Case No. ZZ20D65691

OSTYNBetween :Nicholas Cusworth KC and Eleri Jones (instructed by Payne Hicks Beach) for the ApplicantPatrick Chamberlayne KC and Daniel Bentham (instructed by Harbottle and Lewis) for the RespondentHearing dates: 11, 13, 14, 17 and 19 October 2022Approved JudgmentMR JUSTICE MOSTYNThis judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that in any report of this judgment or of the proceedings the children shall not be named and the address of the family home in West London shall not be stated. All persons, including representatives of the media, must ensure that these restrictions are complied with. Failure to do so will be a contempt of court. Otherwise, there are no reporting restrictions applying to the judgment or the proceedings.Mr Justice Mostyn:1.This is my judgment on the following applications:a.by Michael Fuchs (“the husband”) in Form A dated 30 March 2021 for financial remedies against Alvina Collardeau-Fuchs (“the wife”);b.by the husband dated 15 April 2021 that the wife do show cause why a prenuptial agreement (“PNA”) dated 2 March 2012 (as modified on 23 March 2014 after the marriage) should not be made an order of the court;c.by the wife in Form A dated 24 March 2022 for certain financial remedies against the husband (but not then including secured child periodical payments); andd.by the wife dated 12 October 2022 against the husband for secured child periodical payments.2.The matter previously came before me on 9 February 2022 when I awarded maintenance pending suit to the wife: Collardeau-Fuchs v Fuchs [2022] EWFC 6, and on 26 April 2022 when I heard an application by the wife to enforce that award: Collardeau-Fuchs v Fuchs [2022] EWFC 45.3.Although the husband maintains that the wife has come close during the course of the proceedings to repudiating the terms of the modified PNA, her clear stance before me is that she accepts its binding nature. However, the parties do not agree on the interpretation of the modified agreement and leave me to resolve their differences. Further, they do not agree what level of child support should be awarded.4. Therefore, I have to decide two matters:a.The correct entitlements of the wife under the modified PNA and their value. Although the agreements are governed by New York law, I have not been burdened with any legal arguments about the meaning of the agreements. Rather, I have been asked to construe, by reference to the ordinary meaning of words, common sense, and the intentions of the parties, what the agreements, properly interpreted, provide for the wife.b.The quantum of child support to be awarded to the wife for the benefit of the children, and whether the award should be secured. The wife makes a very substantial claim of £1.13 million per annum for the children, excluding school fees. The competing arguments have involved close consideration of the terms of the legislation and of much case law.Background5.The husband was born on 25 January 1960 and is 62. He is a highly successful real-estate developer and investor. Originally from Germany, he moved to the US in the 1990s, completed an MBA in California and concentrated on purchasing property in New York as well as Germany, ultimately acquiring a significant portfolio of prime Midtown Manhattan real estate. He holds both US and German citizenship. 6.The wife was born on 19 March 1975 and is 47. She is a French national with UK pre-settled status and a US Green Card which will be relinquished. She was raised in France until age 14 when she and her family moved to London. She attended university in Florida and embarked on further studies in New York. She is a former journalist but left her career in the early days of their relationship as the husband’s lifestyle was and remains one of constant travel, and she wished always to be by his side. 7.According to the wife, they met in 2006 and began cohabiting in 2008; according to the husband, it was in 2008 that they met. The dispute is of no relevance. They began living together, according to the husband, in the USA in 2010. Their first family homes were in New York (they have always had more than one home). They oscillated between London and the US until they settled into London in 2018, where the wife and children remain. 8.They married on 14 April 2012 and separated in March 2020. The wife’s divorce petition was issued on 22 December 2020. Decree Nisi was pronounced on 24 August 2021 and is yet to be made Absolute.9.The husband has two adult daughters from a previous marriage and a son from another relationship. 10.The parties have two children together, A, now aged 6, and B, now aged 4. They attend pre-preparatory school together and live with their mother in the family home. In Children Act 1989 proceedings the circuit judge on 1 September 2022 ordered a structured development of staying contact with their father. Contact will develop so that the husband will soon have the children on alternate weekends during term-time, together with around 8 weeks a year in school holidays. 11.On two occasions, the husband has disclosed his billionaire status. The schedule appended to the PNA dated 2 March 2012 stated his wealth to be $1,018,215,671. The schedule produced by him on 25 June 2021 (in response to an order made by me on 19 April 2021) stated his wealth to be $1,731,289,558. Between those dates, which approximately correspond to the span of the marriage, there was therefore an increase in the husband’s wealth of $713,073,887, although in his oral evidence he claimed that the value of his fortune had plummeted recently due to the turbulent economic climate. In cross-examination Mr Cusworth KC put to him that during the marriage there had been an acquest of $713 million. This was the ensuing exchange:“A. Yes, I need to correct him, because it was in – when I made the statement like nine months ago that was the assets. Today, if I would make a similar statement, it would be between 600 and 800 million.MR JUSTICE MOSTYN: Really. Your total net worth. A. Yes, and I can give the –MR JUSTICE MOSTYN: Between 600 and 800 million.MR CUSWORTH: As of now, you have lost in the last nine months about $1 billion worth of assets?A. Yes.MR JUSTICE MOSTYN: Okay.A. Yes, I can explain if it's necessary.MR JUSTICE MOSTYN: No, I am just processing that, okay.MR CUSWORTH: You have never asserted or relied on that fact before today, have you? There has been no updated evidence from you about the state of your assets.A. It is not important.”12.The husband’s evidence is not that surprising. The schedule summarising his investment property portfolio, disclosed on 25 June 2021, identifies numerous commercial properties, mainly in New York. These properties are all co-owned, in varying shares, with other investors. The properties are said to be worth $10.17 billion with mortgages of $6.65 billion. The properties are thus all highly leveraged. The overall debt-to-assets ratio is 65%. The equity is $3.52 billion of which the husband’s share is $1.47 billion (41.8%).13.It would not take much movement downwards from the top figure for the husband’s share of the equity to fall to $700 million. Mathematically, a reduction of the $10.17 billion figure by 18.1% to $8.33 billion results in a halving of the value of the husband’s share of the equity. It seems to me plausible that the blows to the global economy since June 2021 could have resulted in such a reduction in the value of the property portfolio. But as the husband rightly says, it is not important. The result of this case does not differ depending on whether the husband is worth $700 million or $1 billion or $1.7 billion.14.The parties certainly lived a billionaire lifestyle during their marriage. The nature of the parties’ relationship was such that money (and particularly the detail of family expenditure) was never a concern. I described their lifestyle in my maintenance pending suit judgment. At [12] I stated:“It is common ground that during the marriage the parties enjoyed an extremely high standard of living. They had the use of properties around the world (including a property located in the heart of the Cap d’Antibes, to which I will return later in this judgment). The parties employed a significant number of staff at the West London property, as I have described above, and in their other properties. It is agreed that the parties would spend a great deal of time travelling, typically by private plane or first-class commercial flights, and staying in high-end hotels or villas at significant cost.”15.They ran at least five fully staffed homes in fashionable places such as The Hamptons, New York City, Paris, Miami, Cap d’Antibes, Capri and London. 16.The wife and the children have their primary residence at the family home in West London, and when in London the husband lives in an apartment near the family home. The family home is over 8,500 square feet in area. Its agreed value is £35,000,000 and the mortgage is £21,500,000. It is a property of exceptional amenity, but with extraordinarily high running costs. It has six stories, five bedrooms, and an indoor heated pool in its basement. It has a private garden and access to a communal garden. The parties had a retinue of staff at the family home. They formally employed two rota chefs, a house manager, two or three housekeepers, a laundress and two full-time nannies, in addition to a multitude of contractors (gardeners, pool maintainers, builders, plumbers, electricians and handymen). 17.In the maintenance pending suit judgment, I described and analysed the annual expenditure. According to a schedule produced by the husband on 25 June 2021, in 2019, the last calendar year of the marriage, the expenditure was £4.78 million. Mr Cusworth KC submits that an analysis subsequently made of the American Express statements shows that this figure is understated. Be that as it may, the rate at which the family lived was phenomenally high. This is not a common-or-garden big-money case; this is a case of the super-rich who, as I stated in my previous judgment (quoting F Scott Fitzgerald), are truly different to you and me.18.This family’s custom of unrestrained expenditure has been practised in the litigation. Prodigious amounts of legal costs have been incurred. The parties’ Forms H filed at the start of the trial show a combined expenditure on these financial remedy proceedings of £4,314,769, broken down as follows: Since the date of her Form H (29 September 2022) the wife has incurred a further £317,382 in financial remedy costs, giving a final total for her of £2,503,179.19.I gather that the parties have spent much the same in the Children Act proceedings. To spend over £8 million in family litigation in such a short period must be almost a record. The scale and intensity of the financial dispute between the parties, and the amounts spent on it, demonstrate the enduring vigour of the law of unintended consequences. The intended consequence of the modified PNA was to spell out with clarity the financial outcome in the event of divorce, and in so doing to prevent, or at least seriously circumscribe, any future litigation. In fact, the exact opposite has happened. The parties have furiously and expensively litigated, probably more intensely and extensively than would have occurred in a routine financial remedy case without a PNA. The PNA20.The parties executed the PNA in accordance with the law of the State of New York on 2 March 2012, some six weeks before the marriage. As stated above, the husband’s net worth was disclosed in the sum of $1,018,215,671. The wife’s net worth was stated to be $4,471,500. Both parties had advice from, and were represented by, distinguished lawyers and there has been no suggestion of deficiency or pressure within the process leading up to the execution of the PNA.21.The parties signed a subsequent Modification Agreement on 23 March 2014. In her evidence, the wife described how this was presented to her in completed form as a birthday present. It increased the financial provision to be made to the wife pursuant to the PNA. As with the PNA, there has been no suggestion that the process leading to its execution was in any way flawed. 22.The PNA creates a regime of separate property and includes a waiver of spousal maintenance claims in consideration of the provision made in the agreements. The key features of the agreements are as follows:a.The preamble to the PNA states that it is intended to be in full satisfaction of all the parties’ rights arising out of the marriage or its dissolution except with respect to issues relating to custody and child support of any children of the marriage. To reinforce their mutual intention, the PNA concludes by stating in Article 17, in uppercase and in bold type:“EACH PARTY TO THIS AGREEMENT FULLY UNDERSTANDS AND AGREES THAT HE OR SHE IS RELINQUISHING VALUABLE PROPERTY RIGHTS BY SIGNING THIS AGREEMENT.”b.The parties acknowledged that they had received independent legal advice and that each had made clear and comprehensible financial disclosure (Article 2 and Exhibits A and B).c.Separate property is defined in Article 3 and any claims in respect of such property is waived in Article 4.d.The right to claim maintenance or alimony is waived in Article 5.e. Article 6 establishes the rights that arise on an Event of Marital Dissolution, which is defined, for the intents of the case before me, in Article 11 as the commencement of divorce proceedings by either party. That occurred on 22 December 2020, and so for the purposes of the PNA this was a marriage of 8¾ years (to be exact, 103 months). An important provision is article 6.2.1 which permits the wife, in the event of the breakdown of the marriage, to remain in the primary residence of the parties until the youngest child of the marriage attains 21 years of age, with the husband discharging the mortgage repayments, and paying for major repairs and the household staff, with the wife bearing all other expenses of the property.f.The terms of Article 6 are of central relevance to the dispute that I have to resolve and will be addressed in detail later in this judgment.g.Article 13 provides that on the occurrence of an Event of Marital Dissolution, the husband shall pay the wife’s legal fees necessary to resolve all issues between the parties, including issues relating to child custody, access and child maintenance, but capped at $750,000. Further, it provides that if either party should commence proceedings to set aside the agreement, or to claim spousal support other than in accordance with the terms of the agreement, then that party shall pay all the legal costs of the other party.h.Article 16.3 provides that the agreement, its validity and interpretation, and the rights of the parties under it, shall be governed and construed under the laws of New York.i.The Modification Agreement provides that on the first happening of an Event of Marital Dissolution, or the wife becoming a US citizen, the husband will transfer to the wife a one-half interest in the Miami apartment and the residence in Southampton, New York.The disputes about the agreement23.Notwithstanding the detail and clarity of the modified agreement, there are numerous disputes between the parties as to its true meaning. I required the issues to be expressed narratively in a Scott Schedule and numerically in a spreadsheet (“the Outcome Schedule”).24.On the face of it there are 17 separate issues, although Issue 17 is nothing to do with the interpretation of the agreement. Further, I think that some of the issues are duplications. One issue was resolved by agreement on the last day of the hearing. I consider there are 10 separate issues, to which I now turn.Issues 1 & 2: The failure by the husband to set up the Joint Investment Fund25.Article 6.1 provides for the establishment by the husband of a ‘Joint Investment Fund’ (“JIF”). The husband was to fund it and the parties were to share its growth and value equally. 26.Specifically, Article 6.1 provides:“Within three years from the date of the marriage, Michael shall establish, from his Separate Property assets, a joint investment fund (the “Joint Investment Fund”), in the name of both parties or in the name of an entity owned by both parties, with a minimum balance of Ten Million ($10,000,000) Dollars. Each party shall have a 50% interest in the Joint Investment Fund (with Alvina’s share vesting from the date of the marriage)…”27.Article 6.1.2 goes on to reinforce the provision made to the wife by the JIF to give her a guaranteed (or “floor”) amount depending on the length of the marriage. 28.Specifically, Article 6.1.2(b) provides:“If an Event of Marital Dissolution occurs after the establishment and full funding of the Joint Investment Fund and before the ten year anniversary of Michael’s management of the Fund, but in no event beyond the thirteenth anniversary of the parties’ marriage, Michael shall be entitled to the contents of the Joint Investment Fund, provided that he shall pay to Alvina a cash amount equal to the greater of (i) half the value of the Joint Investment Fund, or (ii) the cash sum of Five Million Dollars ($5,000,000) plus an amount equal to the product of (x) the number of full months the parties were married prior to the Event of Marital Dissolution up to a maximum of 120 months, and (y) $41,667. Such cash amount shall be paid to Alvina as a tax-flee distributive award payable as follows: (1) $1 million within ten days from the Event of Marital Dissolution; (2) an amount equal to the remaining sum due, less $1,500,000, within ninety days from an Event of Marital Dissolution; and (3) a payment of $500,000 each year on the first, second, and third anniversary of an Event of Marital Dissolution.”29.Thus, the Event of Marital Dissolution having occurred on 22 December 2020, the wife was to receive half the value of the JIF, or, if more, a sum calculated as follows: [$5,000,000 + (103 x $41,667) = $9,291,701]. This was payable as follows:30.However, unbeknown to the wife, the husband did not establish the JIF. His explanation was that he believed that the subsequent purchase by him in joint names of other properties pursuant to the Modification Agreement, and voluntarily, satisfied this obligation. He was wrong about that. He now accepts the advice from his New York attorney Allan Mantel who wrote on 20 June 2022 that the New York court would not accept that these property purchases constituted a substitute for the JIF.31.Much has been made by Mr Cusworth KC of the husband’s failure to establish the JIF but there is no numerical difference between the parties in relation to these issues in the Outcome Schedule. The entry for each party in that Schedule is $9,291,700. The wife’s position in the Scott Schedule is stated thus:“Floor provision in PNA [is] only applicable as a floor. If needs require a greater sum in replacement, that is legitimate.”32.The husband’s position is that there is no evidence of any loss. In [11] above I gave the figure for the increase in the husband’s fortune from the date of the marriage until June 2021. That increase was 70.03%. If the husband had in fact established the JIF there is no reason to think that it would have increased at a rate markedly higher than the rate of increase of the value of the husband’s overall assets. An increase of 70.03% would mean that the JIF would have been worth $17,003,000 in June 2021, and in my opinion certainly no more today. The wife’s 50% share would thus be worth today no more than $8,501,500, rather less than the amount provided for by the “floor” of $9,291,700.33.I accept the husband’s submissions. The figure I use in the Outcome Schedule is $9,291,700. The husband’s breach of the agreement, while regrettable, is redressed by using that figure. There is no warrant for assessing the household needs for the purposes of the award of child support in a more liberal way than I would do otherwise because the husband failed to comply with that term of the agreement. The argument is a non- sequitur.Issue 3: The mortgage on Meadow Lane (1), Southampton, New York34.This property was purchased by the husband in his sole name in September 2006 with a mortgage of $8 million. The mortgage now is $13 million. The wife correctly says that the $5m increase in the mortgage debt derives from a re-mortgage in 2016 when the husband raised a lump sum amount to pay off his first wife’s mortgage under a long-standing obligation in a court order. 35.The wife’s position is that she did not agree to the re-mortgage. The husband’s position is that the wife did agree to it; that the debt to his ex-wife was genuine; and that there is no basis for artificially excluding the value of this re-mortgage. Mr Chamberlayne KC submits that this was not ‘wanton expenditure’ within the add-back jurisprudence.36.The original Article 6.6 provided:“Southampton Residence. Michael is the sole owner of a house located at Meadow Lane, Southampton, New York (“the Southampton Residence”). In the event that the Southampton Residence is sold prior to an Event of Marital Dissolution, Michael agrees to pay to Alvina an amount equal to one-half of the excess of the net sales price (defined as the gross sales price less broker’s fees, transfer taxes, and customary closing costs, but not deducting any mortgage) of the Southampton Residence over $20 million, but in no event less than a minimum of $1 million. For example, if the Southampton Residence sold for a net sales price of $25 million during the marriage and prior to an Event of Marital Dissolution, Michael would pay to Alvina the sum of $2.5 million. In the event that Michael still owns the Southampton Residence at the time of an Event of Marital Dissolution, he shall pay to Alvina the sum of $1million within ninety days of such Event.”This original agreement shows that the existence of a mortgage was recognised, although its value would not be taken into account in computing the wife’s relatively modest share of the proceeds of sale if the property were sold prior to the breakdown of the marriage. It also shows, on the facts as they have unfolded, that the wife would have got $1 million under this unmodified term in circumstances where the property has not been sold.37.As stated above, the Modification Agreement provided that Article 6.6 was amended to provide that the husband would on the earlier of the breakdown of the marriage, or the wife becoming a US citizen, transfer to her a one-half interest in this property. Nothing was said in the MA about any mortgage, but it was implicit that the wife’s half share would be subject to such mortgage as existed at the time the transfer took place. There was nothing in the MA freezing the mortgage at the level at which it stood at the date of its execution; there was nothing in the MA prohibiting the husband from, in accordance with his customary practice, mortgaging the property for his personal purposes. The wife knew perfectly well that it was the husband’s customary practice, indeed it was the very essence of his entrepreneurial spirit, to raise money on existing properties to fund investment in other projects or to meet his own personal needs. The wife was well aware of the husband’s fractious relationship with his first wife and the financial obligations under the order and, indeed, was a drafter of proposed emails to be sent to the first wife’s lawyers.38.These matters seem to me to favour taking the true mortgage position. On the other hand, on the basis that equity treats as done that which is agreed to be done, the husband is in effect requiring the wife to pay half of the lump sum raised to discharge his obligations under a divorce order to his first wife. Further, I am not satisfied that the wife knew about the raising of this re-mortgage in 2016 for this particular purpose. Indeed, Mr Cusworth KC demonstrated in his cross-examination of the husband, that he had not given a correct account in his witness statement where he said that the borrowing against Meadow Lane was used to meet living costs and improvements to the property as well as to meeting obligations to his first wife. On the contrary, the contemporaneous documents include a completion statement which shows quite clearly that the entirety of the re-mortgage money went to pay off the mortgage of the husband’s first wife.39.In my judgment, a reasonable interpretation of the Modification Agreement is to be gained by asking what the Commuter on the Bronx Subway1 would have said in answer to this question:“Should the wife’s half share that was promised to her in 2014 in the Modification Agreement be depredated by a further mortgage to pay off her predecessor’s own mortgage? ”I am convinced that such a reasonable person would say:“It would be unfair, and therefore outside the contemplation of the parties, that such a further debt should be taken into account against the wife’s promised share.”Therefore, the figure that I use in the Outcome Schedule for the mortgage against Meadow Lane (1) is $8 million.Issues 4 & 5: Does the Modification Agreement cover Meadow Lane (2)?40.This next-door property was purchased by the husband in his sole name on 10 April 2014, a few weeks after the signing of the Modification Agreement on 23 March 2014. It is therefore not covered by it. It could only be covered by Article 6.7 of the PNA if the parties had lived in it as a primary or vacation residence, and they did not. Article 6.7 provides:“