected. The court had ruled on paper and had largely acceded to the husband’s objections, concluding that this was an attempt to introduce fresh evidence, although it permitted inclusion of the wife’s comments on properties already produced in evidence.

1. iv) After the parties had exchanged and lodged skeleton arguments, the husband had served updating disclosure. The wife had objected either to the updates being adduced in evidence, or to the updated figures appearing in the composite schedules. The court had therefore started the trial with competing composite schedules, which had been thoroughly unsatisfactory and had defeated the purpose of having composite schedules in the first place.
2. v) The working day before the hearing, the husband had served on the wife a financial analysis of matrimonial expenditure through the parties’ joint account in 2018 and 2019. The itemised schedule consisted of thousands of entries. The wife’s legal team had unsurprisingly objected to late receipt of this analysis. Commendably, in short order, they had responded with a schedule of their own in respect of sole accounts, so as to give a more complete picture. This court deprecated the practice, which appeared to be prevalent, of lawyers producing at the eleventh hour spreadsheet analysis of expenditure during the marriage (and/or since separation) based on primary documents such as bank and credit card statements which had been in their possession for many months. If an exercise such as this was to be relied upon, it must be provided well in advance of the final hearing (the court suggested before the PTR or final directions hearing) so that the issues, and evidence, could be properly identified and case managed.

It had seemed to the court at the start of the trial that far and away the most material aspect of the case was the wife’s reasonable needs. By the end of the trial, the court’s view on that had not altered. It was a moot point whether the wide-ranging, and at times bad-tempered, inquiry by the parties into a multiplicity of other issues had achieved much of value.

The sharp delineation between marital and non-marital assets at the time of gift or inheritance had blurred over time as a result of (i) the length of the marriage, and (ii) the fact that the funds had been used to fund the family’s needs and lifestyle, and (iii) the use of some of the properties as matrimonial homes. Since both parties had approached this case principally by reference to needs, the court did not need to embark on an attempt to delineate between marital and non-marital property. However, the general background of non-marital wealth on the husband’s side was separately relevant in two ways: i) it informed, or might inform, the circumstances surrounding the pre-marital and post-marital agreements; and ii) it was, or might be, relevant to an assessment of the wife’s needs.

The main issues before the court were: i) the circumstances surrounding the pre-marital agreement, and whether any weight should be attached to it; ii) the circumstances surrounding the unsigned post-marital agreement, and whether any weight should be attached to it; iii) whether the husband could anticipate a resumption of the inter vivos gifts previously received from his father; iv) whether prospective inheritance from the husband’s father was a relevant factor; and v) the wife’s needs.

The court was confident that both the husband and the wife had been under pressure from the husband’s father in relation to the pre-marital agreement. The court was equally confident that the wife had felt under stress and had been uncomfortable with the process. However, none of the vitiating factors set out in Radmacher applied and there was no reason to discard, or ignore ab initio, the pre-marital agreement. Despite the pressure on both the wife and the husband, the wife had not been under undue pressure to enter into it. In almost every pre or post marital agreement one or other, or both, parties were under a degree of pressure, and emotions might run high. The collision of the excitement engendered by prospective marriage, and the hard realities of negotiating for the breakdown of such a marriage, could be acutely difficult for parties. Tension and disagreement might ensue. If, as here, one side of the family was applying pressure, the difficulties were accentuated. But in the end, each party had to make a choice and unless undue pressure could be demonstrated, the court would ordinarily uphold the agreement. The pre-marital agreement contained clauses that the agreement was being entered into “of their own free will without undue influence or duress” and that “they would not be getting married unless they had entered into the agreement”. Their solicitors had signed certificates to similar effect, and the wife’s solicitor had corresponded with the husband’s solicitor saying that the wife was freely entering into the agreement. It had been considered, discussed and negotiated over a period measured in months. The wife had had the benefit of lawyers in both England and Switzerland and had benefited from its immediate implementation (the London property being put into joint names and a considerable sum being placed in a joint account). The pre-marital agreement had largely been overtaken by events. Nevertheless, the exposition within the agreement as to why the parties were entering into it was relevant: it expressly recorded that all dynastic property already acquired by the husband or acquired during the marriage should be free of claims by the wife save as necessary to implement the agreement, and that each should retain their own separate property. The section “Genesis of the Agreement” specifically referred to the past receipt by the husband of family monies, and the anticipated future receipt of dynastic assets which were intended to be excluded. Self-evidently, the agreement had had one eye on the future wealth which was expected to cascade down to the husband.

Although there was no doubt that the wife had been placed under pressure by the husband to sign the post-marital agreement, the wife had not been placed under undue pressure, let alone duress, to sign. Both parties had been under pressure for different reasons. The husband and wife had been in communication, through their lawyers, about the post-marital agreement for some 2 months. The document (to which the wife had assented in correspondence) explicitly recorded at clause 8.8 that each party entered into the agreement “of their own free will without undue influence or duress and without any promise or representation other than as set out in the Agreement, and neither has suffered inequality of bargaining power“. The wife’s solicitor had signed it. At no time had the wife’s solicitors said that the agreement was being conducted under undue pressure. In the end, the wife had elected not to sign, as was her right. The court rejected the wife’s submission that no agreement could, in any event, have been reached, because otherwise why would they have been in ongoing discussions? The post agreement discussions were privileged, and the parties have not waived privilege. The court therefore had no idea what they contained and whether they in fact represented an ongoing chain of negotiations which did not achieve consensus on a final version of the post-marital agreement. Far from undermining the agreement, the fact that some form of without prejudice discussion had taken place after the agreement had been reached demonstrated vividly that agreement had in fact been reached; otherwise, why attempt to renegotiate it? In any event, the correspondence explicitly confirmed that agreement had been reached on 22 August 2017. If there had been an attempt to re-negotiate, nothing suggested that a supplemental agreement, or variation of agreement, had been entered into.

Normally, an agreement would take effect as a result of both parties signing. The principle of autonomy, articulated in BN v MA [2014] EWHC 2450 when emphasising the importance of a party signing (and, by corollary, not signing) was relevant. However, there was no immutable law. Each case was fact specific. It might be, for example, that parties agreed in correspondence that agreement had been reached, and signatures were not required. It might be that parties did not sign, but clearly considered themselves bound and acted accordingly. But in this case, it seemed unreasonable for an agreement to be formally binding upon the wife in the absence of her signature when that very same agreement expressly, and in terms, only took effect upon both parties signing. The purpose of such agreements was to achieve as much certainty as possible, and it struck the court as unfair for the wife to be strictly held to a document which had been carefully drawn up to require, as an express clause of the agreement, both parties’ signatures.

This was therefore not a formally arrived at agreement in the Radmacher sense, whereby the presumption was that it should be given effect to unless in the circumstances it would not be fair to hold the wife to its terms. In other words, the court declined to find that it bound the wife unless she could demonstrate that it operated unfairly. But nor was the court willing simply to discard and ignore it. To do so ran contrary to the s 25 requirement to take account of all the circumstances of the case. Although not a strict Radmacher agreement, this had been an agreement reached by the parties, with the benefit of legal advice, and upon full disclosure. Even though the wife had not signed it, the court was entitled to take it into account and attach such weight to it as it thought fit. It was one of the factors, to be considered in the mix. The terms agreed in 2017 were relevant, albeit not determinative.

The annual payments from the husband’s father ceasing, and the reversal of the funding of the trust had principally been caused by the wife’s divorce proceedings. Contrary to the wife’s case, this had been instigated by the husband’s father, and was not the product of collusion between the husband and his father. Given the current disputes within the family, in the foreseeable future the husband’s father was not likely to resurrect the previous level of payments or immediately replace in the dynastic trust the sums previously removed, or anything like it. The court was not satisfied that it could or should take this prospective resource (i.e ongoing support provided by the husband’s father) into account in any meaningful way, save that the court doubted that he would want to see his son destitute; in other words, he was in the background as a safety net in the event of calamity rather than in the foreground as a foreseeable ongoing resource. It was not for the court to try to encourage him to restore the inter vivos payments; to do so would be to trespass on his autonomy. However, even had the court concluded that monies of up to c £600,000 pa would shortly be made over to the husband once again, its conclusions on the appropriate order would be the same.

The general proposition of law, per Michael, was that the fact and timing of inheritance were ordinarily so uncertain that it could not be viewed as a resource. The dicta in Alireza moved the dial a little in the direction of greater certainty as to fact although not as to timing, in cases of forced heirship. On the facts of this case, although the court could not ignore the possibility that a family meltdown of such magnitude would take place that the husband’s father would take active steps to avoid forced heirship and disentitle his children, it was, on balance, more likely that at some point the husband would indeed receive a significant inheritance. However; i) such inheritance would be entirely non-matrimonial, received long after separation; ii) it had always been understood by the parties, as recorded in the two agreements, that future inheritances should be excluded from claims by the other party; iii) in terms of foreseeability of resource, it might be several years away, and was unlikely to be of immediate assistance to the husband. At best, it gave the court confidence that the husband would not want for money in the long term.

The court’s award was based principally on an assessment of the wife’s needs, although it had had in mind in particular the length of the relationship, the primacy of the children’s needs, the available resources, the standard of living and the origins of the wealth. It had also factored in the post-marital agreement in circumstances where, although the wife had not signed it, agreement had been reached and there was nothing to suggest she had been discontented with the terms at the time.

The court had concluded that an appropriate housing sum for the wife was £3.5 million plus stamp duty (£333,750). To provide sufficient funds to complete the purchase, move and renovate a new property, the court rounded up this sum to £4 million. The wife would of course be able to spend more on a property if she so chose, but would have to tailor her income fund accordingly. The court rejected the wife’s claim to a second home in Switzerland costing £1.8m-£2m. The children would be able to see the husband in Switzerland at his home (which was also their home), and in any event their needs did not as a matter of law extend for more than perhaps another 10 years. Currently, when the children went to stay with the husband, the wife also travelled to Switzerland in case of an emergency; the court sincerely hoped and expected that she would not need to make these trips for much longer, and did not regard this aspect of the case as supporting her request for a second home. She would have ample funds to travel there, stay in hotels and/or rent if she chose. Given that the children were based in London in term-time and that about half the holidays were likely to spent by the children with the husband, the time spent by the wife and particularly the children in a second home would be limited. Provision for a second home in Switzerland had not been included in the post-marital agreement and would be an unreasonable need. The wife would have enough funds to purchase a second property if she wished, particularly if she scaled back her London aspirations, but was a matter of choice for her rather than an expense attributable solely to the husband. Further, the court was unconvinced that the husband had liquidity to pay for a second home as sought by the wife and, moreover, were he to do so his ability to meet his own needs would be severely affected.

Deducting the cost of running a second home in Switzerland brought the wife’s budget down to about £224,000 pa. The husband’s budget (similarly excluding costs directly referable to the children) was £233,215 pa, albeit including £43,225pa of mortgage costs; excluding mortgage costs brought his budget down to £189,990. In the post-marital agreement, the budget deemed appropriate for the wife was £110,000 pa (uprated for inflation). In her most recent proposal, the wife was seeking a Duxbury of £3.4m which equated to about £155,000 pa. It seemed to the court that £110,000 pa would be inadequate in the light of the standard of living, the historic expenditure by the parties, and the husband’s own budget. An appropriate sum was £150,000 pa which, in accordance with the Duxbury tables, was capitalised at £3,319,000 (UK state pension, for which the wife had minimal provision, had been ignored for the purpose of this calculation). In the long term the wife would also have a valuable property which she could trade down to release money if she so chose. The court had taken into account that such a sum would be referable to the wife’s personal costs alone, and the husband would, in addition, be paying a very high level of agreed expenditure for the children (about £174,000 pa) The sum required to meet the wife’s needs was £7.32 million; the court would increase that to a total of £7.45 million to allow for unforeseen contingencies. The structure of the award would include a transfer of the London property to the wife, as the post-marital agreement had envisaged. It was more logical for her to have that property, and sell it how and when she wanted. In any event, the husband could not pay the entire award in liquid cash.

The wife’s award therefore consisted of the London property, the wife’s bank accounts, investments and pension, minus her liabilities, leaving a balance to be paid by the husband of £4.681 million. He was to pay £3.5 million by 14 June 2022 and the balance of £1,181,574 by 14 September 2022. This would enable the wife to buy her own property in London, without needing to sell the current London property until such time as it suited her. The wife’s award of £7.45m net was about 60% of the present total assets of £12.47 million. The husband would also be making a very high level of financial commitment for the children. This was a fair outcome for both parties. It approximated to the post-marital agreement, but went beyond it so as to meet what the court considered to be the wife’s needs judged against all the relevant factors. The court was confident that the husband would be able to meet his own needs under this order.

The court rejected the wife’s claim the husband should meet her projected costs of the Children Act proceedings, said to be £173,000. The court knew nothing about those proceedings, including how proportionately or reasonably each party was conducting the litigation. It would be a matter for the judge hearing those proceedings to decide if a cost order one way or the other was warranted.

The combined costs of the financial remedy proceedings were just over £1.6 million (the wife’s were £917,000 and the husband’s were £709,000), which was about 13% of the assets and more or less comprised the difference between the parties in their open proposals. The court would deal with any costs application separately.