Case No. BV20D11362

16.The Wife filed a petition for divorce on 25 June 2020 and made this application shortly thereafter. A decree nisi was pronounced on 25 January 2021. It has not yet been made absolute. 17.The parties exchanged their respective Forms E in October 2020. The Husband’s Form E is dated 16 October 2020. At the time, he was still splitting his time between rented properties in Central London and a provincial city. He deposes to the fact that the parties owned 50% of a Mediterranean villa jointly with the Husband’s brother and his wife. An agreement had been reached to sell the villa for €425,000 which would produce a net equity of approximately €175,000 for the parties. The rest of his disclosure shows only modest assets, amounting to only just over £250,000 plus a pension worth £98,600, other than his interest in the trading company. He said that his shareholding would reduce from 69.76% to 66.387% due to an employee share reward programme. He valued the shares at £46.7 million and said he was of the view that there would be no UK CGT on any sale due to his non-domiciled status. He added that his income had been £807,870 gross, including bonus. This was £438,041 net. He did, however, put his income for the next year at only £210,000 net. In addition, he had dividends of £393,146. He said he had to resign as CEO as he was not able to give the business his full attention due to the divorce and Children Act proceedings. He was pessimistic about the future of the trading company, referring to delays to drug trials as a result of the pandemic. He said the new plant was £4 million over budget but was necessary as the previous manufacturing facilities had been old and inefficient. There had been production failures of batches of the product in 2019, requiring this long overdue plant upgrade. He said the family had a reasonably good standard of living during the marriage, but his present levels of income had only arisen in the last few years. He said he had transformed the company which X Co had intended to close and had renegotiated contracts very favourably. He added that it would be impossible for the parties to go into the future as joint shareholders due to the acrimony of the previous year.18.The Wife’s Form E is dated 19 October 2020. At the time, she was still renting a property in London. Her net assets were only some £71,122. She said the family had enjoyed an excellent standard of living. She added that she had made a full contribution as housewife and mother. She had moved countries to benefit the Husband’s career. Their entire financial futures were invested in the MBO, including by borrowing money against the free equity in their house to finance the purchase of the shares. She said that the Husband planned to sell the business in the next two years. 19.The First Directions Appointment took place before DDJ Nigel Smith on 17 November 2020. The case was to be allocated to a High Court Judge, but with a private FDR. There were two directions for reports by single joint experts. The first was to be a valuation of the trading company, by Steve Taylor of St James Valuation. The second was a report on Danish tax on realisation of the shares. 20.The valuation of Steve Taylor is dated 18 January 2021. It has become contentious, not for what it contains, but for what it does not contain. Mr Taylor valued the Husband’s shareholding in the trading company at £57.8 million as at 31 December 2020, being the pro-rata value of his shares to the whole of the company, which he valued at £87 million. He did say that the business has significant potential. Indeed, if it delivered on its five year business plan, its own internal documents describe a £600 million company in 2025. He took the view that this was a reasonable aspiration, but there were significant risks that would have to be overcome and no buyer would place such a value on it at the time of Mr Taylor’s report. The business had many attractive attributes, such as the security of the relationship with Q Co; a growing customer base; and a high quality product, but it had to finalise the plant overhaul by demonstrating it can produce the product at consistent quality before it can resume manufacture for sale. This objective had been put back by the failure of the first batch, but it was clear that this was due to human error. Mr Taylor considered that there was the potential to borrow £10 million to fund a dividend of £12 million, which would mean that the Husband would receive £8 million but there would be income tax on such a distribution. The company could create liquidity by a partial sale to M Fund but he did not think it wise to approach Q Co. He then opined that the Husband’s interest was worth £33 million in July 2019, which would have been £48 million at the date of the report, if he had left the business at the time of the separation. The Husband intended to draw a salary of £100,000 per annum for one day of work per week. The anti-embarrassment clause had, by then, expired. The purchase was a small transaction for X Co, which had a market capitalisation at the time of c$15 billion. Mr Taylor opined that the transaction was, for the Husband, a bargain purchase. Turnover had increased from £19.3 million in 2016 to £26.7 million in 2019, before it reduced again to £22 million in 2020. Profit had gone from £1.3 million in 2016 to £6.8 million in 2019 and then £4.9 million in 2020. Mr Taylor opined that the business could have made a loss if it was not for the renegotiation of the Q Co contract (£4.4 million) and the super profit from the sales of the discontinued different type of the product (£2.5 million). The company has a blue chip customer base, which was “highly sticky”, which means that it is very difficult for such companies to change suppliers, due to their patents being granted on the basis of the use of the trading company’s product. Q Co accounts for 50% of revenue. The new facilities should increase production three to four fold. He did refer to the risk created by batch failures, with reference to this happening in 2019 with the old plant. The net assets were £24.9 million, of which £7.5 million was in cash but the company might need to invest a further £7 million. It only had three or four competitors. The 2025 figure of £600 million would be a multiple of 20 to profit of £30 million. Other than in relation to the Q Co contract, a high quality CEO could have done what the Husband did, but his presence will assist a sale. Mr Lewis Marks KC, who appears on behalf of the Wife, with Mr Marcus Lazarides, points to the fact that there is no reference in this report whatsoever to the company moving into the sale of the product for specialised therapies. 21.The Husband was clearly not happy with this report. He asked approximately sixteen questions. I accept the point made by Mr Marks that these were designed to drive the valuation down, rather than anything else. Mr Taylor was basically unmoved, accepting that there were risks but saying it was hard to move away from the arms’ length price negotiated between the CEO and the CFO for the CFO’s 4.4% shareholding. He added that he had removed £2.5 million from the valuation due to the failure of the first batch of the product following the plant and machinery upgrade. The new plant initially worked well with successful production of the product over a significant period, commencing in April 2021. Shortly thereafter, the board approached a number of investment banks to advise as to the sale of the business. Their marketing pitches were received in June 2021. The range of indicative values went from £196 million to £393 million, very different to the figure produced by Mr Taylor. 22.Both parties made open proposals around this time. As it has turned out, both are now entirely historical but it is necessary to refer to them briefly. The Wife’s proposal was dated 30 March 2021. She contended that she should receive 50% of the net proceeds of sale of the trading company, when it was eventually sold and, in the interim, the Husband should transfer 50% of his shareholding in the holding company, Y Co, to her. There should be an equal division of the dividends and a shareholders’ agreement. The Husband’s response was dated 14 April 2021. The Wife’s proposal was entirely rejected. He contended that there was sufficient liquidity for a clean break. The letter refers to the company facing significant headwinds, some serious and recent. He said he would transfer £1 million on account to her on 20 April 2021 and would pay her a lump sum overall of £20 million. There would be a further £3 million by the end of July 2021, with the remainder to be paid by 2025. A private FDR was held before Mr Christopher Pocock QC (now KC) on 6 May 2021 but no agreement was reached. The Wife then made a further open proposal on 28 May 2021 to take 45% of the net proceeds of sale of the trading company, with security via the Y Co shares. She is criticised now by Mr Tim Bishop KC, who appears on behalf of the Husband with Mr Richard Sear, for subsequently reneging on this offer and seeking 50%. I make it clear that I reject that criticism entirely. Parties are to be encouraged to make open offers without any fear of being restricted to these offers going forward. If the offer is a good one, it should be accepted. If it is rejected, the party rejecting it can have absolutely no complaint if a higher proposal is made at a final hearing.23.The tax report was dated 29 April 2021. It said that neither party would be treated as tax resident in Denmark until they relocate there. The shares would have been deemed disposed at fair market price when the Husband moved abroad. Although this tax would normally have been deferred, he assumed that it had been paid in this case. It would have been very modest in any event. If so, no tax liability would exist any longer. 24.I first heard the case on 28 May 2021. I allocated the case to myself. I made what I consider to be pretty standard directions, including for statements, one of which was intended to come from the Chairman of the trading company, Mr K. In fact, he has not filed any statement but I do not draw any inferences from that at all. I directed a five day final hearing. Mr Bishop subsequently persuaded me to increase the estimate to seven days. As it turned out, the hearing itself was easily concluded within five days, but I doubt I would have been able to complete my judgment in such a timeframe so I am actually very grateful for the additional time. 25.On 4 June 2021, the Husband paid the Wife DKK 2.3 million, or approximately £270,000 from dividends and said he would continue to discharge the Wife’s costs. She left for Denmark with the children in July 2021. At this point, the trading company began to experience repeated failures of its production batches of the product. Each batch takes approximately six weeks to produce and these failures were clearly serious, although I will have to decide how serious. For a long time, the cause of these batch failures, which were from the new plant and machinery, was unknown. The process to sell the company was, almost inevitably, put on hold. On 28 September 2021, the Husband withdrew his open proposal of 14 April 2021, although I am not completely certain that the two events were linked. [Further details redacted.] H’s health then deteriorated and his medical advisor recommended that he should not engage in the financial court case for the next 4-6 months.26.In consequence, he applied, on 7 December 2021, to adjourn the final hearing, which had been listed for April 2022. His statement in support referred to both his recent health difficulties and the significant developments in relation to the trading company. He said that the company was in a position of significant dire straits with considerable doubts about its future. It was teetering on the brink of collapse. The previous increase in value had been due to his leadership and deep understanding of the company and the industry but it had only been achieved through immense pressure and hard work. It had been made worse by the resignation of the Chief Commercial Officer and the restriction of materials and equipment from the United States Government due to the pandemic. He said that the cost of producing each batch of the product was approximately £1 million, which would generate revenue between £1.5 to £2 million, so each batch failure was very costly. He said that microbes had infected production but they still did not know how or why. There had been five consecutive failed batches and the plant was at a standstill. There would be a serious risk even if the next batch was produced successfully. They would run out of product in February 2022. Costs were running at £1.5 million per month. Saving the company must be his primary focus and only he could solve it. This latter point is seriously in issue, particularly given that he then had a breakdown, but the problem was subsequently solved. 27.At around the same time, the Wife produced a statement dated 22 December 2021 in support of an application for LSPO funding. She said that she had agreed to the adjournment of the final hearing due to the Husband’s health issues and the problems with the batch failures. She said she had to give up her work as a landscape architect to support the Husband’s career, as he was working long hours and was away a great deal. Notwithstanding receiving an interim lump sum in May 2021 of £235,000 and £30,000 relating to the sale of the Mediterranean property, she had run out of money. She asked for a further £170,305 in September 2021, but had received no response. She said she had no doubt about the severity of the business situation. The Husband had warned her that she would have to go to the “municipal”, in other words claim benefits, yet the Husband had spent £1 million on a flat in Denmark that he had bought through Y Co. 28.On 31 December 2021, there was a very distressing incident. [Further details redacted.] On 17 January 2022, I vacated the original final hearing, fixed for 4 April 2022. I did, however, list the Wife’s claim for maintenance pending suit and LSPO funding on 4 April. That aspect was, however, compromised and I made an order on 28 March 2022 by which the Husband would pay the Wife interim maintenance of DKK 700,000, which was approximately £80,000 and her outstanding legal fees in the sum of £46,000 as well as the children’s school fees in Denmark. The application was then adjourned until 7 October 2022.29.In March 2022, there was huge relief as the trading company managed to produce its first batch of non-infected product after approximately eight months of failed batches. External experts had been called in. They had identified two problems.. In any event, there were no further batch failures once these two problems were identified by the external experts and rectified. The Husband was, at that time, acting in person, after his previous solicitors had come off the record in March 2022. His brother wrote to the Wife’s solicitors to say that, as a result of the successful production of non-infected batches of the product, the company’s financial situation had stabilised and the Husband had decided to proceed with the process of selling the company. On 3 July 2022, H’s brother wrote again, saying that any sale, if agreed, would be unlikely to take place before mid-August 2022, after which there would be an approval period of several weeks. 30.The matter returned to court before me on 7 July 2022. The Husband, via his brother, provided a PowerPoint presentation which was headed “Pre-Read material”. It provided time-lines for the sale of the trading company and what was described as a “mechanism for securing the Wife’s control of a share of the proceeds”. It disclosed that, in July 2021, the investment banks had provided indicative values of the trading company of around £250 million, which had reduced to nil due to the infections but, following the remedying of those failures, initial indications from prospective bidders, received on 1 July 2022, were that the company was worth from £290 million to £350 million. This had led to several prioritised buyers. Negotiations were taking place. The hope was to sign contracts by the late summer 2022, whilst the earliest that the proceeds of sale would be received was the autumn of 2022. There would have to be mandatory UK regulatory approval for the sale. The Husband would receive around 65% of the sale proceeds, then thought to be approximately £200 million but, it was said, he would likely need to continue to work in the company for two to two and a half years.31.I heard the further directions appointment on 7 July 2022. The Husband appeared by video link, assisted by his brother. I reminded the parties of their obligation to keep these proceedings confidential. I made various directions for further disclosure, including an updated Form E from the Husband and a schedule of dividends he had received since April 2021 and a narrative explanation as to how they had been utilised. 32.It appears that P Co (“the purchaser”), a large international company, then decided to make an offer to acquire the trading company on the basis of an exclusivity agreement, which would exclude the other bidders from making any further offers. The Husband rejected that proposal but, on 4 August 2022, the purchaser increased its offer and the Husband accepted. Some may find it remarkable that a company can be in meltdown in March 2022, with repeated batch failures apparently threatening its very existence, but be sold for such an enormous sum only some months later. There is, however, no doubt that this is what did occur. 33.The Wife provided some updating disclosure on 16 August 2022, in which she denied that she had inherited any money from her grandmother who died thirteen years ago. Even if she had, it would have been non-matrimonial property, but I am satisfied that she did not. At the end of August 2022, the Husband agreed to provide interim provision of £500,000 to the Wife. He filed his updated Form E on 1 September 2022. He confirmed that he had suffered a nervous breakdown due to issues concerning his relationship with the children and the problems in the business. Thankfully, he made a swift recovery. He was purchasing a property in Spain. Other than his shareholding in the trading company, he deposed to assets of £1,407,501 and liabilities of £102,394. He estimated the value of his shares to be £273,387,000 net, after professional fees associated with the sale, the employee share scheme and the like. He confirmed that Y Co had purchased the apartment in Denmark where he now lives for £1.27 million, subject to a significant mortgage, and he was acquiring a boat. His dividends last year had been £1,840,691 together with a salary of £191,342. He said that it was “new strategies” since the separation in 2019 that had led to the company valuation rising so much from the SJE valuation in early 2021 to the sale in August 2022. These were decisions he had taken, which had involved a huge level of work, commitment and leadership. He did not particularise these decisions in any way at that point. I will have to make findings about this in due course.34.The sale was completed formally in late 2022. The purchaser Press Release said that the trading company was a leader in the field of the product. Y Co received almost £275 million. A further sum of £2.1 million was retained in another of the Husband’s companies, G Co, to deal with potential future obligations or, if there were none, to be distributed. As I understand it, this was not the purchaser’s requirement and there is no possibility of reclaim of any of the proceeds by the purchaser. The Husband was not required to continue to work in the business, although I note that the CEO, Mr S, and the Chief Technology Officer (“CTO”), Mr M, do continue to do so. The matter came back before me on 7 October 2022. Fortunately, the Husband was now represented by his current solicitors and counsel. He undertook to preserve not less than £125 million in a form which is readily realisable and without risk. There were various directions for disclosure, such as that he produce a full copy of the share purchase agreement with the purchaser; the tax advice that had been provided to him; a full copy of the completion statement and the like. In addition, he was to provide a letter from Grant Thornton to confirm that there would be no UK tax on the sale proceeds. I directed section 25 statements and supporting statements from witnesses.