K v K (ANCILLARY RELIEF: PRENUPTIAL AGREEMENT)
High Court: Family Division
Judge: Rodger Hayward Smith QC (sitting as a deputy High Court judge)
Judgment date: 5 July 2003
RODGER HAYWARD SMITH QC:
This is an application by a wife for financial ancillary relief for herself and one child of the family following divorce. For convenience I shall refer to the parties as ‘husband’ and ‘wife’.
It was a very short marriage. The marriage took place on 16 March 2000. The child, D, was born on 5 August 2000. The marriage soon ran into difficulties. The wife went to solicitors in January 2001, 10 months after the marriage. The final separation was on 1 May 2001, about 14 months after the marriage. Prior to the marriage, there was a pre-nuptial agreement.
The wife is aged 28. She has assets in the region of £1 million, most of which are held in trust. The trust was set up by her father and from it she draws income.
The husband is aged 39. He has built up a substantial fortune by way of property dealing. He is worth at least £25 million and probably a good deal more. He has conceded that with his wealth and liquidity he can meet any order that I might make and on that basis, at an earlier directions hearing, the court refused to permit the wife to inquire further into the husband’s financial affairs.
The wife’s open position in summary is that she seeks for herself a lump sum of £1.6 million and periodical payments for herself of £57,000 pa.
The husband’s open position in summary is that he should pay the wife a lump sum of £120,000 plus a further £600,000 in trust to provide a home for the wife and D until D finishes his education, with reversion to the husband. He offers no periodical payments to the wife.
The parties have agreed that the husband will pay £15,000 a year for the maintenance of D, plus his school bills.
It is obvious that the gulf between them is very wide. The difference in approach reflects each side’s differing contentions as to the effect, if any, of the pre-nuptial agreement and the shortness of the marriage. In resolving those contentions I must look carefully at the facts, including the background leading up to the pre-nuptial agreement.
As to the facts, there is a broad measure of agreement between the parties, but some important areas are disputed. In evaluating the disputed evidence I find the wife to be a more reliable witness than the husband, but only marginally so. I believe that at times the husband was trying to mislead me. He came perilously close from time to time to asserting that he had liquidity problems and would have difficulty in meeting any orders I might make. Insofar as he sought to make that assertion, I do not believe him, and I hold him to the concession that was obviously properly made and on the basis of which no further inquiry into his wealth was permitted. I had the impression that the husband was doing his best to persuade me that the wife should receive the absolute minimum. He suggested at one point that a small narrow room in a garden or basement flat only about 6 ft wide with only a small window would be perfectly adequate as a playroom for his child as he grew up. The husband’s stance was not attractive, bearing in mind that this case is largely about providing a home and enough money for a decent upbringing for his child, whom I accept he loves dearly.
The wife comes from a wealthy family. Her father was a successful businessman. I have no evidence of the extent of his wealth. In January 1983, when the wife was aged 8, her father created a settlement for her and her brother. The trust fund is now worth in the region of £1.7 million. The wife’s share is one half of that. The trustees have power to advance capital or make loans. But it has been sensibly agreed that for the purposes of this application the trust should be treated as a source of income for the wife. Her income from it is about £20,500 pa net.
The wife is outgoing and vivacious. Prior to the marriage she had a career as a model. She is intelligent but she is not well versed in financial matters and for most of her life, and certainly before the marriage, she left her financial affairs to her father to deal with. Before she began her relationship with the husband she lived with her mother in Maida Vale.
The husband is a chartered surveyor. He had built up his very substantial fortune before he and the wife started going out together. Although very wealthy, he lived comparatively modestly in a flat above his office in W Street. He worked hard and was not ostentatious with his wealth. But several years before the marriage he bought a house in L Road. It is a substantial property. Over the years, the husband has gradually renovated it. He says that he has spent £600,000–£700,000 on the renovations. I suspect that he may have spent a good deal more than that but the precise figure matters not for the present purposes.
The L Road property is uninhabitable by reason of the work being done to it, although at one stage the husband lived in two rooms there. The husband had a dream that one day he would live at L Road with a wife and children. The wife always believed that she and the husband and D would live there once the renovations were complete. If and when the renovations were complete it would make a splendid home and would be worth anything between £8 million–£15 million. I will return to L Road later in this judgment.
The husband and wife had known each other for some time before they started going out as a couple but they did not know each other very well. They started going out together exclusively as a couple in about September 1999. The husband was already very wealthy. None of his wealth came from the wife, nor did she contribute in any way to its accretion. In November 1999 the wife became pregnant by the husband and she told him. Her pregnancy came as a serious shock to them both. They were both in a dilemma. They discussed at great length what they should do. They did not at that stage tell the wife’s parents. Each made very clear to the other their respective positions.
The wife’s position was that she did not want to be a single mother bringing up a child alone. Either they should marry or she would seek to have the pregnancy terminated. She loved the husband and thought that their marriage would be successful.
The husband’s position was that he did not believe in abortion. He was wholly against termination but he did not feel that he and the wife were ready to marry. He wanted more time so that he and the wife could know each other better. If he married, he wanted the marriage to work. And so there was an impasse.
In December 1999 the husband and wife went on holiday together with the intention of trying to resolve the problem. It was a lavish and expensive holiday, costing in the region of £30,000. They were away for 5 weeks. They visited various parts of the world and ended up in Mauritius. It was a difficult and emotional 5 weeks for both of them. Towards the end of the holiday the husband proposed marriage to the wife but he made it clear to her that it was to be on the basis that they would have a long engagement; that they would not marry before the child was born; and that they would only marry if both of them were confident that the marriage would work. The wife agreed. It appeared that they had resolved their problem.
But the wife then telephoned her parents from Mauritius and told them of the engagement and of her pregnancy. Her family would not hear of the child being born out of wedlock. Various members of the wife’s family proceeded to telephone the wife and the husband over their remaining time in Mauritius in an attempt to persuade them, particularly the husband, to marry before the birth of the child. The husband remained reluctant. On the plane home from Mauritius, he called the engagement off. The wife was in tears. It was an extremely difficult time for them both. On their return to England the husband said to the wife that he thought they should not see each other for the next few days. Again the wife’s family intervened. The wife’s mother told the husband that either he agreed to marry the wife or she would take the wife to have the pregnancy terminated.
I pause in the narrative to say that I have no evidence from the wife’s mother but there is broad agreement between the husband and the wife as to the events I relate. The wife’s mother put the husband in an impossible position. A discussion then took place between the husband and the wife’s father at which the wife was not present. One of them mentioned the possibility of a pre-nuptial agreement. It is not clear to me who mentioned the possibility first. The wife says she thinks it was the husband but she was not at the meeting. The husband says the wife’s father raised it first. He gives an account of what the wife’s father said at the meeting between them and the wife agrees that the husband’s account sounds like her father talking. The evidence thus points to it being the wife’s father who raised it first. But it does not matter because it is clear that both the husband and the wife’s father were in favour of a pre-nuptial agreement. The husband has a sister who has autistic children whom the husband supports. He was anxious that there be no claim by the wife upon his capital. As for the wife’s father, I have no doubt whatever that he saw the pre-nuptial agreement as being a carrot to persuade the husband to marry the wife before the child was born.
At no time did the husband tell the wife that he would not marry her without a pre-nuptial agreement. The husband put her under no pressure whatever to sign the agreement. The wife made that clear in her own evidence.
The wife’s father made an appointment with his solicitors, Messrs Paisner’s, and on 26 January 2000, not long after the return from the holiday, a meeting took place at Paisner’s office. Present at that meeting were the wife, the husband, the wife’s father and two solicitors from Paisner’s, Mr Paisner himself and Mr Whitehead.
The note of the meeting says that the husband explained that he and the wife were planning to get married in April 2000; in fact the date of the wedding was brought forward to March. The note goes on to say that the husband explained, in the presence of the wife and her father, that each of them was financially independent and wished to enter into a formal agreement to govern the disposal of their property in the event of death or divorce. There is then some dispute as to what was said. The note says that the father said that he had his own solicitor who was not a specialist in this area and had said that any such agreement was not worth the paper it was written on. The husband disputes that he said that but I think he probably did say it because it appears clearly in the note.
The father went on to say, according to the note, the accuracy of which I accept and so indeed does the father, that the father was concerned that he had dependants and they were slightly concerned as to any potential claims against his assets.
Mr Paisner and Mr Whitehead both advised that while any such agreement was not strictly binding on a court, in the event of divorce it would be taken into account. Having said this, it would become less relevant the longer the marriage lasted, and if children were involved it was not likely to be of significant value but still may be of some evidence as to intention. Mr Whitehead advised that to maximise the influence such an agreement might have on a judge, both parties should take independent legal advice and there should be full and frank disclosure of the assets of both parties.
At that time the husband and the wife and the wife’s father all knew that the wife was pregnant. I heard evidence from Mr Whitehead, who said that at that time he did not know that the wife was pregnant and that it was disclosed to him subsequently by the wife’s father on 11 February.
The husband’s evidence is that he recalled that at least one of the solicitors knew of the pregnancy at that time. He said that perhaps it was Mr Paisner. I have no evidence from Mr Paisner and it is not clear from the note whether he did or did not know of the wife’s pregnancy at that meeting on 26 January 2000; but it matters not because Mr Whitehead, who was advising with Mr Paisner, was certainly told on 11 February, some considerable time before the agreement was finalised and signed.
The attendance note of 26 January goes on to say that the parties had in mind that the agreement would contemplate the next 5 years and would indicate the amount of capital the husband would provide to the wife if they were to get divorced or separated during that period. They had in mind a lump sum in the region of £100,000, perhaps increasing by about 10% a year over a 5-year period. It was noted that the provisions of an agreement would be far less influential upon a court if children were involved. The husband indicated that he would fully intend more than adequately to provide for any children, and they wished a clause to be included to this effect.
On 31 January 2000, Mr Whitehead wrote to the husband enclosing a draft of the pre-nuptial agreement. In that letter he records the discussion including the statement of intent in relation to children. The letter goes on to say:
‘As discussed at the meeting the agreement will not be binding on a court in the event of divorce, but will carry evidential weight. It is likely to be most influential if the parties receive separate legal advice and fully disclose their financial resources. It is envisaged that a schedule will be attached to the agreement with brief details of your and [the wife’s] principal assets and sources of income. The agreement is likely to carry progressively less weight the longer the marriage continues, and in particular if and when you have children.’
A similar letter was sent to the wife on 31 January. I do note that the communications between Mr Whitehead and the wife were all care of her father’s home address or his email address. There is a letter of 1 February 2000 from the husband’s solicitors to Mr Whitehead which includes the following:
‘I understand that our respective clients have agreed that in the event of separation as considered in the draft agreement, periodical payments would not be appropriate, and that part of the proposed agreement should be deleted.’
There had been a draft agreement (and this letter clearly refers to it) which included provision for periodical payments although the figures were not inserted in the draft, and here is the husband’s solicitor saying that part of the draft should be deleted.
On 2 February Mr Whitehead wrote to the wife care of her father’s address, and the letter said:
‘Please let me know if you wish to discuss the proposal in relation to the lump-sum payment.’
On 10 February Mr Whitehead wrote to the wife, care of the same address. The husband’s assets had been disclosed in a statement without giving values. Mr Whitehead’s letter said:
‘I believe it would be helpful to have approximate values of these assets and propose to go back to them [ie the husband’s solicitors] on that basis. I also look forward to receiving your comments on the agreement itself. I will be away from the office next week, but please contact Mr Paisner if you would like any assistance in my absence.’
The statement of assets of the husband set out a number of properties and a number of companies; and incidentally it refers to the property at L Road as being ‘home’. No valuations were given. On 11 February a letter was sent to Mr Whitehead from the wife’s father. He said: ‘We have spoken about this matter and I [that is the wife’s father] am most anxious not to make waves that may, however well-intentioned, “rock the boat”.’
It is clear from the evidence of Mr Whitehead that what the wife’s father meant is that he had a daughter who was pregnant and that he did not want to put the husband off marrying his daughter by pressing for valuations of the various assets set out in the husband’s assets statement. Indeed it was on 11 February that Mr Whitehead learnt of the wife’s pregnancy. The letter of 11 February was faxed to Mr Whitehead and he would have received it on the same day.
Mr Whitehead said in his evidence that it was his belief from what he was told that the husband had very significant assets and that the agreement would be of benefit to the husband, and indeed that letter from the wife’s father included the following:
‘I understand that [the husband] is the one that needs protection and it should be up to him to make the declaration of net asset value if he so wishes and that interference by the wife could be construed negatively.’
And then the letter concluded:
‘In any event, in view of the potential development possibly this entire matter is irrelevant and I await your comments.’
It is not clear what was meant by the words, ‘in view of the potential development’. It may have referred to the wife’s pregnancy but it is not clear and the wife’s father has not been here to explain what he meant.
On the same day, 11 February, there was a telephone conversation between Mr Whitehead and the wife’s father. The wife’s father said to Mr Whitehead that he and the wife felt that they did not wish to request full details of the value of the husband’s assets, although the wife’s father thought they were in excess of £50 million. Mr Whitehead advised that he felt the amounts being considered being given to the wife were low if this were the case. The wife’s father said to Mr Whitehead that the wife was expecting a baby, and Mr Whitehead said that the pre-nuptial agreement would not be particularly useful once the baby was born and without full asset figures. But it was agreed that no asset figures should be requested.
On the same day, 11 February, Mr Whitehead wrote to the wife care of the same address (that of her father) giving advice that I have already recorded, indicating that he thought the amount agreed in the pre-nuptial agreement was low, particularly bearing in mind the expectation of a child. He went on to say in his letter:
‘Having said that, the pre-nuptial agreement is unlikely to be very relevant in relation to support for your child and indeed it specifically states that [the husband] intends to make reasonable financial provision for any children.’
On 16 February there was a note from Mr Paisner to Mr Whitehead referring to a meeting he had on the previous day with the wife’s father. Mr Paisner recorded the fact that the wife and her father fully understood and accepted the contents of the letter that Mr Whitehead had written to her on 11 February. The note went on to say:
‘They emphasised, however, that they did not wish to put at risk what both regarded as a sensitive situation by pushing the husband too hard for valuations. The wife’s father was satisfied that the husband had net assets worth in excess of £100 million and more like £150 million.’
The note went on to say:
‘In the final analysis if the wife and her father were happy with the position, they would simply proceed based on the draft agreement which had been agreed in principle.’
Mr Paisner said in the note to Mr Whitehead that Mr Whitehead should be aware, as he already was indeed, that the wife was expecting a baby, and Mr Paisner continued:
‘On balance I do not think this affects the terms of the agreement since the father would have an obligation towards any child of his irrespective of any agreement reached between father and mother. Do you agree?’
On 24 February Mr Whitehead wrote to the wife attaching the draft agreement as amended and drawing her attention to cl 4 which included reference to the provision of a home.
The agreement was signed on 15 March 2000 on the day before the parties married. The agreement includes the following terms: it refers to the fact that the parties intended to marry in April 2000. Clearly that date had not been amended although the date of the wedding had been brought forward. It says:
‘The parties by this deed wish to regulate their rights and obligations towards each other in the event of their death or separation or the dissolution of their marriage …’
It records that the parties have entered into the deed freely and voluntarily and acknowledge that they have had the benefit of independent legal advice about it. It records that each party has disclosed to the other full details of income, earning capacity, property and other financial resources, and it says this:
‘Subject to any order the court may make on a future dissolution of the marriage between them, the parties intend this deed to be in full and final settlement of all claims, rights and duties to which they have to each other in law in respect of the property to which it applies as declared below.’
The property is said to include cash, property and investments and all other interests, rights and assets, both tangible and intangible of any kind. I need only refer to two of the operative provisions of the agreement. Clause 1 says: ‘That the parties agree that in the event of their separation for a period of 6 months or more, or the dissolution of their marriage within 5 calendar years of the date of this agreement, the husband shall pay to the wife £100,000 to be increased by 10% pa compound.’
It is clear from the negotiations and of course from the body of the agreement itself, that the parties intended this agreement to have effect only in the event of a short marriage, because it was expressly to last only for 5 calendar years from the date of the agreement.
Clause 4 of the agreement reads as follows:
‘In the event of the parties’ separation for a period of 6 months or more, or the dissolution of their marriage and there is a child or are children of the marriage, the husband wishes and intends to make reasonable financial provision for such child or children including provision of an appropriate home for both the wife and any children, and it is acknowledged by the parties that this agreement is in no way intended to affect any order of the court relating thereto or an assessment to pay maintenance by the Child Support Agency in respect thereof.’
The agreement itself says nothing about periodical payments for the wife although, as I pointed out, an earlier draft had made provision for periodical payments without the figures, but that was deleted from the final version.
Mr Whitehead gave evidence before me and he told me that he felt that the wife understood what she was signing. The wife herself says that she understood. She says that she was not put under pressure. Her evidence is that she did not really care about the agreement and was not interested in it, but that she did understand it. I accept what she says about that. I will come back to the effect of the agreement later in this judgment.
In January 2000 the wife moved to the husband’s flat in W Street; indeed that is the address given for both parties in the agreement. On 16 March 2000, the day after the agreement was signed, the wedding took place. The date had been brought forward at the behest of the wife’s parents because they did not want the wife to appear pregnant at the wedding. Furthermore they wanted music at the wedding and music would have been inappropriate during the period of Passover.
The wedding was a splendid affair. The reception was held at an expensive London hotel. The cost of the wedding was over £82,000. In addition was the cost of the flowers, the bill for which the wife’s father sent unsolicited to the husband. I do not have the figures for those. The husband did not want a grand wedding. He suggested a much more modest affair but the wife’s parents did not take him seriously. The husband played little part in arranging the wedding. There were 400 guests, 70 of whom were from his side. During his wedding speech, the wife’s father included a joke as to how much the wedding was costing him. It is therefore surprising, to say the least, that an investigation of the wife’s finances shows that her father arranged that she should pay for the wedding. She said that she and the husband thought that her father had paid for it; indeed the wife told me that her father did not give them a wedding present because he told her that he was paying for the wedding.
After the marriage the husband and wife lived comfortably but they did not live the lifestyle of the ostentatious rich and neither of them have ever done so, apart from expensive holidays. Over Christmas 2000 they went for 3 weeks to the Cayman Islands and the holiday cost between £25,000–£30,000.
The husband and the wife continued for a time to live in the husband’s flat in W Street. In July 2000 they moved to a flat in H Terrace which had been bought in November 1999 by the wife with the aid of loans from her trust. Thereafter they were expecting to move to a property in C Terrace owned by the wife’s brother. There was then a dispute with the wife’s father as to whether they should pay rent for C Terrace. It is not clear why the wife’s father was involved if the property belonged to the brother. They did not move there because of the dispute. I do not know who, if anybody, was at fault in that dispute and for these purposes it matters not.
There was then purchased a flat in W Road. That too involved a dispute with the wife’s family. It had been agreed that the wife would sell her flat in H Terrace and with the proceeds contribute one third of the cost of W Road, but the trustees of her settlement felt that there was insufficient security because of the way the title to W Road was held by one of the husband’s companies. The precise details do not matter. The wife wanted to move to W Road but the husband said that he could not afford to buy it without the contribution from her trust. But the husband thought better of it and he bought the property in W Road. He took the wife out to dinner. He told her that he had bought the house she wanted in W Road, and he gave her a card in loving terms to celebrate, saying in the card that W Road was their new home. He relies on that card in support of his contention that W Road was to be their permanent home.
The pre-nuptial agreement
I turn to consider the effect, if any, of the pre-nuptial agreement. The husband relies on that agreement, the wife does not. I have been referred to a number of well-known authorities, Edgar v Edgar  1 WLR 1410, (1981) 2 FLR 19, F v F (Ancillary Relief Substantial Assets)  2 FLR 45, S v S (Divorce: Staying Proceedings)  1 WLR 1200,  2 FLR 100, M v M (Pre-nuptial Agreement)  1 FLR 654, and an unreported case of Wyatt-Jones v Goldsmith in which the judgment was given in the Court of Appeal on 28 June 2000.
I distil from those authorities the following questions, which I ask myself in determining the issue whether as against the wife the agreement is binding or influential in any of the decisions I have to make.
(1) Did she understand the agreement? Yes.
(2) Was she properly advised as to its terms? Yes.
(3) Did the husband put her under any pressure to sign it? No.
(4) Was there full disclosure? No. There was disclosure of assets, but the decision not to press for values came from the wife’s side and it was known that the husband was very wealthy; figures of up to £150 million were mentioned by the wife’s father.
(5) Was the wife under any other pressure? The circumstances in which she found herself put her under pressure and there was pressure from her own family but she was not under pressure to sign the agreement. The husband too was under pressure. He was being pressed by the wife’s family to enter into a marriage about which he had serious misgivings. The wife says in one affidavit that she signed the agreement in a hurry the day before the marriage. But the terms of the agreement had been discussed and agreed before then and she had had plenty of time to consider it. Having heard her evidence I do not accept that she felt under any pressure at the time she signed the agreement.
(6) Did she willingly sign the agreement? Yes.
(7) Did the husband exploit a dominant position, either financially or otherwise? No.
(8) Was the agreement entered into in the knowledge that there would be a child? Yes.
(9) Has any unforseen circumstance arisen since the agreement was made that would make it unjust to hold the parties to it? No.
(10) What does the agreement mean? It is suggested on behalf of the wife that cl 4 is so vague as to render the whole agreement bad. I consider the agreement is clear as to the capital provision to be made for the wife if the marriage broke down within 5 years. Clause 4 means that provision for the child was to be either agreed or adjudicated upon by the court bearing in mind that such provision would have to include the mother as full-time carer for the child.
(11) Does the agreement preclude an order for periodical payments for the wife? I think not. If the agreement had meant to bar any claim by the wife for periodical payments, it would surely have said so. It does not. It refers to ‘property’ which I interpret as capital. But if I am wrong see para  below.
(12) Are there any grounds for concluding that an injustice would be done by holding the parties to the terms of the agreement? My answer is no; not insofar as capital for the wife is concerned. On the contrary, I think an injustice would be done to the husband if I ignored the agreement.
(13) Is the agreement one of the circumstances of the case to be considered under s 25? Yes.
(14) Does the entry into this agreement constitute conduct which it would be inequitable to disregard under s 25(2)(g)? Yes.
(15) Am I breaking new ground by holding the wife to the capital terms of the agreement? No. Pre-nuptial agreements have been regarded as influential by Wilson J in S v S (Divorce: Staying Proceedings)  1 WLR 1200,  2 FLR 100 and by Connell J in M v M (Pre-nuptial Agreement)  1 FLR 654.
(16) Insofar as maintenance for the wife is concerned, if I am wrong in my interpretation of the agreement as above, and if the agreement does preclude a maintenance claim, would it be unjust to hold the parties to that aspect of the agreement? My answer is yes, it would be unjust to the wife but not to the husband. The wife has a child to bring up. Although this was a short marriage with no contribution by the wife to the acquisition of the husband’s wealth, I must have regard under s 25(2)(f) to the contribution that the wife has made and is now making and is likely for the next 18 years or so to be making in caring for their child. That is an enormous contribution. The wife is now 28. When the child has finished full-time education the wife will be approaching 50. Furthermore, any earning capacity she may have is clearly prejudiced by the time she must invest in bringing up their child. I accept that, but for the child, the wife would not have been financially prejudiced by this short marriage, but to suggest that in the circumstances as they are, she should have no maintenance, either because of the shortness of the marriage or because of the pre-nuptial agreement strikes me as wholly unjust to her. On the other hand her maintenance claim in my judgment should be in her capacity as a mother and to enable her to live as mother to a reasonable standard commensurate with the wealth of the husband/father.
In my judgment, therefore, the wife should receive a lump sum of £120,000 in accordance with the agreement and the husband’s offer. She should have no further capital claims upon him for herself, apart from a canteen of cutlery, which I will come to later.
I should say, finally, on this topic that Mr Francis QC, for the wife, has referred to a government green paper Supporting Families, dated 4 November 1998. He contends that that paper suggests that according to Government thinking I should not enforce the pre-nuptial agreement. Mr Moor QC, for the husband, says that the green paper says no such thing. I decline to adjudicate on that issue.
On this aspect I have been referred to Camm v Camm (1983) 4 FLR 577, J v C (Child: Financial Provision)  1 FLR 152, and H v P (Illegitimate Child: Capital Provision)  Fam Law 515. Apart from Camm v Camm which came earlier they were cases under s 15 of and Sch 1 to the Children Act 1989 and this case is not.
Nevertheless, the observations in those cases as to the appropriate level of housing must apply to this case.
A child is entitled to be brought up by a mother in circumstances which bear some sort of relationship to a father’s current resources and standard of living. That does not mean that if the husband was living in considerable style at L Road that the wife and D should have a comparable property to that and the wife has, of course, not suggested that it does. But substantial disparity of homes and lifestyles could well create problems, especially as the husband has substantial contact with D, and long may that last.
That brings me to the issue of where the husband will be living in the future. He now says, and he said it for the first time in the witness box before me, that he no longer intends to move to L Road. That house was formerly a school. The husband says he could not contemplate living there alone. He says that he always envisaged himself living there with a wife and several children. He points to the fact that he has never lived in a substantial home, he has lived in flats, and that was so during the marriage. The husband and wife lived either in her flat or at his flat in W Street. He points out that the renovations at L Road have been continuing for about 9 years, and the house is still not habitable. He says that if he had seriously planned it as a home he could have made it habitable long ago. He says that he now plans to turn it back into a school. It will be a school for autistic children with his sister, who is a teacher, as headmistress. He says that steps have already been taken to that end. The property still has planning permission for a school.
I find it surprising that the husband had never mentioned any of that before. Nevertheless, looking at the history of the husband’s housing I do accept that he is telling me the truth about his intentions in regard to L Road. I think it probable that he will not live there. The husband is nevertheless well able if he wishes to fund very substantial housing for himself.
The wife is not in that position. I have been taken through various properties that the parties have looked at for the wife and D. The wife wishes to live in an expensive area of north London. That is where she lived before and during part of the marriage and it is perfectly understandable and reasonable that she should live in the area of her choice. The husband does not suggest otherwise. But properties there are very expensive. The wife’s flat, where she lived before and during the marriage, was sold in May 2001 for £725,000. The property in W Road was bought in the same month for £1.67 million.
The properties suggested by the husband are on the market for between £595,000 and £625,000. The wife has seen many of them, and for one reason or another rejects them as unsuitable as, for example, being too small or too dark, or in the wrong area, or in need of refurbishment. I agree that some of them did look small or dark. There was one maisonette in H Terrace which was the block where the wife used to live, the asking price of which was £695,000. The area was right but the wife said that the property needed modernisation and if D was playing in the communal garden, she would not be able easily to see him.
There was one property in F Gardens that the wife saw and described as very beautiful and in itself wholly acceptable to her. In oral evidence, she said that it was surrounded by council flats. That was not the picture that she painted in her affidavit evidence and questionnaire answers, and I have already observed that I think on that aspect of the case, she was exaggerating. The asking price was £895,000. The wife herself has been looking at properties with an asking price of between about £1 million and £1.7 million.
What does the wife need for D? She needs a garden, or at least access to a garden. She needs sufficient space for him to play and have friends around, especially as he grows older. She needs a home where she herself can be reasonably happy. I do not see why she should spend the next 15 years or more bringing up D in a home that may be suitable for him – at least while he is young – but which she dislikes. D’s father would not be required to live in such a way: why should his mother? In my judgment the proposals made by the father for housing are inadequate. I bear in mind that the wife’s flat in H Terrace was sold for £725,000 in May 2001 as I have already mentioned, and that was for the wife alone, although for a time the husband and wife lived there together. On the other hand I think that the properties which the wife has put forward, at least some of them, are too high in price.
In my judgment the figure should be £1.2 million which I intend to include sufficient for the wife to buy furniture because she says she has insufficient furniture. The husband may protest that this was a short marriage, that the wife did not contribute to his wealth, and that there is a pre-nuptial agreement and that he was forced into marriage. All of that is true, but in my judgment it is wholly irrelevant to this issue. This money is to be held on trust as a home for the child and only incidentally for the wife as mother. The fund will revert to the husband when the trust terminates.
It may be said on behalf of the husband that my decision is way out of line with the cases such as H v H (Financial Relief: Conduct), to which my attention has been drawn. I have of course considered that, but every case turns on its own facts. In order to test my figure I pose myself the following questions:
(1) Does the wife need a home for herself and D? Yes.
(2) Is the area in which she wishes to live unreasonable? No.
(3) Is it an expensive area? Yes.
(4) Can the wife afford to purchase a home for herself while leaving her trust fund intact to provide an income, as has been agreed to be sensible? No.
(5) Are the wife’s objections to the properties proposed by the husband reasonable? Not all of them, but mainly.
(6) Is the figure I propose to order way out of line with properties that the parties have lived in in the past or are likely to live in in the future? No.
(7) Is the figure I propose too great a burden on the husband’s finances? No.
I turn to consider the question of periodical payments for the wife. Maintenance for D has already been agreed in the sum that I have mentioned.
I have already set out my reasons why I regard the husband as having a liability to maintain the wife. The wife’s financial position is as follows. She has the trust fund which I have mentioned which produces a net income of about £20,500 pa net. She has child benefit of £900 pa net. She will have maintenance for D of £15,000 pa net, making a total so far of £36,400 net pa.
There is a dispute about her capital apart from her interest in her father’s trust. She will have in accordance with my order £120,000. She has received an inheritance from her grandfather of £121,000. She had substantial sums in bank accounts but it has virtually all been spent. She has paid £97,000 in respect of her costs of these proceedings, some of which may or may not be recoverable from the husband, but I know not at this stage.
She agrees that since the breakdown of the marriage she has been on a spending spree and I have been taken through some of the items. She says that she preferred the term ‘depression spending’ to ‘spending spree’. She was for a time spending wildly on clothes. I do not have a figure for the total amount said to have been spent profligately. The figure would be likely to run into tens of thousands of pounds rather than hundreds of thousands.
In addition there are various sums that she has either paid to her father, or says that she owes her father. She says she owes him £16,740 and that she has already paid him £204,789, making a total under this heading of about £222,000. The figure she has paid him includes the £82,000 for the wedding that I have already referred to and which, according to the wife, he took from her without her knowledge. I believe the wife is telling me the truth about that.
Mr Francis says, on the wife’s behalf, that apart from the trust I should take the wife’s capital at £224,000 in round figures, being the money due from the lump sum of £120,000 plus her inheritance of £121,000 less the £16,740 owed to her father. He says that I should assume she invests that at 3% giving an income of £6,720 pa gross or roughly £4,500 net. That would give her a total income including the above figure of about £40,900 net for herself and D. The figure would be higher if she is awarded any costs from the husband and invested it to produce an income.
Mr Moor, on behalf of the husband, says that I should take the wife’s capital and income at a higher figure. He says I should add back money spent on the spending spree plus the £222,000 either already paid or owed to her father. He says that in addition it is obvious that the wife’s father will help her financially when this litigation is over. In addition, he submits, that the wife has an earning capacity. He says that I should assume that the wife could achieve a higher rate of return on her capital than 3%. He suggested 6% and pointed to documents to support that contention.
As to the wife’s father, I find this a difficult area of the case. I think it probable that he will help the wife financially although he is under no legal obligation to do so, and I cannot possibly place a figure on what such help might be. It is, however, the husband’s obligation to support his child, to provide a home for his child, and to ensure that his ex-wife as mother of his child is adequately provided for. I strongly suspect that the wife’s father’s activities in relation to the expenses of the wedding was a misguided attempt by him to ensure that the wife’s assets were as low as possible for the purposes of this case. I hope he pays the wife back, but I cannot force him to do so. £222,000 at 3% pa would amount to roughly another £4,500 pa net. The wedding money, £82,000 at 3% would yield roughly £2,000 pa.
Although I appreciate the force of Mr Moor’s submissions, I do not think it right to add back any specific sums in the context of what I am deciding. I am considering whether the wife should have periodical payments to assist her to bring up D. In that context I do not think it right to credit the wife with some specific notional sums that may not be available to her. Nevertheless, in considering the case overall, I bear in mind that more money may be available to her.
As to earning capacity, in cross-examination by Mr Moor the wife agreed that she might be able to earn £15,000 a year. She is 28. She has no qualifications apart from two GCSEs. She may be able to get back into modelling and has made tentative steps in that regard. But she says that at 28 she is getting too old for that. She is willing to work. She says she may try and get qualifications such as doing a business course. She has a concept of running a beauty bar and hopes to find a financial backer. She has D to care for. She has some help at home, a lady called R, who has been with the wife’s family for a long time. The wife’s father pays R. It is not clear how long that arrangement will last. I think it probable that the wife herself does not know. I think the wife’s earning capacity is speculative. She may be able to earn, but I would not put her earning capacity as higher than £8,000 a year net. If she had to pay someone to look after D on the basis that R left, her earnings might defray the cost but probably not much more.
The wife’s suggested income requirements have fluctuated. She asks for £57,000 a year net for herself on the basis that her income requirements for herself and D are £92,000 per year. That figure does not include decoration and repairs at the home, replacement of her car, replacement of equipment within the home. It is said the true figure of her income requirements is in excess of £100,000 a year.
In my judgment the wife is asking for a figure in the region of what might in some cases be payable for a fully entitled wife after a marriage of substantial length. There are in any event many items in her list of expenditure that strike me as too high. I approach the wife’s income requirements on the basis of what, if anything, she needs to care for D and to augment the agreed £15,000 a year for him and other income. The husband will be able to afford to take D on very expensive holidays. She will not. He will be able to afford to buy his child very expensive presents. She will not. I have no evidence to suggest that the husband will take advantage of this situation but there are clearly at least potential problems given the enormous disparity in the parties’ wealth.
The husband’s case is that she should have no periodical payments at all based on the agreement and the shortness of the marriage. If she has none, she will have about £40,900 net for herself and D and perhaps more if some of Mr Moor’s contentions prove to be accurate. If she were able to earn on the basis of her father continuing to pay for R, her income may approach £50,000 or more. In addition I think her father will probably help her but, as I have said, he is under no legal obligation to do so.
In most other cases before the courts, it would be absurd to suggest that a mother could not bring up a small child on an income of around £40,000–£50,000 a year. But this is not such a case. I think the husband should contribute more to the household of his ex-wife and child. But in the circumstances of this case, he should not be required to contribute to the extent that the wife seeks.
I step back from the detail and look at the whole case. The circumstances include:
(a) the shortness of the marriage;
(b) the pressure on the husband to marry before he felt ready to do so;
(c) the interference of the wife’s father in not only pressing for the marriage but in controlling and I think manipulating the wife’s finances and attempting to reduce them;
(d) the wife’s spending spree;
(e) the husband’s substantial wealth and his ability to pay;
(f) the disparity between the wife’s finances and the husband’s finances insofar as it may impinge upon D;
(g) the lack of contribution of the wife to the husband’s wealth, balanced against her present and future contribution in bringing up their child;
(h) the possibility of the wife achieving more than 3% return on her capital.
Of course the danger of compiling a list is that either party may seize on a factor which I have not expressly included and suggest that I have not thought about it, but I have considered everything. Above all I have thought of D and the mother’s ability to provide financially for their home and life together. I make it clear that the figure that I have determined upon is not based on any arithmetical calculation; it is simply the figure that in all the circumstances I regard as fair to the husband to pay for the wife by way of periodical payments to enable her more easily and more comfortably to bring up D.