Case No. FD11D02580

1.The applicant has applied in these proceedings to set aside a consent order made in financial remedy proceedings. In response to that application, the respondent has applied to strike out his application as an abuse of the court’s process. This is my judgment in the latest round of long-running litigation which has absorbed an inordinate amount of court time since April 2012. More than ten years ago, a district judge sitting in the Central Family Court approved a consent order at the conclusion of financial proceedings between two former spouses following the final dissolution of their marriage in 2012.2.Three years later, after a fully contested hearing before me in June/July 2015, that order was set aside on the basis of a failure on the part of the respondent to inform the applicant of an imminent commercial investment in her start-up technology company. My judgment is reported as AB v CD [2016] EWHC 10 (Fam). A full retrial of their financial claims against each other had been listed for early November 2016. Extensive disclosure had been prepared to support the litany of complaints which each was then making against the other in terms of non-disclosure. With a lengthy rehearing in prospect, the parties arrived at court with their legal advisers. Agreement was reached as to the way forward and a comprehensive settlement was brokered which enabled each to achieve the clean break which had been envisaged by the original 2012 consent order. I approved that consent order which was sealed on 9 November 2016.3.Five years later, in December 2021, the applicant issued a second set aside application in relation to the order made on 9 November 2016. That application prompted a cross-application from the respondent’s legal team in February 2022 to strike-out, or summarily dismiss, his application. 4.At a directions hearing on 29 March this year, by which time the respondent had filed a narrative statement and the applicant had filed Particulars of Claim, I directed that the strike-out application should be dealt with as a preliminary issue before either party was permitted to embark on a further round of costly litigation. I allowed the applicant to file further evidence limited to his allegations of non-disclosure and the specific grounds on which he sought to resist the strike-out application. Full skeleton arguments have now been exchanged. There has been no renewal by the applicant of his application for permission to cross-examine the respondent at this hearing on the contents of her statement. The matter has been dealt with over the course of three days by way of oral argument only.5.Such has been the level of corrosive antipathy between these parties that I was asked to make participation directions at the start of this hearing in terms which prevented either from communicating or otherwise coming into any contact with the other during the hearing or whilst entering or leaving the court building. The respondent maintains that this hearing and the application which drives it is but one more iteration of her former husband’s ongoing campaign to ruin her commercial reputation. She maintains that this litigation has in itself become a form of abuse. The applicant maintains that both he and the court have been egregiously misled by an elaborate construct devised and implemented by the respondent to conceal her beneficial ownership of valuable shares held within an offshore corporate structure. (i)The background: the first round – 2012 litigation6.Each of these parties is independently wealthy. Each has, over the years, enjoyed a successful career which has generated much of the wealth which now enables them to instruct the legal teams now aligned to fight their respective corners.7.It is litigation which has to be seen in the context of its genesis. It will be convenient in this judgment to refer to the parties as ‘H’ and ‘W’ since each has been both applicant and respondent. This was a second marriage for W and a third for H. It was celebrated in 2008 after a few months of cohabitation. By June 2009 the parties were no longer living in the same household. On H’s case, the marriage lasted for less than a year. On W’s case, all attempts to repair the marriage ended in July 2010. Thus, even on her case, they were married for less than two years. There were no children born during the marriage. We are now some 12 years further down the road and the parties continue to be locked into a dispute which, in its essence, has not changed in terms of the fundamental nature of the issues between the parties.8.At the time of the original financial compromise in April 2012, the assets held by the parties amounted to c. £6 million. Less than £1 million of that sum was held in W’s name. H owned the substantial former matrimonial home in South Kensington. W had retained her former flat in central London and there was a third country property in Oxfordshire in their joint names, subject to a substantial mortgage.9.H has generated his independent wealth as a successful venture capitalist. W had an established track record as an entrepreneur prior to their marriage in 2008. Four years earlier and before she met her former husband, she had incorporated B Ltd, a company involved in the development of tracking and surveillance technology hardware. She had provided the start-up capital from her own resources. H was one of the external investors who put money into the company in about 2005. By the time they embarked on their relationship, he had acquired 19,738 shares (about 4.6% of the issued share capital).10.The value of the parties’ respective shareholdings in B Ltd was one of the central issues in the final hearing which was to take place in 2012. The parties and their legal representatives attended court for the purposes of a first appointment in February 2012. Negotiations between them on that occasion led to an overall settlement of their respective claims. It was that settlement which was reflected in the consent order approved by the district judge in April 2012. In my set aside judgment four years later in 2016, I said this at para 30:-“The parties’ common expectation as they approached the hearing on 6 February 2012 was that any disputes in relation to valuation or the ambit of disclosure would be resolved by the judge on that occasion. However, matters never reached that point because on the day the parties decided to negotiate with a view to achieving an overall settlement. Each decided to take a view and compromise so as to avoid months of future costly litigation. On W’s case, as I accept, one of her essential objectives was to put into effect a complete clean break between herself and H so that neither would need to have any future involvement in the other’s life or business interests. In this context, securing the return of H’s shares in B Ltd was an essential prerequisite for W and one for which she was prepared to sacrifice the opportunity of further exploring the disclosure which he had made in his Form E. She was also prepared to abandon any claim to share in what she contended was a potentially significant marital acquest.”11.H agreed as part of the consent order to relinquish his shares in B Ltd. The deal which was embodied in the 2012 consent order included what was referred to as an “anti-embarrassment clause”. This was intended to protect his position in the event that she subsequently sold the shares in B Ltd for a significant uplift over and above any assumed value as at the time the deal was struck. His entitlement to share in any uplift was to extend to the end of 2013 at which point it would fall away. In this way there was an in-built mechanism for ensuring that, in the event she should sell her shares in B Ltd, he was not deprived of the opportunity to benefit in future value should there be a material increase. That entitlement was to remain for a period of slightly less than two further accounting years from the date of the consent order.12.As a result of the 2012 consent order, W was to receive a lump sum of £350,000 together with H’s 50% interest in the country property in Oxfordshire in which there was then very little equity. He undertook to pay the mortgage on that property for a period of 12 months and thereafter he was to receive an indemnity in respect of any further liability. She agreed to forgo any further claims against his assets including the former matrimonial home in South Kensington, the equity in which she claimed reflected a significant marital acquest given her contribution to a substantial programme of renovations.13.Within a matter of weeks after that order was sealed, H read a report in the financial pages of a national newspaper that a well-known hedge fund investor had taken a significant stake in B Ltd. The issue was immediately raised with W’s matrimonial solicitors. It absorbed months of correspondence between the lawyers. On her case the new investment (some £3.5 million) had simply replaced existing working capital which was used to repay existing borrowing and provide the company with sufficient cashflow to survive the next financial year. 14.That explanation was not accepted and H issued his first set aside application. It generated a very significant amount of disclosure. A final hearing was listed in March 2014. W issued her own application 13 days prior to enforce the payment of the tranche of her original lump sum which remained outstanding. Mrs Justice King (as she then was) was due to determine these applications over the course of five days in 2014. Leading and junior counsel were assembled on both sides of the case. By the time the parties appeared in court on the second day of the hearing, negotiations to settle the case were underway. By the time it became clear that those negotiations were not going to result in settlement, there was insufficient time to conclude the case. The matter was listed before me with a revised time estimate of ten days for the cross-applications.(ii) The second round: the 2015 litigation15.Those were the cross-applications which I heard in June and July 2015. By this time, W was acting in person having insufficient resources to continue meeting the costs of her lawyers. H was represented by counsel, Mr Nicholas Yates. The global costs by this stage were approaching £1 million. I heard extensive evidence from the parties and from various third party witnesses, including board members, who were called to assist the court in relation to the potential value of the shares in B Ltd and the potential effect, if any, of the Odey investment in the company. By the time the hearing had concluded, it was known that the Supreme Court would shortly be considering the conjoined appeals of Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61. Because those cases concerned the impact of non-disclosure on settlements reached in matrimonial proceedings, it was agreed that my judgment would be delayed so as to encompass any development in the law insofar as that development impacted upon the facts of this case.16.My findings at the conclusion of that hearing are set out in paras 178 to 191 of my judgment in AB v CD (cited above). In terms, whilst I found that it was incumbent on W to disclose the existence of the significant external injection of cash which had been made into B Ltd prior to allowing H to commit to the financial settlement, I absolved her of any deliberate, or fraudulent, attempt to mislead him or the court. I found that this information was, or would have been, material to his decision in relation to whether or not to settle on the terms which were then on the table. 17.At paragraph 190, I said this:“… Disclosure was, in my view, essential in order to enable the court to assess what each party’s financial position was likely to be not only in the immediate aftermath of the making of any order but in terms of the court’s review of the foreseeable future. Odey had, by the admission of its chairman, acquired an equity stake in B Ltd in return for its £3.5 million of funding. It had undertaken due diligence as part of its decision to invest and that due diligence had persuaded Odey to invest at a price of slightly more than £33 per share. H’s evidence was that that sort of bench-mark valuation would be highly persuasive in terms of share value to an experienced equity investor. Given his many years of professional standing in this field, it seems to me that I can properly attach significant weight to that evidence. I accept that Odey was a “major player” in its field and it is highly unlikely that, having completed the process of due diligence, the company would have been persuaded to invest at an artificially inflated price at the request of a struggling young technology company which had yet to make a profit. That information was plainly relevant to outcome and is thus material in the context of the present set aside application.”18.Having found that the potential undervalue of both parties’ shares in B Ltd was a fundamental obstacle to the integrity of the 2012 consent order, it was set aside.19.Thus it was that the matter came back in November 2016 for what was intended to be a five day rehearing of the parties’ outstanding financial remedy claims. By this stage it was W’s case that she had sold her remaining shares in B Ltd to an investment company called MP. That transaction had taken place in June 2016 and it involved the transfer of all 162,000 B Ltd shares which she then held, including her original Founder’s shares. She maintained that she had taken that step in order to raise funds to meet pressing debts including her outstanding liabilities in respect of the legal costs of the first set aside application. Thus, by the time of the November 2016 rehearing, the only remaining shares in B Ltd which apparently concerned the court were the 19,738 shares formerly owned by H and subsequently transferred to W pursuant to the order made in 2012. She had acknowledged that she then held those shares as bare trustee for him and had undertaken not to deal with them pending the rehearing in November 2016.(iii) The November 2016 rehearing20.Mr Glaser appeared again on that occasion with Ms Robinson for W on a direct access basis. Mr Yates appeared for H, together with Mr Richmond, specialist company law counsel instructed in relation to the rectification of B Ltd’s share register. By that stage the company had made an offer to buy back the remaining shares at a fair value which was to be agreed. H had resisted that course in the run-up to the rehearing. W’s case as the hearing commenced was that, if this remained his position, she would want the shares transferred to her because B Ltd did not want to retain any connection, or involvement, with her former husband. There was, at that stage, no formal valuation of the B Ltd shares1 because her stance up to the pre-trial review had been that she had severed her connections with B Ltd and it was a matter of no concern to her how those shares were dealt with by the court. The issue was essentially one between H and the company.21.In her section 25 statement prepared for the purposes of the November 2016 rehearing, W said this of her case in relation to the shares in B Ltd:-“92.If, at the conclusion of this case, [H] is not allowed to retain the shares in [B Ltd] and they are transferred to me, or sold at fair value to others, then I would find it much easier to assist [B Ltd] through its transitional phase, which would at the very least enable me to speak with investors and try to limit the impact of my departure. This may mean once the dust has settled, I can continue working there and making a living. However, if [H] retains an interest, I cannot continue there.”22.Of the transfer of her own shareholding in B Ltd to MP and the suggestion which was even then being made by H that this was not a genuine transaction, W said this:-“95.This company [i.e. MP] has been a customer of [B Ltd] for some time. It is a large American company, which provides alarm monitoring services. They work closely with [B Ltd] in Malaysia delivering a monitoring service to the Royal Malaysia Police and aim to develop across the region. I was instrumental in winning and setting up that contract for [B Ltd]. Its parent company is one of the largest private companies with 12,000 employees. The idea that this company is some sort of ‘stooge’, or that they would aid me in a transaction at an undervalue, for the purposes of deceiving my ex-husband is extraordinary. Again, this is an allegation that continues to be aerated without any evidence in support.”23.Of any value to be attributed to the remaining shares in B Ltd originally transferred by the 2012 consent order, W invited the court to attribute to each share a value of £7.34 (valuing H’s remaining shares at £146,061) being the value of the last traded shares in the company.24.The written skeleton argument prepared by Mr Yates for the November 2016 hearing reflected an explicit acknowledgement by H that there had been significant fluctuations in the B Ltd share price over the years since the original 2012 consent order. The evidence available to this court (which reflects information available from Companies House) is that, between 2004 and 2011, the share price fluctuated between £1.00 per share and £34.23 per share. I acknowledged the potential extremes of these price fluctuations in my original 2016 set aside judgment. At paragraph 99 I said this:“H was asked by Mr Yates whether he considered that his assumed value of £33 or £34 per share (predicated on the basis of the Odey investment) was an accurate reflection of the underlying value in B Ltd at that point in time. H accepted that he could not confirm definitively that the investment translated into a hard value at par for the shares since “young technology companies were often a law unto themselves”. However, he pointed to the subsequent prices at which external investors had been prepared to invest in B Ltd following the injection of Odey funds in October 2011. In 2013, an external investor came in at £45 per share. Most recently, shares had been offered at £122 per share.”25.Had agreement not been reached in November 2016, Mr Yates’ position on behalf of H was that the court should start from a reliable base line share valuation of £7.34 (giving W’s shares a value of c.£1.2 million) increasing to a potential ceiling of £34.23 per share. That figure was informed by the price at which Odey had purchased its equity stake at £3.5 million.26.I have been provided with a full transcript of the November 2016 hearing. I was told by Mr Glaser on the first day of the hearing that H had threatened his client with further litigation (“perjury or private prosecutions” were mentioned “because he does not wish to let this drop”2). I was told that he had renewed his enquiries through various third parties about his former wife’s ongoing involvement with a raft of corporate entities, including B Ltd. Shareholders had been approached.27.Mr Yates had not been forewarned that W had secured legal representation for the purposes of the hearing in November 2016. The presence of Mr Glaser had apparently not been advertised until the night before the hearing. It rapidly became apparent, as is reflected in the transcript of the hearing3, that each of these parties was in fact seeking to relitigate all the issues, allegations and counter-allegations which had been engaged in 2012 when they agreed the initial compromise of their claims. I asked counsel to reflect over the lunch adjournment on whether this was indeed the exercise upon which we were embarking and whether, as it appeared, there was a renewed challenge to my original finding in 2015 that there was no evidential foundation to link W with Zinc Ltd4. Mr Glaser told me that this suggestion and the potential reopening of this issue had come as a complete surprise to his client5. There was before the court at that juncture a supplemental bundle which contained a number of documents formerly before the court by way of exhibit to Forms E and/or written statements. These were said to support the case previously run by H in relation to his former wife’s connection with Zinc. None of this was new.28.At 2.00pm when the hearing resumed on 7 November 2016 I was told by Mr Glaser that discussions outside court had led to the resolution of the entire case. Mr Yates confirmed that the parties had reached a “full agreement” on a clean break basis. He told me that both parties had been motivated by a desire to achieve an overall compromise in circumstances where it was becoming apparent that the case “could not continue this week”6. As he put it, before outlining the terms:“We have moved on. We have an agreement…. So we really, really can wrap this all up, everything is signed, everything is agreed, so there is no chasing of either party hereafter.”29.The deal which was struck on that occasion was that W would pay her former husband a lump sum of £450,000 within twelve months. Until payment, that sum was to be secured against the property she owned in central London. That sum was to be in full and final satisfaction of all and any claims which either had against the other including any outstanding liability on W’s part to pay 50% of the applicant’s costs pursuant to a costs order which I made following the first set aside application.30.I adjourned the matter overnight to allow time for detailed drafting of the proposed consent order. On 9 November 2016 I was asked to determine the remaining drafting points. One of the points in issue was H’s wish to include within the body of the order a recital in relation to the value of the shares in B Ltd which W was to retain as part of the settlement. Mr Glaser was objecting to the inclusion of such a recital because, in the context of a case involving allegations and cross-allegations about non-disclosure, it was wrong to focus on one asset on a unilateral basis when the essence of the deal had been an agreement to bypass all these issues. If reference to an assumption in relation to share value was to be included, he submitted that there would need to be similar recitals in relation to the value of H’s assets and none was being offered. This is what I said in response to that submission:-“What we do not want to happen is [for] this agreement to be translated into a final order which I have approved and for there to be any suggestion [of re-opening these issues7] in three/four weeks, two/three months’ time [when] [H] opens his Financial Times one Saturday morning and sees that [B Ltd] has been sold for some astronomical sum to somebody else or that [Crispin Odey] has decided to increase his interest in the company, whatever it may be.”31.I made it quite clear to the parties that, if I were to approve the order, they must understand that any future increase in the latent potential value in the shares which H, in particular, believed to exist would be achieved as a result of future effort and input on the part of his former wife. I said:-“That has been the central issue in this case and it has cost everybody a lot of money and I can understand why Mr Yates, on behalf of his client, might want something in there [i.e. the draft order] but equally I can see your client does not want to be set up for another hostile litigation assault, as she will see it, if there is some information in the press about these [B Ltd] shares in future.”832.There was significant jockeying for position in terms of what, if any, recitals should appear in the draft order. On behalf of his client, Mr Glaser made these representations on instruction to the court:-(i)W’s role in B Ltd was ongoing insofar as she was continuing to seek external funding for the company and to secure contracts for the company;(ii)her position in relation to the company had changed since she explained in a previous written statement that she saw no option but to sever her ties with B Ltd. In circumstances where it was now accepted that her former husband would no longer hold shares in the company, she wished to continue to support the company and sustain an income from it;(iii)she knew of nothing which had not already been disclosed in these proceedings which might have a material impact on the current assumptions in relation to the B Ltd share value; and(iv) whilst the focus of the debate at this hearing had been on the destination and value of the shares in B Ltd, his client had a much wider case to run in the context of the present set aside application. In agreeing to the compromise which was now to be reflected in a final court order, she was agreeing to a “drop hands” agreement which would require her to abandon her claims to an entitlement in a share of the marital acquest and an enquiry into the extent of what she alleged to be her former husband’s non-disclosure in these proceedings.33.In the context of (iii) above, Mr Glaser told me that there had been a further recent round of fundraising on behalf of B Ltd in the context of which shares were offered at £1.17 per share. Less than 60% of the existing individual/investor shareholders had taken up the option to increase their stake in the company. That offer and the analysis in the KPMG report secured by his client suggested that the value of the shares she was to receive from her former husband as a result of the current settlement was no more than about £23,000.34.For his part, Mr Yates on behalf of H told me that the current deal was being struck on the basis that his client was accepting that W had disposed of her shares in B Ltd to an arm’s length purchaser at £1.17 per share and that she had no interest in Zinc. (“If the wool is being pulled over my client’s eyes for the second time, he will apply to set aside the order again”.9)35.After further argument as to the form of the recital which was to appear in the consent order, I said this:“If [the respondent] … is to remain linked to the future of [B Ltd], because it is her creation at the end of the day, I acknowledge and expect that she is going to do everything she possibly can to inject real and substantial value into that company. I acknowledge and expect that there will be some sort of business plan which envisages an exit route at some point whether or not she [reacquires] additional shares to those she is getting back. There may well come a time, and I hope very much that there will come a time, when all the effort she has put into this company pays off and she is able to realise a substantial [return] for her shares in the future. She is an entrepreneur, that is what she does, but, having recorded her belief that that was the best price she could achieve at the time [when she sold her shares in B Ltd], we are drawing a line. It matters not what happens to the value of those shares in the coming months and years because that will be down to her hard work and it is the role she will be expected to deploy in the company. So I do not anticipate further litigation in relation to this financial agreement and I hope and expect that both of these parties’ financial fortunes are going to prosper.”(iv)The order made on 9 November 2016 (“the 2016 consent order”)36.Included in the recitals to the order which I approved on 9 November 2016 were the following:-“7.