Financial Remedies
June 2022

Summary:

An application before Mr Justice Mostyn by a wife for financial remedies. The main area of dispute was around the valuation of the company within which the husband had a 50% share and what proportion of that should be ringfenced as a pre-marital asset.

Background:

The parties, both from the Republic of Ireland, met in Donegal in 2003 or 2004. W moved to London in 2005 and began cohabiting with H. The parties were married in July 2008 and have three children, two 11 year old twin boys and a 6 year old girl.

The business that H owns 50% shares in, Galldris Construction Ltd, was incorporated in 1998. H and another party each owned 50% shares; the other party did not join the company until Christmas 1999, by which the company had secured its first two major contracts. The company has since developed and expanded into a group of companies; experts have agreed that the companies should all be valued as one for the purposes of this application.

H’s business is extremely successful with a turnover of around £74 million the year prior to the parties separation. The business had substantial growth prior to the parties’ cohabitation and marriage; when W moved to London in 2005 in order to cohabit with H, H had a property portfolio of around £1.24 million.

The parties separated in November 2019 and a petition for divorce was filed by W in March 2020. Following the separation, H purchased his own home in Barnet for £2.15 million, mortgage free in August 2020, although there has subsequently been a mortgage secured against it. The property has since been improved, including the addition of neighbouring land purchased in June 2021 for £250k. W has remained living at the former matrimonial home since separation. The children reside with W through the week and reside with H at the weekends at his new home.

An application for financial remedies was made on 14 April 2020.

Decision:

Mostyn J confirmed that he had valued the parties overall assets at £35,456,884 and that, in relation to the main dispute, he found that the value of 24.5% of the Galldris business should be excluded as a pre-marital asset. On that basis, the matrimonial property amounted to £28,475,246 with an award in W’s favour of £14,237,623 (made up of transfer of the former matrimonial home, a property in Ireland and a lump sum of £12,129.209).

Various experts were appointed in relation to the valuation of the former matrimonial home, the husband’s property portfolio in the UK and Ireland and the value of the business.

H made an application for an anonymity order on 13 May 2022 which has been reported separately (Gallagher v Gallagher (No 1) (Reporting Restrictions) [2022] EWFC 52).

When considering the expert evidence given, Mostyn J confirmed the requirement for impartiality and the need for experts to give the court an informed view rather than simply siding with the party who instructs them.

Mostyn J used a linear method to calculate what proportion of H’s business should be excluded as pre-marital assets. The total of this amounts to £6,981,638.

It was also confirmed that a 50:50 distribution of the assets was appropriate. When considering the sum payable to W, Mostyn J confirmed that W would retain the former matrimonial home and one property in Ireland. Mostyn J also confirmed that H should pay W a lump sum and ordered £3,129,209 to be paid by 1 July 2022 and the remaining £9,000,000 by 1 July 2024; H was also ordered to pay periodical payments to the sum of £225,000 per annum pending the payment of the second sum in 2024.

The court also considered child support and, taking into account the spousal maintenance being paid in the interim and sums accounted for the time the children spend with their father, Mostyn J believed that £46k per annum was a fair starting point. It was confirmed that this figure would be adjusted to account for H paying the children’s school fees.

Summary:

Mr Justice Moor concluded that the will of the deceased did not make reasonable financial provision for the Claimant (wife of the deceased) and that there was a constructive trust in favour of the Claimant, in relation to the matrimonial home, on the basis of an actual common intention between the Claimant and the deceased. Moor J also considered the impact on what reasonable financial provision would be where the Claimant was set to receive inheritance from the estate of one of the deceased’s relatives, in place of the deceased.

Background:

The deceased, Steven Paul, was an international fencer who competed for Great Britain in the 1980’s and 1990’s and earned his living as a head coach and chairman of Tunbridge Wells fencing club. The deceased was diagnosed with motor neurone disease in 2015 and passed away in 2019 at the age of 64.

The deceased had previously been married in Australia and had two children from that marriage who are now both adults, aged 35 and 32. That marriage broke down and the deceased returned to the UK in 1991; his adult sons joined him in the UK and resided with the deceased, and eventually the Claimant, until 2006.

The Claimant and the deceased began cohabiting in 1996 and married in 1998. There are two children of the family, one aged 23 and the other aged 16. The Claimant and the deceased purchased a property in 2002 in joint names before purchasing the final matrimonial home in 2011. The property was purchased in the sole name of the deceased in order for the parties to obtain a mortgage.

The will of the deceased only left provision for the Claimant to receive the contents of the matrimonial home, valued at £1,000 for probate purposes, and left the balance of the estate between his four children. The executors of the will acknowledged that the matrimonial home was held on constructive trust as to 50% for the Claimant due to the Claimant relying on a common intention and acting to her detriment by paying half of the mortgage.

The deceased had two life assurance policies, one of which paid off the remainder of the mortgage and the other, payable in 5 annual increments of £30k, paid to the Claimant. An issue was raised as to how the life assurance paying off the entirety of the mortgage should treat the constructive trust of the Claimant and whether she would owe the deceased’s estate for her half of the mortgage.

The Claimant and Deceased’s youngest daughter attended a fee-paying school and had fallen behind in her education, due to having additional needs, and so would attend the fee-paying school until she was aged 20; provision for this also needed to be considered in relation to the estate and the Claimant’s proportion.

The Claimant was also due to receive £250k from the estate of the deceased’s step-mother. The deceased was due to receive inheritance from his step-mother’s estate, however, the step-mother executed a codicil after the deceased passed away which meant that the Claimant received the deceased’s share of the inheritance.

Decision:

Moor J was happy to conclude that there was a constructive trust in favour of the Claimant as to 50% of the matrimonial home due to the common intention that the property should be equally shared between the Claimant and the deceased; this was accepted by the deceased’s youngest children and the executors of the estate. Mr Justice Moor then considered the life assurance policy and whether the Claimant owed money to the estate of the deceased for paying off her half of the mortgage; it was concluded that, as a matter of law, the Claimant would owe the estate half of the amount paid to redeem the mortgage.

Moor J then considered the provisions under the Inheritance (Provision for Family and Dependants) Act 1975 (“the Inheritance Act”) and noted that reasonable financial provision when considering a spouse was not limited to the consideration of provision for maintenance alone. Moor J outlined the recent guidance of reasonable financial provision in Illot v The Blue Cross [2018] AC 545, as well as the principles under s.3(1) and s.3(2) of the Inheritance Act. It was also confirmed that the court must have regard to what the Claimant might have expected to receive had the marriage been terminated rather than the deceased passing away; Moor J considered s.25 of the Matrimonial Causes Act 1973 and determined that the Claimant would have been entitled to an equal division of assets had there been a divorce.

Moor J confirmed that he needed to consider the youngest child of the family and her additional needs; it was confirmed that the Claimant sought to stay in the matrimonial home until the youngest child had completed her education in three years time.

The first Defendant, the deceased’s eldest son in Australia, explained that both he and his brother were experiencing financial hardship and so had a need for the money, but Moor J concluded that the deceased passed away fairly early and so in normal circumstances the deceased’s eldest two children would not have been expecting to receive inheritance at this time and so they could wait for three years to receive their inheritance.

Moor J confirmed that the Claimant had not received reasonable financial provision under the deceased’s will and determined that the deceased’s intention was likely to have been that half of the matrimonial home was hers and that the life assurance policy would also pay off her half of the mortgage. The court noted that the deceased was wrong in relation to paying off the Claimant’s half of the mortgage and did not make any provision for the Claimant and the children to remain in the property until the youngest child completed her secondary education.

Mr Justice Moor then considered what reasonable provision would be for the Claimant. It was confirmed that the inheritance being received by the Claimant of £250k could not be ignored but confirmed that the inheritance was for the Claimant to spend as she wishes. Moor J then varied the provision of the deceased’s will, the exact distributions of which are found at paragraph 45 of the judgment.