Case No. RS20D03594

57.In the end, I only heard oral evidence from the two parties. As it is his application, the Husband gave his evidence first. In answer to questions put to him by his counsel, Miss Bangay, he told me the intention was that each child should get a property. He did, however, say that he would expect future properties to come out of the Trust for the children, but that Trust had not been set up when Child A’s property was purchased. I have to say that I consider this to be a sensible approach. He said he intends to settle further assets into the Trust. He viewed the $50 million as a first tranche. Property W had been mentioned to Child B as it is available but Child B said it was not Child B’s kind of property and was not in the location Child B would like to live. It is a four bedroom town house. He was then asked about DEF Inc. He said that the trusts have “impaired” the interest, by which he meant written it off, as they took the view the business would never make enough profit to repay it. The difficulty, of course, is that the business is now making a profit and Mr I’s view is that the value of DEF Inc is sufficient to repay the interest. I cannot believe that the relevant trust would not be able to accept the interest, even though they had previously written it off. He was asked about his lawyer in City Y saying that he would soon expect DEF Inc to be sold. He said this was pure speculation, although he could understand why the lawyer might think that. He said that, initially, neither party could outvote the other so there would not have been a sale without agreement and he could stop a sale happening but that was not now the case. Whilst I accept that this is factually correct, I cannot see what difference it really makes as both the Husband and the PE Company want to maximise their return on the business. I therefore take the view that their respective interests remain entirely aligned. I do accept that one or other might, previously, have taken the view that they might do better to delay a sale. Such a position is not now available to the Husband, but, delaying a sale, would be a gamble and I cannot really see that the Husband is likely to be in any better position to assess future prospects than the PE Company. The Husband did then say that there are now more than 50 stores rather than the c. 30 reported by Mr I. Miss Stone made much of that in suggesting that Mr I had not been given the full picture but I am satisfied that the explanation is that a further fifteen or so stores were acquired when another business was bought a few years ago. 58.The Husband then said that the transfer of the shares in DEF Inc to the Trust for the children was the Wife’s idea. She denied that was the case and, in any event, the position after the breakdown of a marriage is very different when the available assets have to be divided between the two spouses. He was then asked about the tax authority of Country X. He was adamant that you cannot negotiate with that authority as they only deal on the basis of tax principles. I regret to say that I am clear that he is wrong about that as the documents all indicate that negotiation is exactly what occurs. Moreover, the without prejudice indication given by the tax authority is clear support for this being the case. I do not underestimate how difficult such negotiations may be but I am clear that “horse-trading” is exactly what is likely to occur. He was then asked about ABC Inc. I have to say that, throughout his evidence, he downplayed his role in the business to the extent that he gave a picture of his father, JR and Mr C, the Chief Executive who succeeded him, being entirely responsible for every achievement, whilst the Husband really just got in the way. I simply cannot accept this presentation. He made the fair point that he had joined the business after it had already been in operation for over 30 years and that JR had started it from scratch. That I accept. I also accept that it was well established with a nucleus of stores and staff in place when he took over, but I am clear that it was a small, albeit successful concern that was transformed during the Husband’s time at the helm. A clear example of this is that I asked him if he was the Chief Financial Officer before he was Chief Executive Officer and he made the point, which I am sure is correct, that it was not a sophisticated accounts department that he joined. It was basically just him. He did say that the JVC concept was created by his father, which I accept. He added that his father was keen to roll that out but the simple fact was that it had only been done on a modest scale before the Husband arrived. I am clear that it was the Husband who took this on and developed it successfully as he himself says on his website and as was said in the eulogy to JR to which I referred above. The Husband then said that JR never released his grip on the business as he did not want to give up control. He said that JR held the purse strings right to the end. There may be some truth in this in relation to capital value but I am clear JR was not controlling the company at this stage. After all, JR was in his mid 60s when he appointed the Husband as CEO. I do not accept JR was the key figure thereafter. The Husband then said that Mr C was appointed as CEO in the mid-2000s as the business was growing at a pace. By then, JR would have been in his mid 70s and the fact the business was growing at a pace can only have been down to the Husband. The Husband added that, after he went to business school, he realised he was not up to being the CEO, but one of the great qualities of a successful businessman is getting in others to take the project forward. Moreover, the Husband remained as Chairman. 59.He then told Miss Bangay that the yacht has made the property on the private island and the airplane somewhat superfluous. He said it was time to move on but he had not wanted to sell either of these assets during these proceedings as it would have been likely he would have been criticised for doing so. He said that “we cannot do justice to so many lovely places”. Miss Stone is critical of him in this regard but I consider she is wrong to be critical. It will, of course, be up to him if he does sell or not, but I found his justification for his approach persuasive. He added that he intended to get rid of his timeshare but he was happy for the Wife to retain the other one. Again, this seems sensible. He was then cross-examined by Miss Stone. She dealt first with the Pre-Nuptial Agreement. He said he relied on the spirit of the agreement, namely that the family trusts and the resources flowing from ABC Inc were non-matrimonial. He accepted that there were no valuations given for these assets. He also accepted that the Wife would have got no financial provision at all if the marriage had been dissolved whilst it was operative, if he had not given her any resources voluntarily. He stressed that its relevance was to establish the dynastic nature of the trusts. He did then accept that there had been a joint effort between himself and his father from the 1980s onwards when the business was “significantly enhanced”. He accepted that every single trust was set up during the marriage, other than the two trusts set up by JR and that, in general, both himself and the Wife were beneficiaries of these trusts, as were the children. He did, however, make the point that the trusts were discretionary. He accepted that the Wife is a principal beneficiary of the trust that holds the shares in DEF Inc. 60.Miss Stone then asked him about his role in the business. He said that, as CEO from 1993 onwards, he was working with his father until Mr C was appointed in his place but I do consider that answer is not a true reflection of the position. I am sure JR was still interested and that he would have been consulted as Chairman, but the Husband was the driving force. I accept the Husband was rolling out the model that JR had crafted but it was the Husband rolling it out. He then said that he “stuck to the knitting and not stuffing it up” but I am clear that is not a true reflection of the position either. He then said that it was an officer of the company who recruited the JVPs and found new stores. Even if entirely true, the Husband chose the officer, entrusted him and approved his selections, which were clearly very successful. He was asked about the memorandum by Mr D in 2006 which put an indicative value of between $210 – c. $260 million on the business. Miss Stone compared this to it selling a few years ago for a total in excess of $1 billion including the properties. I accept Miss Bangay’s point that the 2006 figure was not a valuation but an “indicative figure” but I do consider there is considerable force in the comparison. There was huge growth in this business under the Husband’s stewardship. 61.He was then asked about the eulogy spoken by JR’s friend at JR’s funeral. He talked about “JR and IR developing” the JVPs. The Husband’s response that the friend knew the Husband was in the audience is not an answer. He was speaking at JR’s funeral and would not have downplayed JR’s role. The Husband did, however, accept that he and JR were “a great team” or “a dynamic duo” but he continued to stress his father’s “heavy influence”. He was then asked about his website and he confirmed that it does say that it was the Husband who achieved so much in the business. He said that it was JR who got the name of ABC Inc from his travels but it was the Husband who implemented it, apparently following some resistance from the JVPs. He said a lot of the team was in place when he joined but he accepted he added to the team. He then repeated that the real growth occurred when Mr C took over; and that it was Mr C who brought in a lot of the new sophisticated management team. Again, I find that he underplays his own role. He did accept that he led the company during a period of rapid growth. He said there were 16 JVPs at the time of the marriage and they had got to 45 when he “sacked” himself, although Miss Stone suggested it was 60 stores by then. I cannot resolve that dispute but it does not matter. He was asked about the successful marketing slogan, but he said it was the idea of one of the JVPs. Again, however, he was constrained to accept that he oversaw its implementation. Gradually, the other stores adopted it and, said the Husband, he and JR thought it was a good tool for marketing but it did take some time for it to catch on. He then repeated that his achievement was that he didn’t “stuff it up”. I find that he did far more than that but, in any event, not “stuffing it up” is an achievement in itself. 62.He said that the eventual purchaser of ABC Inc did approach him in 2009 about a sale but the company had not been put on the market in 2010. I accept that. He added that he did cultivate the relationship with the purchaser for several years, which I also accept. He said that the JVPs were becoming difficult to manage. He wanted to sell. He said the board engaged Mr C to get it ready for sale, although that is not strictly correct as Mr C was appointed in 2005. I accept the board directed Mr C to prepare the business for sale. He then said that the business could not have afforded to pay out $340 million in the mid 1990s, which I also accept. He said he had lost quite a lot of money as well. For example, $12 million was lost in a venture which went into administration in 2019 and the other start-up company referred to above is $11 million down. He said he hoped it would be a success but I doubt it will ever be in a position to repay that money. Such business failures, which have to be balanced against the great successes, are exactly what happens to businessmen such as the Husband. He then said that he could not see why the boat could not be used by the Wife notwithstanding the divorce. He said she could use it if she wants. He said similar things about Property J, the property on the private island and the jet. He said that it would be a waste of money to rent a separate boat but the difficulty with that is that the other spouse almost always feels completely differently and I entirely accept that this is true of this Wife. He was asked why all these assets were held in a trust named after both spouses, namely the IR & OR Family Trusts. He said that this trust was settled on 4 July 2003 and it is commonplace to name it after the parents. I accept this evidence. He was then asked about the Z Street Property. He told me that he had a “fitted study” at the property. I was shown photographs of a room that did not look particularly grand. It did have both a desk for him and one for the Wife in a window nook. I really cannot see that the existence of this study is a good reason for the Husband to keep this property. He did accept that the redevelopment of the Z Street Property was a joint effort, although not 50/50. They each worked on different aspects as a team. It was to be the family home. He accepted that it had hardly been used to date due to the refurbishment and the various lockdowns. He said that Child D had stayed there for a few days at Christmas 2020 with the Wife and the other children. He had been there for ten days in November 2021 and the week before the trial, when he appears to have spent five days in the Z Street Property and three in Property J. 63.He said that Property W was not conducive for a young child to live in as it has an older demographic in the neighbourhood. It is a four bedroom property. One of the bedrooms is in an external bungalow. Miss Stone suggested that the Wife could not live, or even stay, there with all of the children. He seemed to accept that, saying that it was a temporary base whilst the work was done to the Z Street Property and that the older children could stay in the self-contained flat in the Z Street Property. He was asked about the costs of the boat. He said it had undergone a refit in 2020 at a cost of €330,000 as well as a further €70,000 in 2021 to get rid of unsightly marble interiors. It would cost around £300,000 per week to charter but it has not been rented out at all. Turning to the private plane, he said it was the second one he had owned. It was for travel within Country X. It did have annual running costs of £1,967,439 but it cost less after charters. The cost for 2021 was $1,745,042 but I do not believe this includes depreciation. He was unclear as to the charter costs, thinking it might be $12,000 per hour but he said the fuel alone costs $8,000 per hour. He was then asked about his expenses. He accepted that the schedule showed expenses of £4,255,931 per annum but this does not reflect the hiring out of the plane. A more accurate figure appears to be the sum of £3,144,640 for the year 2021. Miss Bangay, in her closing submissions, says that this figure is not reflective of the true position but I cannot accept that submission as it is only fair to include the costs of running Property J, the property on the private island, the yacht and the plane in a schedule of expenditure. The only item that I do accept is capable of deduction is the sum of $453,000 for running the family office. 64.Miss Stone then turned to the issue of the enquiry by the tax authority of Country X. I have already made some observations about this. She referred the Husband to references from Mr G to the hope that there would be “meaningful discussions” before Summer 2022 and that there was the “potential for a negotiated settlement”. There really is no answer to that. Nevertheless, the Husband insisted that he would have to pay somewhere between c. $40 million and c. $70 million but I consider that is quite wrong, given that the tax authority’s indicative position, admittedly without prejudice, is c. $40 million. I really cannot see how the liability can go above that figure unless it is handled incredibly badly on his behalf. He then accepted that CR, his sister, would be likely to pay 25% of whatever was the final figure as that had been the division of the assets. This must be right. He was asked about various points made by Mr H but I do not feel he was really in a position to respond to those points. I will have to do the best I can. He said he had invested c. $20 million in DEF Inc from non-matrimonial assets that originated from JR. Miss Stone did ask lots of questions about the pressure allegedly put on her client in relation to signing the DEF Inc Side Deed at the last minute. I do not propose to set out either the questions or the responses at this stage but will make some brief findings later in this judgment. 65.He was then asked questions by Miss Bangay in re-examination. In relation to some of the questions, she did not get the answer she had expected. I am clear that, in one respect, relating to whether he called a board meeting to obtain disclosure from the PE Company about DEF Inc, the Husband was wrong in his response, but I really do not think it matters. Miss Stone had been very critical of him in relation to the disclosure provided to the valuer but the valuer had been able to prepare his valuation, albeit it late in the day. Moreover, it does appear that Mr F was not as cooperative as he should have been, perhaps as a result of the dispute about the Side Deed. Miss Bangay asked about the money the Husband had received before the distributions in 2007. The Husband responded that he had received $150,000 per annum as salary and distributions from the Trust in addition to the salary. He said that this was as and when needed. His sister and he “ran them past” his father before they were paid. I accept that evidence. In that respect, JR did keep control of the family money prior to 2007. JR’s only requirement was that the payments would not harm the business. He accepted that the Wife moved out of the property in West London when he returned and that he did not suppose she would have moved out unless she knew he was moving in. Given that he controlled all the assets in Country X and the boat, I consider it was ungallant of him to move back to the property in West London, particularly as it was in her name. It would have been far better if he had rented somewhere else, given that they were being divorced. It is, of course, clear that he did not want the divorce and does not see the need for it but that does not mean that it is reasonable simply to return to her property. 66.The Wife then gave evidence. She told Miss Stone in her evidence in chief that she was a corporate wife who supported the Husband. She believed in him. She was hardworking and had to juggle her various commitments, running a home and five children and attending functions at his request, including one very shortly after the birth of one of the children. The Husband did do a lot of travel in the early years, namely two to three nights per week. I accept this evidence. I accept that the contributions of each spouse during the marriage were equal but that does not deal with the main issue, namely the undoubted fact that ABC Inc was established decades before the marriage. She was asked about the Pre-Nuptial Agreement. She said she thought it only lasted for three years or until the birth of the first child. Although she is wrong about this, given that this was my reading of the document until Miss Stone got me to consider it carefully, I cannot possibly criticise the Wife for her understanding. I am absolutely clear that there was to be a review after three years, or the birth of the first child. This review never happened as the parties basically just forgot about the document. She was taken to her schedule of expenditure for the ten month period ending at the beginning of October 2020. It was in the sum of £1,363,780. I do consider this to be a very high level of expenditure. She probably justified it on the basis of the costs of running the plane and the yacht but the two are not really comparable. She did explain that she had rented a property in the country during lockdown but that only amounted to around £59,000. She added that she had rented an unfurnished property in Prime Central London so she had to spend £260,843 in furnishing it. Child A’s medical treatment had cost £68,451 and the Wife had been paying school fees. The rental of the property in Prime Central London had been £209,476 during this period. Miss Stone then asked her about the art business. She said that she had always wanted to study art but the Husband had not been supportive. She could not run a studio at her property so she had rented premises. It was on a five year lease but she can sub-let. I was surprised that she had done this before the issue of Child D’s education had been determined but, in the overall scheme of things, the cost is not excessive. She was then asked about her future plans if the court ordered Child D to go to the school in Country X proposed by the Husband. She told me that, if so, she considered that she and Child E would go as well. Her base would be back in Country X as that would be the only way she could parent both of the children. She said, however, that she would still maintain a home in London given that one child is studying here and another is studying in mainland Europe.67.She was then cross-examined by Miss Bangay. She told Miss Bangay that she had made the decision to return to Country X if Child D went there. She said she had been giving it serious thought as to how they could parent two young children so far apart and she had decided it was impossible. She had been fairly certain even when Miss Stone and Mr Brooks had prepared their Case Summary but she was now completely certain. She said she knew in her heart that there was no other option other than to take Child E back as well. She had not issued an application for permission to remove Child E from the jurisdiction. They would need to discuss the right time for Child E to move. There was some suggestion that the Husband might oppose Child E’s removal but, although I am not hearing the Children Act proceedings, I doubt that the Wife would be forced to remain here with Child E against her wishes, particularly if Child D was back in Country X. Miss Bangay is critical of the way in which this evidence has emerged and she is entitled to be critical, although I do accept that, pending the receipt of the independent social worker’s report in January 2022, the Wife might have been confident of success in her application for Child D to attend the school proposed by her. The Wife accepted that she would not need a country property in this country if Child D and Child E are in Country X, which is clearly right. She said, however, that she would want a country property in Country X to be able to offer the same experience as Property J. I will make my findings of fact in due course but I cannot, at present, see that a property akin to Property J would be appropriate in Country X.68.She was asked about the two telephone conversations she is accused of having with the Husband in which it is said she attempted to put unfair pressure on him. The first was in relation to prospective changes to the privacy rules in relation to financial remedy proceedings. She said that she was concerned about changes to the privacy rules as the family are incredibly private and she could not see why they would want articles in the press that would affect them and the children. She denied saying it like the Husband said, saying there was no spite and vengeance, although she accepted she might have been emotional. I am satisfied the conversation was, essentially, as described by the Husband. She was also asked, later in the cross-examination, about the conversation prior to the application about signing the DEF Inc Side Deed. She said that the Husband called her to put pressure on her to sign. I accept that. She said that she got upset and was crying. I accept that. She denied saying she could not care about DEF Inc and that she would only sign if the Husband agreed to Child D remaining in this country but, again, I am satisfied that, in her distress, this is broadly what she did say. She was asked about her move to rented accommodation in Prime Central London and she said that the Husband made it clear that he was not moving out of the property in West London so she didn’t have a choice as it was not possible for them to remain in the same house. I have already indicated that I accept this was a reasonable position to adopt. She was then asked about her offer to purchase a country estate. She said that she liked the look of the property; went to visit it; and recommended its purchase. She accepted that it is set in 89 acres; that there are ten bedrooms in the main house; and that it has four other properties, which she said she would rent out. Miss Bangay was very critical of her for considering this purchase but, in the light of the other properties, particularly Property J, the boat and the plane, I cannot say that a purchase for £7.5 million was really unreasonable at that time. 69.She was then asked about the art business and her taking a five year lease. She justified this on the basis that she is able to sub-let, although in the current climate I would have thought it was by no means certain she would be able to find a tenant. The rent is £45,000 per annum and she has spent £100,000 equipping it. She denied that this was her putting down roots but I have already indicated that I consider it would have been better if she had waited until the decision as to Child D’s education had been taken. She then said that she would not intend to be here indefinitely and that there was no need for her to reside here if her children are not here. I have to say that I felt she responded badly to Miss Bangay’s legitimate questions and she became quite argumentative at times, although she also became understandably distressed at others. Turning to the Pre-Nuptial Agreement, she said that the Husband told her it was solely to please his father and I am sure she is right about that. She acknowledged that JR was the ruling patriarch and “a force”. She accepted that he wanted to protect his wealth and the family wealth. She said she didn’t have an understanding of the trusts. Indeed, she accepted that JR and KR controlled the assets at the time of the Memorandum written by Mr D. She added that she was not aware of the big distribution in 2007 when the Husband received $170 million out of the figure of $340 million. I was slightly surprised by that but have no reason to doubt it. She said that, at the time, there were more and more shops being opened. She is clearly correct about that. Each matrimonial home purchase was bigger but money was never discussed with her. 70.She said it was not her idea to put the proceeds of DEF Inc into the children’s trust. She did not know that the funds to start DEF Inc came from JR as it was not discussed with her. Miss Bangay then turned to the issue of the DEF Inc Side Deed. Not unreasonably, she said that she had to be guided by her legal team. She acknowledged that the loan to Child A in relation to Child A’s property purchase was intended to be written off at an appropriate moment. It follows that it must come off the assets schedule. Turning to the Trust for the children, she said that they had discussed placing a substantial sum of money into the trust openly and she agreed. She accepted that she received £4.4 million on the sale of Flat 1 in 2019. She said that the Husband told her that the receipt of this money would avoid his office having to send money over to her. She added that there had never been any constraint on her spending but I do not find that she had previously spent at the sort of rate she has spent since receipt of this money, although she has obviously previously enjoyed access to all the various properties, boats and planes owned by the parties. She said she had not provided a budget with her voluntary Form E as she had not known what the family had been spending. She was then asked about her schedule of expenditure from November 2019 to October 2020. She said she paid for Child A’s medical treatment. She had spent £47,000 on art, which I do not consider was unreasonable in the context of the wealth of this family. She could not remember how she spent £35,000 in cash but she was paying her cleaner and housekeeper in cash, which will largely explain it. The figure of £127,446 for the children included their school fees. She could not explain household/ groceries of £178,849, although she said that there had been renovations to the property in West London during that period. She spent money on her lawyers in the sum of £53,894 although some of that was medical bills. She defended the spending of £260,843 for furnishing her rented property in Prime Central London, saying she had had no choice. In the context of this case, it is not unreasonable to spend such a sum on furnishing a property, although it was largely wasted money. She was then asked about shopping of £148,623. She thought this was clothes, gifts and anything else not included elsewhere. She was asked about her clothes budget. She thought a reasonable budget was around £10,000 per month. She denied that, overall, this level of spending was, to quote Miss Bangay, “an extraordinary ramp-up” but I am satisfied that it was a considerably higher level of spending than she had been used to before. 71.She was re-examined by Miss Stone and she told me that the budget prepared for her by Pennywise, in the sum of £644,000 per annum did not include American Express spending although Pennywise had everything else. She made the fair point that she had not been able to spend properly on holidays during lockdown. She was asked about the Memorandum by Mr D which said that “IR is the key family member in the ongoing management of the family business” and that JR “is no longer involved in the day to day management of the family business assets” in 2006. All she could say was that the Husband was incredibly busy. She added that he would complain that his father would drop into the JVP stores and “aggravate” the JVP running it. I thought that this had the ring of truth.