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	England and Wales High Court (Family Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> H v H [2010] EWHC 158 (Fam) (02 February 2010) URL: http://www.bailii.org/ew/cases/EWHC/Fam/2010/158.html Cite as: [2010] EWHC 158 (Fam), [2010] 1 FLR 1864

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IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
(In Private)

		Royal Courts of Justice Strand, London, WC2A 2LL
		2 February 2010

MR JUSTICE MUNBY

This judgment was handed down in private but the judge hereby gives leave for it to be published in this anonymised form

Lord Justice Munby :

1. These are ancillary relief proceedings which would be straight-forward but for three factors: the fact that vast wealth was generated during the last three years of a marriage which lasted for twenty years; the unusual nature of the business that enabled the husband, with his partners, to generate that wealth; and, as a consequence, the more than usually difficult task – assuming the task to be both relevant and feasible – of assessing the true value of the business as a prelude to determining the share (if any) of the business to which the wife can appropriately lay claim.
2. That said, the reality is that this is and always was a comparatively simple case which has become extended in its scope and protracted in its length almost beyond reason by the forensic enthusiasm with which it has been pursued on both sides. The trial bundles extended to 15 lever arch files. The written opening submissions ran in all to 140 pages. The written submissions in relation to certain tax issues (see below) ran to more than 60 pages. The time estimate (10 days, the first day being a reading day) soon proved to be unrealistic, for the trial, excluding the reading day, lasted for 15 days which, because of the over-run, had to be spread over the period from 28 April 2009 to 9 July 2009. Final oral submissions followed at a hearing which had to be listed at Newcastle upon Tyne, where I was then sitting, on 27 July 2009. The written closing submissions ran, in all, to more than 150 pages with almost a further 100 pages in relation to alleged litigation misconduct.
3. The skill with which, on both sides, all this effort was deployed was first class; whether the endeavour was really necessary is, perhaps, another matter. But in venturing this observation I emphasise how acutely I am conscious not merely of the priceless advantage of hindsight but also of the forensic experience that the inner realities of a case are often much more apparent to the judge who watches the battle played out before him than to those engaged in the fray – this, after all, is one of the consequences, as also one of the advantages, of the adversarial process.
4. I make these points not to criticise but to explain why in this judgment I propose to concentrate on what, at the end of the day, matters. Doing so means that I pass by in silence much of what has been put before me, whether in evidence or in submissions. I intend no disrespect to counsel but if I was to deal with every topic that was canvassed before me this judgment would extend to a length grossly excessive even by my standards and, I am satisfied, all to no useful purpose. I make it clear however that in coming to my conclusions I have, of course, had regard to all the evidence and all the submissions.
5. There are two other preliminary points I should make. In the first place, such is the scale of the wealth here, even taking the most pessimistic view, that there is not, generally speaking, much point in analysing the figures with an excessive degree of precision. Much of the time, and except when a greater degree of accuracy is called for, I will therefore round the figures to the nearest million or fraction of a million. Secondly, for convenience and subject only to what, in the great scheme of things is a tolerable degree of inaccuracy, I propose to refer to most amounts in £ sterling, even though significant parts of the husband's business activities are conducted and some of the assets are held in other currencies which have from time to time moved in relation to sterling. I have taken into account these exchange rate movements but, generally speaking, I need not refer to them.

The background

6. The husband was born in 1958, the wife in 1955. They married in 1987. There are three children born of the marriage: twins (a boy and a girl) born in 1991 and a girl born in 1996. The matrimonial home, a prestigious property in London, was acquired in 1996 for £2.4 million; a further £1.5 million was spent on refurbishment. The husband, who is by profession an accountant, began his current business (see below) in August 2004. The parties separated in March 2007, the wife remaining in the matrimonial home with the children. She issued her petition in September 2007. Both parties filed a Form A in October 2007. The decree nisi and the decree absolute were both granted in June 2008.
7. After much interlocutory skirmishing (including hearings before Hogg J and Baron J, an unsuccessful FDR before Coleridge J and further hearings before Baron J and Black J) the final hearing came on before me on 27 April 2009. It concluded, as I have said, on 27 July 2009. The wife was represented by Mr Charles Howard QC leading Mr Harry Oliver and, on the tax matters, by Miss Emma Chamberlain; the husband was represented by Mr Lewis Marks QC leading Miss Hannah Baker (during July 2009 Miss Katie Cowton) and, on the tax matters, by Mr Stephen Brandon QC leading Miss Harriet Brown. I am very sorry that my new commitments, which began only two days later and which in the event and partly for unforeseen reasons have been more onerous than I had initially imagined, should have delayed this judgment for much longer than I would have wished.

The background: the husband's business

8. The husband's business, carried on with a small number of partners, his share being 25.5%, is in what is called quantitative long-short equity trading. It takes advantage of price mismatches and predictable patterns of stock price movements over very short timescales – a few hours at most, sometimes minutes or even seconds – which typically are generated by structural imperfections in the market. The business involves huge numbers of stock market transactions every day, the massive profits which have resulted being generated, despite the often minute profits on individual transactions, by the sheer volume of the daily trading. The trading is fully automated – computerised – with almost no manual interaction. The 'cutting edge' computer systems which the business has developed have been the key to its success. Computer based strategies involving complex algorithms are used by the business, first to test against historical data whether a strategy in development will 'work' (as it was explained to me, "strategies are developed and comprehensively back-tested"), secondly, if a strategy has been demonstrated to work, to conduct the actual trading ("high speed electronic connectivity to permit fast execution of orders") and, thirdly, to monitor the trading so as to ensure that the automated process is profitable and that unprofitable trading is automatically stopped in time.
9. The gross revenues of the business have been plotted on various graphs and subjected to much statistical analysis. As it happens I do not need to go into any of this in any great detail. The final version of the key graph (which I am satisfied is both factually accurate and statistically valid^[1]) shows the gross revenues in terms of both the actual weekly figures and moving averages calculated over the previous 13, 26 and 52 weeks. Although, inevitably, the moving averages follow somewhat different tracks, the overall picture, so far as is relevant for present purposes, is precisely the same. From a starting point of zero in August 2004 the graph climbs fairly rapidly and steadily to a peak of between $4 million and $5 million per week in June-July 2006 (the 13 and 26 weeks moving averages), then falling equally steadily, albeit at a shallower gradient, to less then $1 million in June 2009 (the most recent figure I have), indeed reaching perilously close to the 'breakeven' figure of $410,000 required to meet the trading expenses but before the payment of staff bonuses. Calculations based on the moving averages from the peak in June-July 2006 suggest that the decline since then will, if continued at the same rate, have taken the gross revenues below the 'breakeven' figure in about September 2009 and back to zero by about February 2010.
10. The overall trajectory is clear: taking the overall period from August 2004 until February 2010, a period of 66 months, and assuming that the decline since June 2009 follows the trend over the previous three years since June 2006, the gross weekly revenues of the business increased from zero to a fraction short of $5 million (the highest actual figure) in July 2006 – a period of some 23 months – before returning to zero between then and (say) February 2010 – a period of 43 months. I might add that, consistently with this general picture, for the downward slope has been fairly constant, the gross revenues were at about $3 million per week at the time the parties separated in March 2007.
11. Although the downward slope has, as I have said, been fairly constant it is also clear that the business returns have tended to be more volatile (that is, the standard deviations have been greater) and therefore riskier in the second half of 2007 and since mid-2008.

The background: the matrimonial assets

12. By the end of the hearing the parties had largely reached agreement as to the value of the matrimonial assets, excluding the value of the husband's business. They can be tabulated as follows:

ASSETS	Agreed values	Wife	Husband
Matrimonial home (net)	11,155.000	11,155,000
Bank accounts	14,365,786	13,406,449	959,337
Life policies	232,503	160,677	71,826
Pensions	679,320		679,320
Trusts	*26,853,373		*26,853,373
Total	+53,285,982	24,722,126	#28,563,856

* The husband's figure; the wife says the figure is £30,781,216

+ The husband's figure; the wife says the figure is £57,213,825

# The husband's figure; the wife says the figure is £32,491,699

13. Before proceeding any further there are a number of things to be added to this tabular exposition:

i) It is agreed that the value of the former matrimonial home is £11,500,000, the figure of £11,155,000 being its value (there is no mortgage) net of notional sale costs of £345,000.

ii) The difference of £3,927,843 between the husband's figure of £53,285,392 and the wife's figure of £57,213,825 relates entirely, as can be seen, to the value of the Trusts and is represented largely (I ignore some small differences totalling less than £4,000 which are not worth considering) by two factors: a difference of some £600,000 between the husband's figure (£6.195 million) and the wife's figure (£6.819 million) for the value of a particular fiduciary deposit; and a difference between the husband's figure (£23.646 million) and the wife's figure (£26.947 million) for a particular investment fund. I shall return to this below.

iii) An issue was raised by Mr Howard in opening as to the husband's alleged interest in a property in India. I do not propose to explore the matter further. It is far from clear that the husband has any such interest and, if he has, the material before me suggests that his interest is worth somewhere between £250,000 to £500,000 – an amount almost trivial in comparison to the other matrimonial assets. And the fact that the matter remains even now far from clear does not, I am satisfied, cast any doubt either on the propriety of the husband's disclosure overall or, more generally, on his credibility.

iv) Mr Howard also submitted that it was appropriate to add into the schedule of assets (a) the residual value – (say) £250,000 – of the husband's lease of his current home and (b) an 'add back' for what he calls the husband's "enormous expenditure" on holidays since the separation, the appropriate figure on a broad view, he suggests, being £750,000. I do not agree. In the context of this particular case, and given the very large wealth involved, it seems to me unnecessary to adjust the table of assets to reflect such a small amount as the suggested value of what is after all a wasting asset. And the holiday expenditure, even if it was as large as Mr Howard suggests, and I am not wholly persuaded that it was, does not justify an 'add back'; this was not reckless extravagance or spendthrift expenditure, merely a reflection of the cost of the kind of expensive hobby that the very rich can afford to indulge in as part of their wealthy lifestyle.

14. It is common ground that the difference between the parties as to the value of the Trusts derives solely from a difference as to the date at which the relevant exchange rates should be taken; the wife contends that the relevant date is 28 February 2009, the date when the schedule of assets and values was updated, whilst the husband contends for an updating to the date of submissions in July 2009. Mr Howard points out that 28 February 2009 was the date fixed at the FDR and submits that, unless everything is valued at essentially the same date one is simply not comparing like with like. Mr Marks characterises Mr Howard's approach as "artificially freezing" the exchange rates at an inappropriately early date. At the end of the day, as it turns out (see below) this point scarcely matters. But if anything turned on it I would prefer Mr Howard's approach.
15. Excluded from the assets as I have just described them is the husband's business. This has two components: first, surplus cash which it is agreed stands at a gross figure of £17,930,869 or (after an adjustment of £892,500 which the husband says, and I agree, requires to be made representing his estimate of bonuses which, he says, will have to be paid to the business's employees in relation to work already done) a net figure of £17,038,369; and, secondly, the value of his 25.5% share in the other assets of the business, a matter of acute controversy to which I must return in due course.
16. The bulk of what are now the wife's assets represents transfers made to her by the husband as follows:

i) £½ million paid in 2005;

ii) £½ million paid in 2006;

iii) £5 million paid on 21 February 2007; and

iv) £7.234 million paid on 20 March 2008 (see below) together with life policies worth £106,815 and the former matrimonial home (free of mortgage).

The background: the events of March 2008

17. The parties had separated in March 2007 and the wife had petitioned in September 2007. On 20 March 2008 the husband's solicitors wrote to the wife's solicitors to inform them that the husband "has today implemented the following arrangements", which, so far as concerned capital provision, included the unilateral transfer by the husband to the wife of: the matrimonial home free of the mortgage, stated in the schedule annexed to the letter to be worth £21 million; cash of £7.234 million and the benefit of two life policies worth £106,815. The letter explained that these arrangements "assuming our client's figure for the value of the matrimonial home, take your client's total wealth to over £34m", which was contrasted with what was said to be "the total value of the parties' wealth … in the region of £101m gross." However, the letter also acknowledged that "there may be issues about the value of our client's business interests and the [matrimonial home]."
18. The letter justified the arrangements on the basis that "in the light of the Court of Appeal's judgment in Charman, and the extent of the assets in this case, the bracket for your client's entitlement is probably 35%-38% of the net assets." The letter presented the context of the arrangements as being advice the husband had received from Mr Brandon as to steps he should take for fiscal purposes before the end of the current tax year a fortnight later.
19. This letter and the arrangements to which it refers have, unfortunately, given rise to acute controversy and taken up what, in the outcome, can only be seen as a grossly disproportionate amount of time during the hearing.
20. In the first place Mr Howard asserts that the letter:

"although initially portraying the … payments as fiscal planning, … was also clearly a tactical device designed to place a great deal of pressure on W not to continue with her financial application."

I reject that accusation. The evidence demonstrates that the timing of the letter was indeed driven by legal advice as to the fiscal need to act before the end of the current tax year. And there is nothing as such improper or 'tactical', if the latter expression is intended to be understood in the pejorative sense, in a party making an open offer and, if rather unusually, without any prior warning proceeding forthwith to give unilateral effect to it.

21. Secondly, and much more significantly, the letter, he says, was disingenuous to say the least in suggesting that the matrimonial home was worth £21 million, and that the arrangements put in place by the husband would leave the wife with assets worth over £34 million. For the husband's solicitors had been told by Savills on 7 February 2008 that the property was "very unlikely" to be worth as much as £20 million and had on their file an unsigned draft short-form valuation from Savills dated 28 February 2008 – less than a month before the letter – giving the value as only £17.75 million, facts which were not revealed until after the hearing before me had begun and even then only after a process akin to drawing teeth.
22. Now this latter matter would probably not have been of any particular significance but for the reliance which Mr Marks in opening understandably placed upon the letter. I think in the circumstances I should quote exactly what he said in his written opening submissions. Having asserted that the division of the assets effected by the husband in March 2008 "certainly was – and arguably still is – distinctly advantageous to W compared to H" (emphasis in original), and having then proceeded to attempt to justify the latter proposition, Mr Marks said this:

"What approach should be adopted to those changes, and does the principle that the assets are to be revalued at the date of the hearing justify a reappraisal of the fairness of the division that H implemented? We submit that it does not.

If the court is satisfied that there has been what is objectively a fair division, particularly one which is a generous fair division, of a class of assets (in this case all the assets which existed in March 2008 with the exception of the value of the future income from [the business]) it would be contrary to the public interest in encouraging parties to reach an early resolution, for the fairness of that division to be revisited merely because the assets of one of the parties have prospered relative to the assets of the other.

… Once done – whether by agreement, court order or otherwise – and provided that it can be shown to have been an objectively fair division, the court should not reopen the division to readjust for changes which occur subsequently – particularly for "passive" changes."

23. Unsurprisingly, as it seems to me, this shone what Mr Howard aptly called a 'forensic spotlight' on the letter, with the unhappy consequence that, as we shall shortly see, each side has accused the other of litigation misconduct in relation to it.

Litigation misconduct

24. Unhappily, and the result in part of the 'atmosphere' in which the hearing proceeded, allegations of litigation misconduct on both sides proliferated and increased in intensity during the hearing. In order to ensure a clear understanding by everyone of what was or was not being alleged, I indicated that each side should set out its allegations in a schedule; Mr Howard's on behalf of the wife and Mr Marks's on behalf of the husband are each dated 13 July 2009.
25. The wife's allegations against the husband focus on the letter of 20 March 2008 and its aftermath. Complaint is made in particular that:

i) the valuation obtained by the husband's solicitors in February 2008 was not privileged and should have been disclosed, the failure to do so being, it was said, a "serious breach" of the husband's duty of full and frank disclosure given the terms in which the letter of 20 March 2008 was couched;

ii) the letter of 20 March 2008 was misleading;

iii) the non-disclosure of the valuation led to significant correspondence which was obfuscatory at best and, submits Mr Howard, in fact deliberately calculated to mislead both the wife and the court, the process of obfuscation and misleading – what Mr Howard calls the "cover up" in an effort to put the wife and the court 'off the scent', indeed a "campaign of misinformation" – continuing throughout the early part of the hearing;

iv) the husband's oral evidence and affidavit on the issues relating to this valuation were "dishonest".

26. Mr Howard does not assert that any of these matters goes to the proper quantum of the wife's award. But they are, he says, relevant not only on costs but also on what he calls the "centrally important issue" of the husband's credibility, a topic to which I return below. He submits that the husband was complicit in and approved the 'cover up', "lied in the witness box … both as to his involvement and his knowledge" and then "tried to lessen the impact of being caught out by swearing an affidavit that was itself untruthful and incapable of belief as to the reasons for his earlier inaccurate (putting it mildly) evidence."
27. The husband's allegations against the wife relate to a number of different topics. Complaint is made that:

i) the wife and her solicitors misled both the husband's solicitors and the court (District Judge Black) in relation to the issue of the petition;

ii) the wife illegally copied the husband's computer hard-drive, using experts to hack into it having falsely told them that it was joint property and thereafter misleading Hogg J as to why she had acted as she had;

iii) failing to hand over Hildebrand documents and thereafter misleading both Hogg J and Baron J;

iv) making "baseless" allegations of non-disclosure against the husband and not withdrawing them until after the final hearing had begun;

v) "raising and pursuing to wholly disproportionate lengths, the disclosure of [the February 2008 valuation], and the circumstances in which it was obtained, including persistent, unwarranted and unrestrained attacks on H and his legal team with the result that the length of the trial was extended by several days."

28. According to Mr Marks, items (i)-(iv), to a greater or lesser extent, created the atmosphere and circumstances in which the litigation commenced and continued, which was, he says, unnecessarily hostile, confrontational and antagonistic and which, he says, generated excessive and disproportionate legal fees. So far as concerns item (v), Mr Marks submits that the allegations formulated by Mr Howard, however they are put, are, in reality, of "a conspiracy to pervert the course of justice made on the flimsiest of pretexts and evidence."
29. Mr Howard takes issue with most of Mr Marks's complaints^[2] before submitting that many of them, at best, are relevant (if at all) to costs and costs alone, differing in this respect, he says, from the allegations against the husband which, striking to the very heart of the case, not only sound in costs, whatever the outcome, but, more fundamentally he says, go to the very merits of his case.

Credibility

30. It is convenient at this point, and before turning to consider whether and to what extent these various allegations of litigation misconduct are made out, to address the question of the parties' credibility.

The wife's credibility

31. Given the limited ambit of what remains in issue the wife's credibility, which Mr Marks sought to challenge, accusing her in his opening of having been willing to exaggerate, mislead by omission and mischaracterise events to obtain forensic advantage, seems to me to be of no practical importance. Nor, pace Mr Marks, does it seem to me to throw any useful light on the more significant issue of the husband's credibility. So I propose to say nothing more about it, save to say (as I think in fairness I ought) that I accept her evidence before me as having been frank and truthful.

The husband's credibility

32. Mr Marks submits that the husband is a trustworthy and credible individual whose evidence can be trusted, whether in relation to the business or otherwise. The husband, he says, is an honest litigant and reliable witness who has made full disclosure. Mr Howard, for his part, emphasises that the husband's entire case as to the value of the business rests, as he puts it, solely and squarely on the foundations of his credibility, his expert, Mr Clokey's, conclusions being only as good as the information he was provided with. Mr Howard submits that I should treat with "great scepticism" any information provided to Mr Clokey that was not supported by independent verification. And in his final submissions he goes so far as to assert that for this reason Mr Clokey had effectively become a cipher for whatever information the husband wished to present.
33. Basing the submission in large measure, though by no means exclusively,^[3] on the husband's evidence in relation to the March 2008 letter and what he calls the "cover up", Mr Howard's case is that the husband "is and was untruthful and his evidence on these matters should be roundly rejected. He lied initially and was caught out." He adds: "This is not a trivial issue … it strikes to the very heart of the case" – an observation rejected by Mr Marks as "pure rhetoric".
34. Mr Marks accepts that, as he puts it, the husband's "accuracy as a historian" has been "dented" by what he says was no more than his "failure to recollect his involvement in, and awareness of the result of" the February 2008 valuation. As he rightly says, the giving of evidence is not supposed to be a memory test and the question, if it goes to credibility, is whether the husband, as he assured me, had indeed forgotten or was only pretending to have done. And he recognises that my decision as to whether or not the husband was indeed lying on this topic will be based as much as anything on my view of him as a witness overall, having had the opportunity, as Mr Marks reminds me, of having seen him give evidence over five days.
35. The husband was exposed to many, many hours of the most searching cross-examination, an ordeal from which, in my judgment, he emerged substantially unscathed. Almost inevitably, given the mass of complicated financial matters which were being put to him, and most of which he responded to from memory and without going to the documents, the husband on occasions made slips and gave answers which subsequently turned out not to be entirely correct. But having had the opportunity of watching him over many days in court, and not only when he was in the witness box, I am satisfied that the husband was an honest, truthful and, for the vast majority of the time, also an accurate and reliable witness. He did not lie. And on the comparatively few occasions when he was 'caught out' it was not for lying but rather, I am satisfied, because, quite genuinely, his memory was at fault.
36. In particular, I accept the husband's evidence in relation to the events of February and March 2008, including his evidence that his earlier account, which he now accepts was inaccurate, was the product not of deception but of genuine forgetfulness.
37. In the position statement dated 2 April 2008 which Mr Howard put before Baron J for the hearing on 3 April 2008, much play was made of what was said to be the husband's failure to make proper disclosure. What was said to be the "poverty" of the wife's "baseless" case in this regard was set out by Mr Marks in his 'Rebuttal' document. By the time the matter was before me the ambit of these complaints had been drastically reduced, the remaining complaint being, as we have seen, that I should treat with "great scepticism" the accuracy of the information supplied by the husband to Mr Clokey.
38. I do not agree. Quite apart from the fact that the husband was not the sole source of the information about the business being supplied both to Mr Clokey and to the wife's expert, Mr Allen, I am quite satisfied (a) that the husband was throughout doing his best to give accurate information to the experts, (b) that to the extent there were gaps or errors in the information he was giving them, that was the result of honest mistake and nothing more sinister and (c) that any previous errors or omissions had been remedied by the end of the hearing.
39. I return to the question of litigation misconduct, and first to the circumstances surrounding the letter of 20 March 2008.

Litigation misconduct: the letter of 20 March 2008

40. Much time was taken up debating whether, as Mr Howard alleges, the draft valuation report of February 2008 was not privileged and should therefore have been disclosed. According to Mr Marks, Mr Howard's allegations of litigation misconduct are crucially reliant upon the proposition that the husband was under a legal duty to disclose the valuation, either because it was not privileged or because, even if it was, the privilege was 'overridden' by the ancillary relief duty of full and frank disclosure. He says that if Mr Howard fails to establish either proposition his case as to litigation misconduct on this issue must "necessarily" fail, for on that basis the husband was legally entitled not to disclose the draft report.
41. I do not accept Mr Marks's submission on this point. Given what was said in the letter of 20 March 2008 about the value of the property, and the way in which the value of the overall 'package' was being represented to the wife, the point is not so much that the valuation had not been disclosed as such but rather that the wife was being told something about the value of the property without at the same time being told that the husband had a valuation which put rather a different complexion on matters. The point is really the same as that encapsulated in Darling J's famous aphorism that "A fishmonger need not cry 'stinking fish' … but if a fishmonger knows that his fish do stink, he is not entitled to cry: 'Fresh fish, fresh fish'."^[4] I therefore do not propose to consider any further the very interesting legal arguments that Mr Howard and Mr Marks prepared for me.^[5] I merely add that the important questions they have raised should, as it seems to me, be decided if and when they need to be, and not before. And since there is no need for me to decide them here, anything I might say would be mere obiter and for that very reason best left unsaid.
42. There is a further vitally important point to be borne in mind. Let it be assumed for the sake of argument that Mr Howard was to succeed in his argument that the February 2008 valuation was discoverable. That of itself would not, could not, justify a finding of litigation misconduct, for there is nothing whatever to show that any of those involved were deliberately deciding not to disclose a document which they knew or believed was or might be discoverable. There is no reason to think that it ever occurred, either to the husband or to his advisers, that the valuation might be discoverable. Indeed, I doubt that it would have occurred to many, if any, family lawyers, however experienced, to think that it might be discoverable.
43. So whichever way one looks at it, the focus, as it seems to me, has to be on the letter and what it said.
44. Mr Marks submits that the letter did not assert that the former matrimonial home was worth £21 million, or that the division was worth £34 million to the wife, let alone that the division was being made on that basis. He points in this connection to the passage in the letter which says that "the above arrangements, assuming our client's figure for the value of the matrimonial home, take your client's wealth to over £34m" (emphasis added). He relies upon what he calls "repeated references to the uncertainty of that value" and what he says was the qualified nature of the valuation and complains that the wife's focus on the suggestion that the house was being said to be worth £21 million is "opportunistic and deliberately distracting." Moreover, and I must return to this in due course, he says that the objective fairness of the division implemented in March 2008 had, and can be seen to have had, nothing to do with any assertion that the property was worth £21 million.
45. Now as it happens (see below) I agree with Mr Marks on this last point, and on that basis the argument in relation to litigation misconduct falls away, except perhaps in relation to costs.
46. That said, however, I cannot accept the way in which Mr Marks seeks to characterise what was said in the letter. True, the letter may not have asserted in so many words that the property was worth £21 million, but it was, as it seems to me, disingenuous to refer to that figure, and the corresponding figure of £34 million, in a manner calculated to induce the belief in the wife that those were the figures the husband believed to be correct when, as is now accepted, both he and his advisers knew what Savills were saying. To that extent I agree with Mr Howard. But beyond that I am not prepared to go. In particular, I do not accept that there was any "campaign of misinformation", let alone a "conspiracy to pervert the course of justice." There was not.
47. Furthermore I cannot help thinking, albeit perhaps only with the benefit of hindsight, that once the forensic searchlight had been focussed on the letter it might have been better if, irrespective of any question of privilege, there had been full and prompt disclosure in relation to the valuation exercise – something which, in the light of how matters in the event developed, might have served to save much time and expense. But if in that sense the husband and his advisers gave the wife and her advisers the opening to take the point, they cannot, of course, be held responsible for the enthusiasm with which the point was thereafter pursued against them.

Litigation misconduct: the wife

48. Since on any view this goes only to the question of costs, I propose to say little about the allegations of litigation misconduct on the part of the wife. Her behaviour in relation to the husband's computer and, subsequently, in relation to the Hildebrand documents was reprehensible. And she was, I think, unwise to pursue for as long as she did allegations of non-disclosure by the husband which she was never able to substantiate. Moreover, at various stages during the interlocutory skirmishing there may have been more appropriate ways in which she might have put her case, both to the husband's advisers and to the court. But beyond that I am not prepared to go. In particular, I do not accept that either she or her advisers ever set out to mislead, or that they did in fact mislead, either District Judge Black or Hogg J or Baron J.

The issues: equality

49. Mr Howard says that this is a paradigm case for equality; indeed, he says, to do otherwise would amount to undermining the entire thrust of White v White and Miller v Miller.
50. Mr Marks accepts as a starting point that this was a long marriage to which the wife made a full contribution. But the husband in his section 25 affidavit had canvassed four reasons for departing from an equal division of the matrimonial assets:

i) first, that he had made an exceptional or special contribution;

ii) second, the absence of contribution from the wife during the last years of the marriage, or at least from August 2006 onwards;

iii) third, that post-separation accruals since March 2007 should be left out of account; and

iv) fourth, that in any event no account, or at most very limited account, should be taken of the husband's future earnings.

51. Little if any play was made during the hearing of (ii), and in any event I am satisfied that there is no sufficiently compelling evidential foundation for such a contention, even assuming it is good in law (a proposition disputed by Mr Howard). So far as concerns (iii), certainly by the end of the hearing the argument was not so much that the 'cut-off' should be the date of separation (March 2007) but rather the date of the letter (March 2008). Mr Marks was, in my judgment, wise to adopt this course for neither the authorities to which he referred^[6] nor the authorities to which Mr Howard directed my attention^[7] lent any very compelling support to the proposition for which the husband was initially contending. At the end of the day the forensic reality is, as Mr Marks explained, that to take into account any argument the wife wished to make to share in the post-separation increase in the value of the business, the March 2008 division included, or at least took into account, a whole year of post-separation accrual.
52. So far as concerns (i), the suggestion of special contribution, this was only ever advanced by Mr Marks in a somewhat hesitant fashion – the husband "would have an argument" – and then only if I was persuaded to accept the views of the wife's expert, Mr Allen, as to the value of the business. And beyond the observation that there is no very obvious distinction between what the husband has done here and what Mr Charman had done, the argument was not really developed in opening:

"we do not intend … to articulate at any greater length the arguments for a departure from equality based on special contribution, and will do so in closing if, by then, it appears that it is a live issue."

By the time he came to make his closing submissions, Mr Marks seems tacitly to have dropped the point albeit without formally abandoning it.

53. Mr Howard for his part characterised the husband's position on this as "intellectually and jurisprudentially moribund." That, I think, goes too far. But whatever Mr Marks's final stance I would in any event have accepted Mr Howard's submission that, applying the principles expounded by the Court of Appeal in Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246, to the facts of this case, the husband cannot make good any such claim. The mere size of the recently generated wealth is not of itself a reason for here finding special contribution. The husband on his own admission, as Mr Howard points out, is not a "genius". And, as Mr Howard submits, the salient facts here – for instance, the fact that the husband did not himself invent quantitative long-short equity trading, the fact that he is only one of a number of partners each of whose disparate contributions has gone to create the wealth in what is a collegiate enterprise and that he, in contrast to at least one of his partners, has no expertise in high frequency algorithm based computer trading, the fact that the highly technical computer trading strategies as developed by the paid employees are key drivers of the ongoing business, and the fact, as Mr Howard puts it, that "whilst the rewards in the present case are huge by any normal standards that says more about the sector than the individual" – simply do not demonstrate the "exceptional circumstances" which the authorities show to be essential if a claim of 'special contribution' is to succeed.
54. In my judgment, so far as concerns any principled basis for departing from equality, the only real argument in play here is (iv), namely the question, to which I shall return in due course, whether the wife is entitled to a share of the husband's business and, in particular, a share of his future earnings.

The issues: tax

55. As things have turned out, I can take this quite quickly.
56. Prior to the hearing both parties had obtained extensive advice, including advice by way of a joint opinion from tax counsel which Mr Howard fairly described as highly complex, technical and caveated. During the hearing I was presented with a substantial amount of written material and I read and heard detailed submissions on a number of tax issues which Mr Howard described, I do not think with undue exaggeration, as falling on the boundaries of the very cutting edge of personal tax planning and fiscal legal opinion.
57. I have to say (and this, I emphasise, has nothing to do with the quality of the submissions from Miss Chamberlain and Mr Brandon, for which I am most grateful) that this entire exercise was of only limited utility, not least because, at the end of the day, I was neither invited to nor in a position to resolve any of these complex issues.
58. Two things I think are clear:

i) The assets already in the wife's hands are, with only one minor exception, 'tax free' – that is they can be used by her either here or abroad without any direct tax consequences. The same cannot be said of the husband's assets, currently held by him offshore; in particular any remittance by him of monies onshore may give rise to a charge to tax. So, as Mr Marks correctly put it, the short and indisputable point is that the husband's assets have associated with them potential tax liabilities which simply do not apply to the wife's assets.

ii) The husband, quite understandably given his wealth, has devoted significant energy and has employed eminent advisers to ensure that he pays the minimum amount of tax that he can by the lawful arrangement of his affairs. This, I emphasise, is not a criticism, merely a fact – and a fact reflecting a state of affairs which, as I find, is likely to continue into the future. That said, it is perhaps unlikely that even the most skilled advice will enable him wholly to immunise himself from future charges to tax. And in any event, as Mr Marks points out, however successful his ongoing tax saving strategies may turn out to be, the husband is probably going to have spend significant sums in obtaining expert advice and going to have to submit to a lack of flexibility in his financial arrangements and the deployment of his resources as the price he pays for avoiding or minimising tax.

59. Beyond that it is difficult if not impossible for me to go. Nor do I need to, for as Mr Marks put it (and it was for him, not Mr Howard, to develop the forensic significance of the tax arguments, since it is the husband whose interest it is to 'talk up' any tax problems there may be):

"Given the enormous number of imponderables and variables as to the way in which the tax issues might play out, we do not, save for one matter, seek to include in our arithmetic any figures for tax; rather we invite the court to treat the tax as a discounting factor, not measured in a precise number of pounds but as a balancing factor in the overall scales when considering fairness."

60. That one matter is this: Mr Marks says that in fairness the husband must be allowed to buy a property in this country – he suggests at a price of (say) £12 million, broadly equivalent to the current value of the wife's house – which will involve him remitting funds onshore in circumstances which are likely, so Mr Marks submits with the support of Mr Brandon, to give rise to a charge to tax of 40% during the current tax year or 50% thereafter. So to the suggested purchase price of £12 million one has, says Mr Marks, to allow for a further £8 million (grossed up at 40%) or £12 million (grossed up at 50%) for tax.
61. I agree with Mr Marks's submissions on both points and propose to proceed on that basis.

The issues: the March 2008 arrangements

62. I have already set out the essence of the way in which Mr Marks puts his case. As we have seen, the foundation of his case is the assertion that the division unilaterally implemented by the husband in March 2008 was an objectively fair division of all the then existing assets and resources of the parties, with the single exception of the unresolved question of the future profits of the business. He elaborates the argument by pointing out that the division left the husband with what he calls the riskier and potentially tax-laden assets.
63. Consistent with his argument that the crucial issue is whether the division, albeit unilaterally imposed, was objectively fair, Mr Marks submits that it does not matter for his purposes that the wife did not agree, and never has agreed. Responding to a comment I made early on in the hearing to the effect that it was "a sort of Edgar argument divorced from an Edgar application", he argues convincingly, and I now think correctly, that my suggested characterisation was inapt. After all, as he points out, an Edgar agreement derives its force from the fact of agreement, and although the court faced with an Edgar application obviously has to have regard to issues of fairness, absent vitiating features the fact of agreement is, as he rightly says, strongly supportive of it being fair.
64. But here, as he accepts, the argument he seeks to make will succeed only if he can establish – as he says he can – the objective fairness of what took place in March 2008. And central to his argument as to why, in these circumstances, the court should not go behind this division is the proposition that, having actually implemented the division, the husband has ceased to "gamble with the undivided share" of the wife in the assets, with the result, he says, that each should bear the consequences, good or bad, of any subsequent changes in the values of their respective portfolios.
65. At this point it may be useful to recapitulate what the assets are and how they are currently held. As tabulated in paragraph [12] above, and including the amount of the surplus cash (paragraph [15]), they are:

ASSETS	Agreed values	Wife	Husband
Matrimonial home (net)	11,155.000	11,155,000
Bank accounts	14,365,786	13,406,449	959,337
Life policies	232,503	160,677	71,826
Pensions	679,320		679,320
Trusts	*26,853,373		*26,853,373
Total	+53,285,982	24,722,126	#28,563,856
Surplus cash	17,083,369		17,083,369
Total	@70,369,351	24,722,126	&45,647,225

* The husband's figure; the wife says the figure is £30,781,216

+ The husband's figure; the wife says the figure is £57,213,825

# The husband's figure; the wife says the figure is £32,491,699

@ The husband's figure; the wife says the figure is £74,297,194

& The husband's figure; the wife says the figure is £49,575,068

66. As part of his analysis, Mr Marks has helpfully sought to recast this table to show the value and distribution of the assets immediately following the division in March 2008. He makes clear that the exercise cannot be done with complete precision, his figures, as he puts it, being indicative rather than definitive, in part because neither the exact value then of the Trusts nor the amount of the surplus cash then is known and in part because of controversy as to the then value of the former matrimonial home. Taking an approach which he says is "favourable" to the wife – for example, taking the value of the former matrimonial home then at what he says is the minimum figure she could realistically contend for – he comes up with the following table (all figures expressed in £millions) which I accept as being the closest approximation to accuracy which is realistically achievable:

ASSETS	Values	Wife	Husband
Matrimonial home (net)	14.6	14.6
Bank accounts	14.0	13.6	0.4
Life policies etc	0.3	0.2	0.1
Pensions	0.7		0.7
Trusts	20.6		20.6
Total	50.1	28.4	21.8
		56.6%	43.4%
Surplus cash	8.5		8.5
Total	58.6	28.4	30.3
		48.4%	51.6%

67. It will be seen from a comparison of these two tables that there have been three significant changes since March 2008:

i) The value of the former matrimonial home has reduced from (say) £14.6 million to £11.155 million.

ii) The value of the Trusts has increased from £20.6 million to £26.85 million (or £30.78 million on the wife's figures). This, says Mr Marks, is partly the result of exchange rate differences and partly through appreciation of the funds themselves.

iii) The value of the surplus cash has increased from £8.5 million to £17.08 million, representing, says Mr Marks, the build up in the accumulated cash. It represents, he says, the husband's share of the undistributed profits of the business between March 2008 and May 2009, in other words, as he puts it, profit earned by the husband's endeavours not merely in the period after the March 2008 division of the assets but, moreover, in a period which commenced a year after the parties' separation in March 2007.

All three, as it happens, have worked to the advantage of the husband and the disadvantage of the wife.

68. As will be appreciated, the value to the wife of the division as at March 2008 depends in part upon the value then of the former matrimonial home. Mr Marks has done a number of helpful calculations which put this point into context. As the table shows, if the property is valued then at £14.6 million the wife's share of the then overall value of the assets (including the surplus cash but not including any further value for the business) amounted to 48.4%. The corresponding figures for other values are £17 million – 50%; £19 million – 52%; and £21 million – 53%.
69. In these circumstances Mr Marks submits that if the value of the former matrimonial home was anything from £14.6 million upwards then, even ignoring what he calls the obviously superior nature of the wife's assets compared with the husband's, the division was sufficiently proximate to equal to be objectively fair, regardless of the fact that the wife did not receive any part of the surplus cash. But, he goes on to say, once the tax, liquidity and risk issues applying to the husband's assets are taken into account, the division in March 2008 can be seen to be "extremely generous", irrespective of the value attributed to the former matrimonial home. Accordingly, he says, the objective fairness of the division implemented in March 2008 had, and can be seen to have had, nothing to do with the assertion that the property was worth £21 million and nothing to do with the fact that the wife received no part of the surplus cash.
70. So, says Mr Marks, the issue, so far as concerns the fairness of the division in March 2008, really comes down to the question – not in any way precluded or foreclosed by the letter of 20 March 2008 – of whether the wife had and has any claim to a share in the business (other than the surplus cash as at that date), that is, any claim to the husband's share of either (a) the additional surplus cash that has accrued since March 2008, or (b) the other assets of the business or (c) the future income of the business.
71. Thus far in his analysis I agree with Mr Marks. If the division actually implemented in March 2008 was fair, then there is, for the reasons he has given, no principled basis for going behind it. And, subject only to the question posed in the last paragraph, I am satisfied that the division implemented in March 2008 was indeed objectively fair, amounting in substance to an equal division of the matrimonial assets as they were then worth.

The issues: the value of the business

72. At this point it is convenient to consider the value of the business, a matter which, I have to say, is somewhat curious.
73. I have had the benefit of reading a number of lengthy reports and hearing oral evidence at great length from two accountancy experts: Mr Timothy Allen of CRA called on behalf of the wife and Mr Peter Clokey of PWC called on behalf of the husband.
74. Both experts were agreed in their methodological approach, which, leaving aside the valuation of the 'surplus cash', I can summarise as follows:

i) The husband's share in the business is unsaleable and thus a 'market value' would be illusory. The appropriate valuation method is, accordingly, to ascertain the 'economic value' to the husband of his ongoing right to receive distributions from the business, whether by way of dividends or (to an extent) by return of capital.

ii) The capitalised value of this right is ascertained by a formula the two most critical elements in which are (a) the quantum of the 'maintainable distributions' (the multiplicand) and (b) the appropriate 'capitalisation rate' (the multiplier), the latter being a function of the required rate of return an investor would expect less the assumed growth rate of the distributions going forward.

75. The critical differences between Mr Allen and Mr Clokey are as to (a) the method by which the 'maintainable distributions' should be calculated, in particular the identification of the historical period by reference to which they should be calculated, and hence the value of the ongoing distribution stream, and (b) the quantum of the appropriate 'discount' or 'capitalisation rate'. (There were, inevitably, other areas of dispute but for reasons which will become apparent in due course I propose to focus, both in my account of the issues and in my findings, on the relatively few key issues.)
76. It would be a work of wearisome supererogation to trace the evolving views of the experts from the time they were first instructed down to the point when their evidence concluded. Suffice to say that, at the beginning of the hearing, Mr Allen was assuming that the husband would go on working for somewhere between 15 and 25 years and was contending for a capitalisation rate of 30%-20% applied to maintainable distributions, calculated as the average of the profits of the business over its entire life to date, of £15.6 million. Mr Clokey was assuming that the husband would go on working for 15 years and was contending for a rate of 40% applied to maintainable distributions, calculated as the average of the profits of the business over its most recent six months, of £3.8 million. Taking 15 years as the period for comparison, the difference between Mr Allen and Mr Clokey came to this: Mr Allen valued the business at between £51.1 million^[8] (30% discount rate) and £73.1 million^[9] (20% discount rate) whilst Mr Clokey valued it at £11.5 million (40% discount rate).
77. It may be noted that although both Mr Allen and Mr Clokey calculated the 'economic value' on the basis of assumptions that the husband would go on working for a period ranging from 15 to 25 years, the bulk of the 'current value' is in fact concentrated in the first three or so years. Thus, taking Mr Allen's figures, somewhere between 45% (20% discount rate) and 56% (30% discount rate) of the value is found in the first three years; taking Mr Clokey's figures, 64% (40% discount rate) is found in those three years. As will be noted, the higher the discount rate the more 'front-loaded' the calculation.
78. By the end of the hearing Mr Allen was contending for a value in the range £52.1 million to £78.2 million and Mr Clokey (still adopting a discount rate of 40% but taking a spread of other possible figures for various elements in the calculation) a value in the range £4.2 million to £11.8 million. Within that range, Mr Marks, submitting that the true figure is "most probably towards the lower end of that range", invited me to adopt, if any, the figure of £8.4 million.
79. Now whatever Mr Allen and Mr Clokey may have thought they were doing, it seems to me, with the greatest respect, that neither of them was in truth identifying a figure for 'maintainable distributions' as that concept is usually understood in the context of the methodology they were each purporting to apply. Indeed, Mr Clokey accepted in his oral evidence that the phrase was something of a misnomer; what he had been looking for was a realistic assessment of the current run rate of the business, though even that, given the relentless downward slope of the graph, is, I have to say, little more convincing as a concept.
80. Mr Marks identified as an "obvious flaw" in Mr Allen's methodology, his adoption of a simple average taken over the entire life of the business. Helpfully, Mr Marks illustrated the point mathematically with a variety of graphs, but the point can be put in more homely terms. A glass is, on average, half full whether it is being filled or emptied, or indeed if it is first filled and then emptied; but whether, at the point when it is half full, its contents are going to increase or reduce depends not upon the mathematical formula (the average) but upon whether the glass is in the process of being filled or being emptied – in other words it depends upon the underlying trend. Mr Allen's approach, says Mr Marks, simply ignores the current trend – which for the last three years has been relentlessly downward – and merely assumes, without any evidential or other articulated basis, and despite the ski-slope shape of the graph, that the maintainable distributions for the future can be calculated on the basis of the average figure over the whole five year period.
81. As against that, Mr Howard points to the weakness of Mr Clokey's approach, as being that he simply takes the most recent six month period as at the date of any particular report and largely ignores the downward trend which has characterised the business since before the date of his first report.
82. Whilst appreciating the forensic advantage which he sought to derive from the observation, there is, I fear, all too much substance in Mr Marks's comment that what he calls the contentious figures of Mr Allen and Mr Clokey are "pure speculation" and that, as he acknowledges, the prediction of future profits in 2010, let alone in 2020 or, in Mr Allen's case, 2030 and beyond, is "too uncertain to have any forensic value at all." At best, he says, it is a heavily conditional estimate, at worst it is no more than a guess, adding that the only certainty is that, whatever the figure proves to be, whether over the next 3, 5, 10, 15 or 25 years, it will be different from the figures posited by Mr Clokey and Mr Allen.
83. That said, Mr Marks obviously seeks to persuade me that, insofar as there is any utility in the exercise at all, Mr Clokey's analysis and ultimate opinion are to be preferred to Mr Allen's. Mr Howard seeks to persuade me to the contrary view. In pursuit of these objectives both counsel have addressed me both orally and in writing in very great detail. I trust they will forgive me if I do not follow them into the maze. However, standing back from this morass of detail there is, at the end of the day, one 'big' point of compelling force to which Mr Howard really had no answer. Bearing in mind the shape and content of the graph, bearing in mind that, taking Mr Allen's discount rates, some 50% of the 'current value' is to be found in the first three years, it is, as Mr Marks says, "inconceivable" that any theoretical purchaser of the business, looking at the graph, would contemplate paying an immediate sum anywhere remotely close to even Mr Allen's lower figure – and, I might add, equally inconceivable that the husband would actually receive over that three year period anything remotely approaching the kind of sums implicit in Mr Allen's capitalised figure.
84. Mr Howard, for his part, observing that, as both experts had agreed, valuation is an art not a science and commenting that in this case I might think that it had moved from the impressionist school to the abstract, nonetheless contended that "it is not fruitless to strive for some degree of solidity in the foundation upon which findings can be based."
85. In support of his argument that Mr Allen's selection of the entire life of the business as the relevant basis for assessing maintainable distributions is to be preferred to what he called Mr Clokey's 'short term' or 'snapshot' approach, Mr Howard sought to pray in aid the proposition that the business "is inherently cyclical based as it is on the life cycle of 3-4 years of individual trading strategies (they get less profitable over time and are renewed)", a matter, he says, of "crucial importance" given Mr Clokey's emphasis on the downward trend. This "inherent degree of cyclicality" means, he says, that it would be wrong to presume that the trend will continue to move only one way – downward – in future. Nor he says, and this is a separate point, should one attribute to the business the high degree of risk implicit in Mr Clokey's high discount rate: "history does not support the very risky view" given that, as at the beginning of the trial, the business only had losses in 6 out of the previous 237 weeks. And he urges caution in accepting the husband's bleak assessments of the business's future profitability. As he says, the continuing investment in new staff is telling.
86. Mr Howard does not shirk the gravity of the issue, accepting in his final submissions that "central to the court's ultimate conclusions is the issue of cyclicality." And, picking up on a point which emerged during the hearing, he correctly identified as a key issue whether the curve of results is like, for example, a sine-wave, and thus due to make an upward turn, or whether it is, as he put it, "the inescapable downward slope to ultimate obliteration."
87. Mr Marks says that whereas Mr Clokey has been able to point to plausible explanations for the decline in profits from the high-point in mid-2006, namely various structural changes in the market,^[10] Mr Allen although acknowledging these changes seemingly does not accept what Mr Marks suggests is a very clear correlation, indeed what he says is the "inescapable conclusion". Even more to the point, says Mr Marks, Mr Allen provides no alternative explanation of any substance to explain the relentless decline since then. And looking to the future the reality, Mr Marks says, is this: If the business recovers, it will be because of some new invention – a new strategy – not out of the intellectual property which existed during the marriage, nor even in the period shortly after the marriage, but because someone (who may or may not have been employed by the business during the marriage) finds a new seam to tap and devises a strategy to tap it. "It may happen, it may not. There is nothing in the history of the business to suggest that it will, certainly not on a balance of probabilities."
88. Accordingly and in any event, says Mr Marks, there is simply no basis for saying that the business is cyclical in any ordinary sense of the word. Strategies may typically have a life of around three to four years, but they have then to be replaced by a new strategy which may or may not be found.
89. Whilst the husband was giving evidence I sought to make sure that I understood what he was saying. I asked him (Day 3, Transcript p 56):

"It is cyclical, only in the sense that, if you are exploiting some structural imperfection in the market, it is likely that, sooner or later, that is going to disappear as a result of regulatory intervention, and if you are going to get back to a corresponding level of profitability, you have got to discover a new gap?"

His answer, which I have no hesitation in accepting, was "Absolutely, yes." I said, "And it will be cyclical so long as you can keep on finding new gaps, new structural problems", to which again he answered "Absolutely."

90. Mr Marks in my judgment correctly identified the key point when he submitted that the only sense in which the business is cyclical is that it has continually to reinvent itself in order to be able to survive – it has continually to devise a new strategy or new strategies. I agree. There is nothing to show that this business is cyclical in the sense in which either economists or businessmen talk about economic or business cycles.
91. Now in predicting the future one plainly has to have regard to the past – here to the historical trading data – but given the absence of any true cyclicality the past is here at best an imperfect, in my judgment a very imperfect, guide to the future. It may be that in due course the business will return to its earlier levels of profitability. It may be that it will not. Indeed, it may be that it will no longer be able to generate sufficient income to make any appreciable profit at all. But – and this, in my judgment, is the key point – this is all little more than speculation.
92. Despite all the assistance I have had from the experts, the reality is that there is wholly lacking any safe basis upon which to make even the most qualified prediction as to the future profitability (or otherwise) of the business. And it is therefore, in my judgment, quite impossible to put any meaningful figure on the value of the husband's share of the business. The furthest the evidence permits me to go, adopting what I believe to be a prudently cautious view but recognising that even this may turn out to be wildly wrong, is that the value of the husband's share in the business is likely to be closer – much closer – to Mr Clokey's figures than to Mr Allen's.
93. I should mention one other matter if only to get it out of the way. Because the husband's business generates its profits by identifying and exploiting imperfections in the market and price mismatches, its profitability is not directly dependent upon how 'well' the market is doing. So there is, as I am satisfied, no basis for linking the relentlessly declining profitability of the business (a phenomenon which, after all, began in June-July 2006, long before the onset of the crisis) with the current global financial crisis or for asserting that when 'normal' conditions return the business will therefore return to profitably. Plainly there is some effect. If the market is depressed, with reduced trading volumes overall, the trading volumes of the husband's business may be reduced, and, more directly, if market prices are reduced the tiny slice which the business skims off out of price mismatches will be correspondingly smaller. And the overall state of the market affects the leverage rates the business can achieve. But the causes and scale of the business's relentlessly declining profits – a decline which preceded the current economic crisis – are to be found elsewhere.
94. Now quite apart from all these difficulties with the expert evidence, and the "unbridgeable" "arithmetical gulf", as Mr Marks puts it, which divides the experts and which only goes to demonstrate, he says, the inutility of any attempt to arrive at any mathematical accuracy as to the 'value' of the business,^[11] there is what he correctly describes as an even larger issue between the parties: that is, whether the valuation actually matters at all. For whereas Mr Howard treats the capitalised 'economic value' to the husband of his share in the business as a capital asset which, in common with all the other matrimonial assets, ought, he says, to be valued as precisely as possible and then divided – and divided equally – between the husband and the wife, Mr Marks says it is simply the husband's future income over the rest of his working life and, therefore, although something to which I must have regard as a factor in accordance with section 25, not an asset properly susceptible to the sharing principle. Moreover, he says, it is "not a value which can be extracted. It is not real. It is not money which can or should be "shared"".
95. Mr Howard, supported by Mr Allen, characterises the value of the business as being the equivalent of 'goodwill':

"there is a simple and utterly conventional term for the non-surplus cash value element of a going concern – goodwill. That is not the fruits of H's future endeavours, it is value inherent in the entity".

And he points to capital assets in the form of, inter alia, intellectual property rights (eg the strategies and the algorithms) which he says are potentially of immense value,^[12] what he calls the technological infrastructure (eg the computer systems), and the 'human capital' tied up in the business. He seeks, moreover, to bolster the argument by the undoubted fact that the husband receives a salary and bonus – what Mr Howard calls "the return for his hard work" – which even in aggregate come to much less than his share in the 'profits' of the business. So, he says, the remuneration for his employment is only a "very, very small proportion indeed" of the total of what he gets in return for his work and the ownership of the assets – the balance, he says, being the husband's return for ownership of his share of the business.

96. Mr Marks pours scorn on this characterisation, commenting that if it was correct it would not affect the valuation of the husband's interest in the business whether he worked for another 15 years or another 15 minutes. On the contrary, as he points out, on Mr Allen's approach (see footnotes [8] and [9] above) on one set of assumptions the husband's willingness to work for another 25 rather than only 15 years adds £4.2 million to the current value of his interest in the business. Likewise he pours scorn on any suggestion that the value is an 'investment return' on his share of the business in the sense that future distributions will continue to flow to him whether or not he continues to work. The reality, he says, is that the husband's initial investment in monetary terms was trivial – less than £100,000 – whereas his investment in effort, past and present, has been massive; so, he says, on any basis there must be a substantial element which is referable to the husband's ongoing contributions.
97. Mr Clokey's view, adopting what he acknowledged was a necessarily crude division, was that the value of £11.5 million could be treated as being attributable as to £4.1 million to 'investment return' – ie, that part of the economic value of the business to the husband equal to the current value of the trading capital invested^[13] – and as to the remaining £7.4 million to 'future earnings.' If one takes the overall value as £8.4 million (Mr Marks's final figure), the corresponding figures are approximately £2.8 million and £5.6 million.
98. I agree with Mr Marks's analysis, just as I accept Mr Clokey's distinction between 'investment return' and 'future earnings'. Mr Howard is right when he points to the capital assets he has identified, even if, in my judgment, he is wrong in his characterisation of the remaining value as goodwill.

The wife's claim

99. Mr Howard opened the case on the basis (i) that the husband's share of the business (taking Mr Allen's mid-point figure) was £75.4 million, taking the matrimonial assets in total to some £132.61 million, and (ii) that the wife was seeking, in addition to what she had already received, a lump sum of £42 million, payable as to £24 million immediately and the balance by four annual instalments of £4.5 million on 1 October 2009, 2010, 2011 and 2012 – giving her in all, on Mr Howard's calculations, a total of £66.72 million or 50.31% of the assets.
100. That in essence remained his stance at the end of the hearing.
101. Mr Marks repeats that his primary case is that, because of the division which took place in March 2008, and since there is, as he would have it, no good reason why the wife should share in profits generated thereafter – more than a year after the separation – no order should be made in her favour.
102. His alternative case – if she has some entitlement to profits generated since March 2008 – is that it is both a less than equal and a rapidly diminishing share to (a) the additional surplus cash of £8.5 million accrued since March 2008 and (b) the £8.4 million which, as I have already explained, is the value he invites me to put on the remainder of the business. As to the former, he submits that to give the wife even 25% would be very generous (it cannot possibly be 50% he says). As to the latter he submits that the wife should, for the reasons I have already set out, have nothing; alternatively, that she should have no more than a share in the net assets deployed in the business (not the future profits), that is an appropriate share of £2.8 million.
103. Finally, he says, if I am to proceed by ignoring the March 2008 division altogether, looking at the assets afresh and at their current values, and allowing the husband £8 million for the tax cost of buying a house here, then I am faced with total assets worth (he says) £62.3 million, presently divided as to £37.6 million (60.4%) to the husband and £24.7 million (39.6%) to the wife – a disparity of £12.9 million. So the award to the wife necessary to achieve what he calls numerical equality would be £6.44 million.
104. However, Mr Marks is properly at pains to emphasise that, in assessing what might be a fair and just division of the assets, I need to bear in mind that the wife's share consists (or will consist) of assets which are risk-free, liquid and capable of being brought onshore without adverse tax consequences, whereas the husband's are, to a significant extent, at risk, illiquid and, being entirely offshore, liable to potentially adverse tax consequences. He also makes the point that, although the husband has gone along with the "fiction" that the 'surplus cash' is to be treated as if 25.5% of it belonged to him, the reality is that (a) it is not available to him, (b) it is at risk of being required by the business to meet its outgoings and (c) it is liable to be taxed if distributed to the husband and utilised by him in the United Kingdom. So, he submits, the figure of £6.44 million would not be appropriate, even if an award to the wife is properly to be calculated on that basis (which, of course, he says it is not). The lump sum (if any) should, he says, be "significantly" less than that.

The wife's claim: discussion

105. At this juncture I must pull together the key points. For the reasons already given I have concluded that:

i) If the division actually implemented in March 2008 was fair, then there is no principled basis for going behind it.

ii) Subject only to the question whether the wife is entitled to a share in the husband's business, that is, a share in either (a) the additional surplus cash that has accrued since March 2008, or (b) the other assets of the business or (c) the future income of the business, the division of the matrimonial assets in March 2008 was objectively fair, amounting in substance to an equal division of the matrimonial assets as they were then worth.

iii) The question thus becomes whether the wife is entitled to share in either (a) the additional surplus cash that has accrued since March 2008, or (b) the other assets of the business or (c) the future income of the business.

iv) As to (c), I agree with Mr Marks that she is not. The husband's future income is not a capital asset, whether to be characterised as goodwill or in any other way. It is simply income. Accordingly, although I must have regard to it as a factor in accordance with section 25, it is not an asset properly susceptible to the sharing principle.

v) Conversely, as to (b), these are in principle capital assets which the wife is entitled to say should be brought into account and which were not brought into account in March 2008. What are they worth? Potentially, Mr Howard suggests, they are of "immense" value. Mr Clokey's analysis suggests a figure in the range of some £2.8 million to £4.1 million.

vi) Given the wife's entitlement in principle to a share in (b), the capital assets, it follows, in my judgment, that she has a claim to some part of (a), the additional surplus cash of £8.5 million that has accrued since March 2008. This share should, as a matter of principle, reflect the extent to which, because the division in March 2008 did not extend to her share of the capital assets, the husband thereafter continued, to "gamble with the wife's undivided share" of the assets.

106. The question then becomes, as it seems to me, how I should most fairly and justly, and having regard to the overall principle of equality which must apply in this case, give effect to the wife's additional claims as I have identified them in sub-paragraphs (v) and (vi) above. This in turn, in my judgment, raises two questions:

i) First, does the fact that the wife has these additional claims justify a complete re-opening of the division which was implemented in March 2008, or can justice fairly and appropriately be done by simply awarding her an additional lump sum?

ii) Secondly, and assuming that there should be no general re-opening of the March 2008 division, what is the appropriate additional lump sum which the wife should be awarded?

107. As to the first of these questions, the answer in my judgment is quite clear. There is no principled basis for completely re-opening the division which was implemented in March 2008. Subject only to the points I have identified, it was objectively fair then, and it does not cease to be fair merely because of the events which have since occurred. And given the comparatively modest adjustments which are called for by reason of those assets which were not included in the March 2008 division, I am quite satisfied that full justice can be done to the wife by simply awarding her an additional lump sum.
108. The most difficult question in the whole case is as to the appropriate amount of that lump sum. Although I must have regard to all the factors referred to in section 25 (assessed, of course, in the light of the crucial fact that all I am really concerned with is the appropriate adjustment to be made to a division which in large part has already been implemented), as also to the various matters pressed upon me by Mr Marks, the justice of the case requires, as it seems to me, that the lump sum is essentially the amount required to give the wife her appropriate share in respect of the two matters referred to in paragraphs [105(v)] and [105(vi)] above.
109. This is, not least given all the valuation uncertainties in this case, an exercise which is hardly amenable to any very precise process of calculation. The starting point, in my judgment, has to be the figures referred to in paragraphs [105(v)] and [105(vi)] above, though always bearing in mind, as I do, that, as he himself accepted, Mr Clokey's figures as I have quoted them in paragraph [105(v)] are at best only crude approximations to reality and that the tangible assets may, as Mr Howard would have it, be worth significantly more.
110. Doing the best I can I have concluded that in all the circumstances, and taking into account what she has already received as a result of the division implemented in March 2008, justice will be done, and the equality to which the wife is in principle entitled will be achieved, if I award her a lump sum of £7.5 million.

The children's maintenance

111. As part of the arrangements implemented by the husband in March 2008 he has been paying a total of £105,000 per annum by way of periodical payments for the children – increased to a total of £150,000 since shortly after the first hearing before Baron J – and, in addition, continuing to meet their educational expenses.
112. Mr Marks proposes that the child maintenance should be £35,000 per child until the end of secondary education and thereafter, during a single gap year and tertiary education (to first degree or equivalent), at a "level to be discussed and agreed with the children directly." The husband will continue to pay the children's school fees, reasonable billed extras, exceptional billed extras agreed in advance, agreed extra-curricular tuition, university tuition fees and (until completion of their tertiary education) private medical insurance.
113. Mr Howard for his part submits that the maintenance should remain at the current figure of £50,000 per child and that this figure should continue until the end of tertiary education. As to the first point, he submits that this amount is appropriate having regard to the fact that the children will for much of the time be living in London "which will be expensive", that the husband makes no indirect contribution to their maintenance, for example by taking them on holiday, and that they are the children of a very rich father who have been used to a very high standard of living. In relation to the other point, it is, he says, and not least given the current unhappy state of the relationship between the father and his children, wholly inappropriate that they be left to fend for themselves in negotiating with him.
114. Essentially for the reasons he has given, I agree that the maintenance arrangements for the children should be as proposed by Mr Howard.

Note 1    In paragraph 81 of his written final submissions Mr Howard sought to argue that that the ‘ski-slope’ profile of the graph was distorted, being “drastically affected” by ‘outlying weeks’ where the actual figures were either particularly high or particularly low compared with the prevailing trend. Removing the highest and lowest 15% of figures the graph shows, he said, not a ‘ski slope’ but a flat consistent line. This was all convincingly rebutted by Mr Marks in an analysis ‘Rebuttal of #81 of W’s written submissions’ which I accept.     [Back]

Note 2    Paragraph 183 of his final submissions contains a detailed point by point response to Mr Marks’s document.     [Back]

Note 3    Other matters which he relies upon were identified by Mr Howard in paragraph 171 of his final written submissions, the most significant being his assertion that on a previous occasion the husband, along with his partners and the finance director, had been “complicit in manipulating an accountant instructed to put forward a valuation to HMR&C” to keep the value down, by withholding from her key information as to the business’s profits. “This conduct”, he says, “cast serious doubt on the degree to which any professional can rely on H as an unvarnished and open source of information … it demonstrates a facility and willingness to mislead … if it serves his financial purposes.” Accepting, insofar as I am able to form any view of this transaction, that in some aspects it seems to cast the husband in a rather poor light – and further than that I am not prepared to go – I do not accept either Mr Howard’s characterisation of the husband’s behaviour or the inferences which he invites me to draw.     [Back]

Note 4    For the full quotation see Cecil, The English Judge, 1970, page 61.     [Back]

Note 5    I record, for anyone who may have in future to consider the point, that the focus of the arguments was on the contrast between, on the one hand, cases such as Carlson v Townsend [2001] EWCA Civ 511, [2001] 1 WLR 2415, and Jackson v Marley Davenport Ltd [2004] EWCA Civ 1225, [2004] 1 WLR 2926, and, on the other hand, cases such as Chand v Chand (unreported 1 November 1978, Court of Appeal Transcript 78/661: it is important to consult the full transcript rather than the abbreviated report in [1979] 9 Fam Law 84); D v D (Production Appointment) [1995] 2 FLR 497; In re L (A Minor) (Police Investigation: Privilege) [1997] AC 16, Vernon v Bosley (No 2) [1998] 1 FLR 304 and Kimber v Brookman Solicitors [2004] 2 FLR 221. I was also referred to (I do not give a full list) S County Council v B [2000] Fam 76, Three Rivers District Council v Company of The Bank of England (No 6) [2004] UKHL 48, [2005] 1 AC 610, C v C (Privilege) [2006] EWHC 336 (Fam), [2008] 1 FLR 115 and C v C (Costs: Leave to Appeal) [2006] EWHC 624 (Fam), [2008] 1 FLR 136.    [Back]

Note 6    Miller v Miller, McFarlane v McFarlane [2006] UKHL 24, [2006] 2 AC 618, and VB v JP [2008] EWHC 112 (Fam), [2008] 1 FLR 742.    [Back]

Note 7    See most recently Rossi v Rossi [2006] EWHC 1482 (Fam), [2007] 1 FLR 790, S v S (Ancillary Relief after Lengthy Separation) [2006] EWHC 2339 (Fam), [2007] 1 FLR 2120, CR v CR [2008] 1 FLR 323, and P v P (Post-Separation Accruals and Earning Capacity) [2007] EWHC 2877 (Fam), [2008] 2 FLR 1135.    [Back]

Note 8    The corresponding figures assuming a longer working life were £51.8 million (20 years) and £52.0 million (25 years).    [Back]

Note 9    The corresponding figures assuming a longer working life were £76.1 million (20 years) and £77.3 million (25 years).    [Back]

Note 10    Full implementation of the hybrid trading system, abolition of the 30 second rule and introduction of Reg NMS.    [Back]

Note 11    A submission which he sought convincingly to bolster by reference to what Moylan J had said in H v H [2008] EWHC 935 (Fam), [2008] 2 FLR 2092, at paras [4]-[5] and [104], observations with which I entirely agree.     [Back]

Note 12    Though he equally accepts, as I understand it, that the pending strategies still in the course of development are impossible to value.    [Back]

Note 13    Calculated as 25.5% (the husband’s share) of the current trading funds of about £16 million.     [Back]