S v S (FINANCIAL PROVISION: DEPARTING FROM EQUALITY) [2001] 2 FLR 246

[2001] 2 FLR 246

Family Division

Peter Collier QC
(sitting as a Deputy Judge of the High Court)

2 February 2001

Financial provision - Factors to be considered - Departure from equality

The parties were married in 1967 when the wife was 25 and the husband 27. There were two children, a son aged 37 who was financially independent, and a daughter, aged 27, who lived with her mother and was supported by her financially to some extent. The wife worked outside the home until her son was born and thereafter ran the house and worked in the husband's business. The marriage broke down in 1998 when the husband left the matrimonial home and disclosed that he had been having an affair with another woman since 1992, and that she had a child by him. At the hearing of the wife's application for ancillary relief the judge found that the husband's share of the total assets of the parties amounted to £2,102,890, consisting of his interests in various businesses, his pension fund, some properties, his half-interest in the matrimonial home and investments, a yacht, and a number of vintage cars. The wife had her half-share in the house, her car, and a portfolio of investments, all amounting to £629,166. It was argued on the wife's behalf that this was a case in which to follow the principles set out in White v White, so as to achieve a clean break and an equal division of the assets, by the transfer by the husband to the wife of his share of the matrimonial home and of the joint investments, together with a lump sum of £400,000. Counsel for the husband contended that in the circumstances that approach would not be fair having regard to the criteria in s 25 of the Matrimonial Causes Act 1973.

Held - the assets of the parties had been valued on a net value basis, ie taking account of sale costs and tax liabilities, and did not fall to be reduced in the husband's case because some of the capital was not readily available or was not producing an income. However, having regard to all the matters in s 25, the award of £400,000 to the wife, required to achieve equality, would discriminate against the husband. On the facts, such an award would mean that the wife lived in luxury, while for the husband with a new family to support, things would be much tighter. If an agreement was harder on one party than the other, then there was good reason to depart from equality. The court should aim to provide both parties with a comfortable house and sufficient money to discharge their needs and obligations. On that basis there would be an order for the husband to transfer to the wife his half-share of the matrimonial home and of the joint investments, and to pay to her a lump sum of £300,000.

Statutory provision considered

Matrimonial Causes Act 1973, s 25

Cases referred to in judgment

Leadbeater v Leadbeater [1985] FLR 789, FD

Piglowska v Piglowski [1999] 2 FLR 763, [1999] 1 WLR 1360, [1999] 3 All ER 632, CA and HL

White v White [2000] 2 FLR 981, [2000] 3 WLR 1571, [2001] 1 All ER 43, HL

Martin Pointer QC for the petitioner
Rodger Hayward-Smith QC and Andrew Marsden for the respondent

PETER COLLIER QC: This is an application for ancillary relief by Mrs S, following the breakdown of her marriage to her husband Mr S.

The marriage

The petitioner (who I will hereafter refer to as 'the wife') is Mrs S. She is 58 years of age, having been born on 14 June 1942. The respondent, her husband, is Mr S. He is now 60 years of age, having been born on 30 April 1940. They were married on 20 September 1967, when she was 25 and he was 27.

The children

S, born on 27 July 1969, he is now 31. He lives in America and is, of course, financially independent. He has not featured in the evidence, unlike his sister M, who is now 27, having been born on 15 July 1973. She has completed her tertiary education; in fact she has two MA degrees, but at the present time has no permanent employment. Her father thinks she should be more independent than does her mother, who continues to support her, having provided a car for her, by way of paying the hire-purchase instalments on the car, which is said to be a loan to her. She has also assisted her, towards the end of last year, in her attempts to set up a small retail business, by buying goods for her; again that is a loan of some £5000 which has been shown in the schedules.

The husband helped M to buy a property in Colchester some while ago now. She currently rents that out, receiving about £500 per month, the mortgage costing her some £340 a month; and at the present time she chooses to live with her mother.

There was a Trust Fund set up for the children in 1976, for tax and inheritance reasons. Since December 1998, M has received a total of £31,556 from the Trust Funds.

Employment

At the time of the marriage the husband was working with his brother, H, in a business that they owned and ran, known as '[SCL]', making car alarms and battery chargers. The business had been started by them in 1960.

When they married, the wife was working as a PA/secretary to the Managing Director of MGN. In 1969, when S was expected, she gave up work and, thereafter, she has not worked outside the family or the family businesses. It is accepted that she worked in the home, bringing up the children and running the home. When S was about 2, she began to work for the husband's company. She was an employee, she was on the books; she did secretarial and what I described as 'general duties', but they covered quite a lot of matters, including hosting people who came to visit.

He says that she has exaggerated her role in the business, and she says that he has minimised it. I find it is not necessary to define it with precision, suffice to say that in my judgment she made a significant contribution to the business.

Homes

The first matrimonial home was in Tomswood Road, Chigwell; it was bought for £12,000, with the assistance of a gift of £3000 from the wife's father, A. The husband says that he does not recall exactly how much, but he believes they also had some help from his family. Again, greater precision will not affect the fact that these two people began to share their lives, with support from their families, it was a real partnership, each bringing what they could to the partnership, supported by both their families and they intended to work hard to make their family and business something of which they could both be proud.

In 1976 or 1977, Tomswood Road was sold for £43,000 and they purchased Hunters, Chigwell, for £58,750 with the aid of a mortgage of £25,000. The mortgage was paid off out of the proceeds of the subsequent sale of the business. The wife remains there to this day, and it is accepted that she should stay there. I am told that the house is not, itself, attractive, being a chalet-bungalow that has been extended, and at the time these proceedings commenced it was in need of substantial redecoration. Over the years that she has lived there, the wife has put time and money into the development of the garden, which is clearly her pride and joy. She envisages that in due course, if necessary, she could put in a ramp and push her zimmer-frame up and down between house and garden.

In October 1991, the husband and his brother H sold SCL to RG, and some of the proceeds have been used to purchase investment portfolios: there is a joint portfolio; there are separate ones for each of the husband and wife; there is one creating a settlement trust for the children; there is also a pension fund, which now provides an income for the husband.

Some time before 1992, the husband formed a relationship with a Miss D who bore his daughter, B, in that year. The existence of both that relationship and that child were kept secret from the wife until April of 1998. I simply record that the husband had had a brief relationship with another woman in the mid 1980s, he had left the matrimonial home for a short time but had returned.

Businesses

In addition to SCL, there are other businesses in which the husband has been and, in some instances, remains involved. PPEL, was set up by the parties to receive commission on the sale of battery chargers for RG after the sale of SCL to RG. PPEL commenced business in 1993. The company has had an income of as high as £19,000, but in recent years it has deteriorated to £2000-£3000 a year. I have been told that the company was used as a vehicle to buy equipment for and fund travel by the wife; the husband says that he anticipates no future profits from this company.

SL and TFL were also companies run by the husband and his brother. I shall say more of those later when I come to deal with valuations. AVIL - I need say little about that: it was a business in which the parties invested money and which failed. Some moneys had been repaid to the husband, and I understand there will be no further income from that source.

Properties

There are other properties that have come within the family at different times. Lower Clapton Road, these are commercial premises which are let.

They are premises left to the husband by his mother, and comprise a shop, a flat and an advertising hoarding. They currently produce an income: the shop and flat, some £11,000 plus; the hoarding, £7500.

There is an issue regarding the hoarding. At an earlier stage in the proceedings it was stated, in relation to its value, that 'the income from the advertising panel, which in our view is high, is relatively insecure'. Since then, it has been disclosed that the local council, Hackney, had written to the husband on 18 November 1997 stating that in their view there was neither 'deemed nor 'express' consent for this board which is in a conservation area. Since then, the advertiser, Postmobile, has written to the council stating that the board has been in its present situation for so long that it must have deemed consent. That letter has been acknowledged and there has been no further action on the part of the local authority. The husband told me that he thought the board had been there for over 45 years. On that evidence, I am not able to discount the rent received in relation to these premises.

There are factory premises in Springfield, Chelmsford. These premises were purchased through a Business Expansion Scheme and are rented out, producing an income in the region of some £10,000 a year.

Aveley Way, Malden, is the husband's present home where he lives with Miss D, B and another daughter of Miss D's by a former relationship.

For completeness, I should perhaps add that prior to the husband's purchase of that property, into which he moved with his new family, Miss D had been living in a council house which she has now purchased with the aid of a loan of £33,331 from the husband. That property she now lets out at £5400 pa, and I am told that the property is now worth some £55,000.

Cars

The parties have an interest in classic cars. The husband rebuilt several of these and they would spend a significant amount of time touring and rallying in these cars. The family's present collection of cars include several classic cars, an E-Type Jaguar, a Jowett Jupiter and a Jowett Javelin. They are all with the husband, who has built a garage at his new home to house them. He also owns an Audi Quatro and a Peugeot 205. The agreed value of all those cars is £41,200. For everyday use the husband has an imported Toyota Estate car worth some £1500; the wife has a Volkswagen Golf, bought with the help of a loan from her sister of £17,000 in November 1998. The Golf is now said to be worth £10,000.

The boat

There is a boat, an Oyster 435, known as 'Star Charger 4', which is currently moored in Antibes in the South of France. There is no agreed valuation, but I am asked to come to a view about its value based on a variety of material that has been put before me and to which I shall turn in due course.

Bank accounts

There are on both sides various bank accounts.

Breakdown of the marriage

The breakdown of the marriage happened in April 1998. The husband does not dispute the wife's account that he left the matrimonial home on 27 April 1998, having disclosed his affair 2 days earlier on 25 April 1998.

Present circumstances

The wife continues to live in the former matrimonial home, she has her own investment income and the £350 per month ordered by way of interim periodical payments.

The husband lives with Miss D, who is 41 years old, B, who is now aged 8, and Miss D's other child, E, who is aged 15, at Aveley Way, Malden. It has been described to me as a typical small modern estate house on the outskirts of the town. The husband says he bought it only intending to stay there until he knows the outcome of these proceedings, when he hopes to buy something more suitable where he can keep his cars and spend his remaining years. He is retired but clearly he remains an active man.

Valuation of the assets

These are mostly agreed, but the outstanding issues remain in relation to the husband's interest in the companies SL and TFL, and the value of Star Charger 4, the boat.

I deal first with SL and TFL. SL manufactures tubular furniture, and TFL does the same, and there is a trading relationship between the two companies. TFL owes SL in excess of £300,000, and TFL has a deficiency of some £63,000. I am told it is to SL's advantage to continue the present situation as it is able to use up tax losses, but to run the two companies involves the doubling of some of the costs. The management of both companies is the same; as I understand it, they have the same directors and similar shareholders. Mr P is the only non-family member who is a director, otherwise, the husband, plus his sister-in-law, PS, and her father, DL, are the directors.

I am asked to resolve the dispute as to the valuation of the husband's interest in these two companies. In order to assist me, I heard from two accountants, ME, called on behalf of the wife, and PM on behalf of the husband.

In relation to SL, they agree that the basis of the valuation should be the company's net asset value. There is a small difference between them as to whether one should discount SL's net assets by the amount of TFL's deficiency, which is £63,539, since TFL still owes SL £306,563. The net asset value of the shares at face value, on ME's valuation, is £92,582, and PM's valuation produces £102,478.

They also differ in the degree to which the appropriate figure should be discounted. I am told that the scale accepted by the Inland Revenue is between 40 and 50%. PM says the proper discount is 40%, ME says it is 50%. Which is chosen is dependent upon the extent of the control that the husband has over the company. The Articles of Association provide that the sale should be, in the first instance, to its present shareholders who are all in some way connected with the family, and, of course, Mr P. If they decide not to buy, then the company can purchase the shares if it has sufficient reserves. Finally, if neither of those routes produce a sale, then a third party sale can take place.

What is the extent of the control that the husband has? It is argued that he does not involve himself in the day-to-day management of the business; that the other directors, as I have said, are Mr P who manages the company, DL and his daughter, PS, who is the widow of H, the husband's brother.

ME is the company auditor and occasionally attends board meetings. He did not disagree when I said to him that I thought it would be suggested that the husband was a strong character. He told me that the husband does attend board meetings where he expresses his views and that he is respected by the other directors. I am satisfied that in key decisions of the sort we are contemplating, the husband would have substantial influence; and so, given the agreed scale of 40-50%, I have assessed the discount at 40% in relation to SL. Also given the relationship of the companies, I do not propose to make a reduction in value because of TFL's deficiency. Consequently, I determine the value of the husband's interest in SL at £62,000.

That leaves TFL. Unlike SL, where ME and PM agree about the basis of the valuation, that is not the position with TFL. There are no assets, so I cannot value the company on a net asset basis. The company has paid no dividends, so I cannot value it on a dividend yield basis. PM says that nevertheless a trade sale basis can be arrived at on the basis of the profit. ME says that there is no track record and the profit is not reliable.

Having explored with ME how these companies are related in their trading, it became clear that TFL was intended to have a genuinely separate existence, resulting from a joint venture between SL and another business. However, the other party gradually withdrew, leaving the owners of SL to run TFL. Their two directors, Messrs. C and J, were replaced by the husband and DL, and the company is now run solely to gain certain tax advantages arising from past tax losses. The result is that TFL is, realistically, just a division of SL. ME said that once someone was told the story of TFL, they would not want to buy TFL's shares. I agree. In my judgment, the shares have no saleable value, certainly not one that could be assessed on a trade sale basis (as PM attempted to do), and no other basis has been put forward to me.

So I assess the value of the husband's interest in SL at £62,000, but the value of his interest in TFL as nil. Mr Hayward-Smith QC suggests that that figure should be further discounted as it is said by the accountants not to be the equivalent of cash. I have considered carefully his submissions, but in the end I have decided that although they are not realisable as immediately as if it was a publicly quoted company, I should not make any allowance for that, otherwise I would have to go through the same exercise with all the properties, each of which may take some considerable time to realise. I must assume that everything has a value and, in the absence of firm evidence about a difference between market value and forced sale value, and also a reason for preferring the latter in some particular instance, I should take the market value of all the assets, including this one, as their true value.

The boat

That leaves the other issue, the value of the Star Charger boat. This was built between 1983 and 1985. The husband has rebuilt part of the cabin area. He jointly owned the boat with his brother, but bought out his brother's share for £50,000 when his brother bought another boat in March 1998. Attempts had been made to sell the boat in 1996 through Oyster Brokerage of Ipswich. They advertised the boat at an asking price of £125,000; no sale was achieved. Oysters have since said, in the summer of 1999, that they had hoped to achieve a price of £110,000-£100,000. Apparently it would sell better in the UK, so any sale here for a better price would necessitate transporting the boat to the UK at a cost of about £4000, in addition to the 10% commission charged by the selling agent.

The self-same agents were asked for a valuation in 1999. They said that their insurance policy precluded them from giving valuations, but said that they estimated the value at £82,500-£87,500 in June of 1999. They were again asked in January 2001. Making the same reservation regarding valuation/estimation, they said it would have depreciated by a further 5-10% and so now would be worth £75,000

The insured sum throughout has been £112,900, which is a replacement value. The boat suffers from osmosis, which has been taken into account in the estimations, but it will effect its saleability. The wife, going on the original advert for sale, and discounting, says that the value should be assessed at £95,000 less 10% commission.

Doing the best I can, it seems to me that if I take the mean between £82,500 and £87,500, which is £85,000, and then deduct the commission and transport costs, and then also make some small allowance for depreciation, I come to a figure of about £70,000, which is the amount, in the absence of better evidence, I shall take as the value of the boat.

As the value of all the other assets is now agreed, those findings of mine produce a total asset value of £2,732,055.

The arguments as to how those assets should be divided which were presented (in the broadest outline) to me are as follows.

The wife's case

On behalf of the wife it is argued that this is a classic case in which to follow the principles set out by Lord Nicholls of Birkenhead in his speech in the House of Lords case of White v White [2000] 2 FLR 981, [2000] 3 WLR 1571. It is said that there are sufficient funds for a clean break, with an equal division of all the assets. That can be achieved by transferring the husband's half-share of the house, and of the joint funds, to her absolutely, and adding to that a lump sum to make up half the value of the assets; that sum is just over £400,000. It is said that the husband has not displaced that as a starting point.

The husband's case

For the husband, it is said that that is not the correct approach; that this is only marginally a White case. It is said that when I look at the statutory criteria set out in s 25 of the Matrimonial Causes Act 1973, my tentative conclusions will be that equality is not possible here if I am to be fair and do justice to those criteria. He particularly argues that given the fact that significant parts of the assets are, on the one hand, the home, which will go to the wife, and, on the other hand, his pension fund, then I am restricted to the extent that I can balance the figures equally.

Section 25 of the Matrimonial Causes Act 1973

It seems to me that I must begin by examining the statute. Lord Nicholls of Birkenhead said in White v White [2000] 2 FLR 981, 992, [2000] 3 WLR 1571, 1581, quoting from Lord Hoffmann's speech in Piglowska v Piglowski [1999] 2 FLR 763, 782, [1999] 1 WLR 1360, 1379:

'section 25(2) does not rank the matters listed in that subsection in any kind of hierarchy.

I think it would be helpful, therefore, if I deal first with those matters relative to background and history. Subsection (d): 'the age of each party to the marriage and the duration of the marriage;'. I recited the history earlier: he 60, she is 58; the marriage was a long one, lasting almost 31 years.

Subsection (f): 'the contributions which each of the parties is or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;'. As I indicated earlier, I take the view that for many years this marriage was a partnership, each contributing equally but in different ways, and no one has argued otherwise.

Subsection (c): 'the standard of living enjoyed by the family before the breakdown of the marriage;'. It is part of the wife's evidence that in the final year of marriage they got through £120,000, and she would have me believe that this was typical expenditure. I find that the £120,000 is not proved. I consider it was an unlikely sum to have been spent, given that it is the sum of their two proposed future budgets, which includes a £24,500 mortgage for the husband. Clearly they were very comfortably off, whatever they wanted to do they could and did do. She told me they 'lived the life of Riley'. She also said that her experience before the separation was that there was plenty for whatever she wanted to do, he begrudged it but there were adequate funds. They enjoyed classic cars that the husband rebuilt; they had a yacht in the south of France; they took holidays as and when they wished. Her expenditure on the garden was unrestrained. She made regular major shopping expeditions to the West End. In latter years, the husband had a child he was supporting to the tune of £350 per month, without his wife, who monitored their finances, suspecting anything.

Subsection (e): 'any physical or mental disability of either of the parties to the marriage;'. There are none of significance. The wife has been depressed, but no one suggests that she should go out to work or that she has special needs that should be provided for.

Subsection (g): 'the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;'.

Subsection (h): ' the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

Neither of those subsections has any relevance to my determination.

I turn to the two main subsections, those dealing with assets and resources on the one hand, and with needs, obligations and responsibilities on the other.

Subsection (a):

'the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire.

Income

Apart from her interim maintenance of £350 month, the wife has investment income only. Currently there is that produced by her own portfolio and her half of the joint investments, producing something in the region, I have been told, of £25,000. It is not suggested that she will have any income other than what is produced by those investments, plus any produced by the lump sum that I order the husband to pay her.

The husband has income from a number of sources. His pension fund currently produces £52,470 per year. His rental from properties produces £28,500 per year, though I note that something less than that was shown in his tax return for the year ending April 1999. He has investment income of his own, of about £12,500, and his half-share of the joint investments, producing something over £5000. Some other earnings have been produced from time to time, such as bonuses from SL. It is clear that he has more cards available to him in his hand than she has in hers, and that he has some more flexibility than she does.

Earning capacity

She has none. I accept that he wants to remain retired, but I note that he is a company director, having his say in those companies. I do not consider that either of them should take steps to increase their earning capacity at this stage of their lives, they have both reached the age when they can expect to live now off the fruits of their past labours.

Property and other financial resources

The matrimonial home and the portfolio of joint investments are the only jointly owned items; each has other property in their own name and other expectations as well as obligations.

The wife

She has her half-interest in the home, which is £252,200, and her half-share of the joint investments at £81,050. She owns a car said to be worth £10,000, but she owes her sister £17,000 which was loaned to her to buy that car. She is owed £5000 by M, which are moneys advanced to help her set up a small business venture at the end of last year. She has some small amounts in her bank accounts. Her main asset is her own portfolio of investments, said to be worth £286,608. She has to date paid legal costs of £12,553 (relevant by reason of the decision in Leadbeater v Leadbeater [1985] FLR 789). Her total pot, therefore, amounts to £629,166.

The husband

He has his half-interest in the home, £252,200 net, and his half-share of the joint investments, £81,050. He owns a collection of cars valued at £41,200; his everyday car is worth £1500. He owns the boat which I have assessed at £70,000. He has lent £33,331 to Miss D. He expects to receive £75,000 from his brother H's estate. He has an investment portfolio worth £356,313 net. He has two PEPs worth £12,526. He has SL shares, which I have valued at £62,000. He has over £115,000 in various bank accounts. His pension fund is valued at 689,037. He has paid costs to date of £38,369. His total pot, therefore, comes to £2,102,890. The total joint assets amount to £2,732,055. I come to subs (b):

' the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future.

The section refers to 'needs, obligations and responsibilities'.

Lord Nicholls of Birkenhead was critical of the phrase 'reasonable requirements which has, in recent years, been used in these courts to comprehend the assessment that is made under this subsection in the context of the rest of the section.

I shall consider her 'needs, obligations and responsibilities in the context that is set by the other factors to which I have already referred. If this is different from 'reasonable requirements', then so be it.

Housing

The wife needs a house; she wants to live in Hunters. She tells me it is the ugliest house she knows, but it has the nicest garden she knows. She wants to stay there; there are no dependent children, so there is no particular need to do so. The house is worth over £500,000, which is a significant part of the assets. One of the difficulties in this case is created by her desire to stay in that house.

The husband has bought a house; it has an equity of £80,000. He hopes to improve his lot in relation to housing, dependent on the outcome of these proceedings. Mr Pointer QC says he does not plan to move, he is settled where he is, but I accept the husband's evidence that he would like to move, and he will if he is able.

Obligations and responsibilities

The husband has a new family, Miss D, B (aged 8) and E (aged 15), and there has been argument about the effect that I should give to that. The wife has no obligations, though she supports her daughter M to an extent, as I have already described. M's father says that her mother indulges her. If she does, that is her choice, perhaps understandable in the circumstances.

General standard of living

I find that the parties have a similar standard of living, as one might expect from people who have lived together for over 30 years. They are not critical of each other's proposed budgets overmuch. She questions his need for a boat costing £10,000 pa, and some expenditure on his cars; and he inquires as to her proposed expenditure of £7000 pa in relation to clothing.

In relation to housekeeping figures, he has a budget of £7800, which is £150 a week; she has a budget of £4633, which is £90. That seems to me to be perfectly reasonable, relative to and consistent with the way they have lived in the past.

As for hobbies, he has his boat and cars, and she has her garden.

Those are the criteria I have to consider. The aim, or, in modern parlance, 'the overriding objective', is now said to be to achieve a fair outcome. Well, what are the arguments? Mr Pointer says this is a classic White case and that all I need to do, having arrived at a grand total value for the assets, is to make an order that will result in them each having a half share of that total.

Mr Hayward-Smith says: 'Not so, that will result in unfairness and that there are reasons why I should not go down that route. First, he says this is not really a White case: White assumes a 'clean break case where the children are grown up and independent, and where the assets exceed the amounts required by the parties for their financial needs in terms of a home and income for each of them. In those circumstances, equality should be the yardstick against which any division should be checked.

Mr Hayward-Smith says that if this is a White case, it is 'on the cusp', and he has sought to persuade me that for various reasons the capital is not all readily available and sufficiently free to make that equal division. There is, he says, nothing binding on H's estate to pay, and no timescale within which they will pay; the estate is not straightforward and the husband will not be paid until it is finalised.

I am not told that he has any charge on Miss D's property; and, as she doesn't earn, she will not be in a position to raise a mortgage on it, so that loan could only be repaid if she sold her property and he cannot force her to sell. The boat has been for sale previously and did not sell. There is also the argument about the saleability of the SL shares. I must also note that whilst they remain in his hands pending sale, none of these assets produces any income. So, for all these reasons, it is said that the assets are not such as enable an immediate fair division by the ordering of a payment of a lump sum so as to even out the shares of assets held by each.

Secondly, it is argued that to simply divide the assets is to take no notice of the fact that the wife unnecessarily diminished the capital available after the separation. It is said that she removed and spent moneys from the accounts as if it was 'going out of fashion'. It is said that she liquidated some of her own capital unnecessarily.

Finally, under this head, it is said that it was quite unnecessary for her to borrow £17,000 from her sister to purchase a car, whilst at the same time purchasing for her daughter, on hire-purchase, a Polo motorcar.

It is said that I should take all that into account in deciding whether this is a White case; and, if it is, that those sums should be reflected in the final calculations.

Thirdly, it is argued that the husband's pension fund takes this case outside White: it is the largest single part of the assets. It is said that this fund is now set up and he cannot vary it, he cannot draw capital from it, and his flexibility in relation to how his income is delivered is therefore significantly affected.

Finally, it is said that he has different and additional needs: he has responsibilities for Miss D, B and E; he wants B to have a private education, as did his other two children; he wants also to provide properly for his new family. It is said that it is accepted that they had come to him knowing that he has a former wife to be provided for; but, nevertheless, they must be considered and they do stretch the limited resources.

Mr Hayward-Smith invites me to perform an exercise whereby, leaving aside the house, I should enhance the wife's present asset position by an additional £143,475, made up of the various sums she is said to have expended unnecessarily, so as to provide a current total of £388,788. To that should be added the joint portfolio, a further £162,099. He says that if she were then to be given a lump sum of £100,000 she would have a total free capital of £650,887, plus a house worth £504,400, giving her assets worth £1,155,287. He says that with the £650,887 she would, on a Duxbury basis, have some £45,000 pa net, not far short of what she is looking for in her proposed budget of £48,611.

In relation to those arguments, Mr Pointer says that first, 'assets are assets and I should not over-concern myself with how and when they may be realised.

In relation to alleged diminution of capital, he says that the figures are wrong and the arguments are flawed: the proper date to take as the start point must be the date when the husband left, which is 27 April 1998, not the start date on the page of the bank statement which was 6 April 1998. He says that if we go from the date of separation, the amount drawn or paid from the bank is not £38,700 but £22,500, and that she has accounted for £18,000, and more, of that in her schedule at A/57.

As to the withdrawals of capital, amounting to £45,000 in 3 years, that has only enabled her to bring her income up to about £45,000 pa that she needs to spend.

In relation to the third point regarding the pension fund, he says that this is not different in principle from the wife's position: she will be entirely dependent upon investment income, she will have to invest in a Duxbury fund and will have no more flexibility than him.

Fourthly, it is said that the position of his paramour and her children, only one of whom is his, cannot reduce the rights of his wife as there are ample resources to provide for her and to enable the husband to look after his new family.

I do not consider that I can differentiate between assets in relation to their value. The courts have always approached these matters on a net value basis, ie, taking account of sale costs and tax liabilities. White affirmed that approach.

I dealt earlier with the difficulty of applying forced sale values to particular items and said that there would have to be very good reasons for doing so. I am not satisfied that there are any such reasons here; and, indeed, no forced sale values have been provided. It seems to me that the place that this might have some impact is on the time allowed for paying any lump sum ordered.

I must therefore, in this case, take the values that have been agreed, or that I have found, and work on the basis that that value is realisable within a reasonable time.

As regards unnecessary diminution of the value of the assets by the wife, I have no doubt that she was devastated by the revelations that her husband had been involved in a ongoing deception of her for many years and that he had had a child by a woman some 6 years previously, which woman he was still seeing and which child he was supporting. I have no doubt that she did spend as she saw fit. She changed the locks and the alarm system. She bought a new car, which is included in the schedules, both the car and the loan; and she continued in the lifestyle to which she had grown accustomed. I am equally sure that she felt drawn closer to her daughter as a result of her husband's revelations.

I am not prepared to find that she was unnecessarily extravagant or that she diminished the resources available to any significant extent. I accept Mr Pointer's arguments about the dates and the amounts of her bank withdrawals. I also accept his argument that the pension fund is, in reality, no different from the Duxbury fund in which she will have to invest.

As to the position of the second family, this is really a question of seeing what happens when the arithmetic is done on different bases.

The proposed equation that Mr Hayward-Smith puts forward seems to me to fail for several reasons: first, I do not accept his argument about the diminution of capital by which I should now notionally enhance the wife's fund. Even if I did do that, then, as such capital as she has liquidated has been spent, she will not be able to buy a sufficient fund to provide for her reasonable needs.

The other side of that equation would be that if the husband only had to raise £100,000 for a lump sum payment, that would leave him with over £500,000 free funds, ie bank accounts and investments, which could purchase an income of some £35,000 pa. That would need to be added to his present income of £80,000 from pension fund and rental properties, and he would still have his boat, cars and money, in due course, to come from H's estate and Miss D. Even given his needs, that does not seem to me to be a fair outcome.

I must test it by comparing it to the outcome of an equal division. What happens if I go down the equality route? It requires the payment of a lump some to the wife of £400,000, in addition to the transfer of the house and the joint investments. That would put £835,000 into the wife's hands. A Duxbury calculation says that that gives her over £50,000 pa; she only asks for £48,000. As Mr Pointer says, it is not for me, in some patriarchal way, to say what she should and should not do with her money, to allow some of her items and to disallow others. However, I am permitted to observe that she would, on her own figures, be living in relative luxury. By that I mean that she will remain in the family house; she will be able to enjoy her garden, spending, as she plans to do, over £7500 per year on it; also spending £7000 a year on clothes and £7000 a year on miscellaneous items not included in her very detailed budget.

If the husband was ordered to pay that sum, and chose to do so by liquidating his investments, then they would produce just under £400,000. He would then have just under £100,000 in bank accounts, plus his expectation from H's estate, the money due from Miss D, his boat, car, SL shares and his properties. His income from his pension fund and rental properties would be the £80,000 gross, which is £51,000 net, plus whatever came from the balance of his assets as he chose to invest them.

He still has several choices open to him: his current home is subject to a mortgage which expires in September 2004; he could pay that off as it was only a 5-year mortgage and is heavily weighted to capital repayments. He has the next 15 years to decide when to convert his pension fund into an annuity. He can make choices about his leisure activity. But is he not as entitled, if at all possible, to maintain those in the same way that the wife will have her garden?

Undoubtedly things will be very much tighter for him than for the wife. His budget contains no provision for education for B; and, apart from his expenditure on his boat, is, on any view, modest, for example, £150 a week housekeeping for a family of four.

So it seems to me that equality may not be the answer here. Is there another course that would be fair? It seems to me that I must consider the various subsections of s 25 and aim to provide as fair a distribution as possible. I am driven to conclude, against the background of this case, that I should therefore aim to provide them each with a comfortable house and with sufficient money to discharge their needs, obligations and responsibilities. If, in addition to the transfer of the house and the joint assets, I order the husband to pay a lump sum of £300,000, then that will provide the wife with a fund of £735,000 which should produce a net income that will meet her stated needs. She will have an unencumbered house worth over £500,000. Her life will, so far as I can judge, continue in the style that she says she enjoyed during the marriage.

The husband will have, immediately, somewhere in the region of £180,000 in liquid funds to top up the income that comes from his pension fund and his rental properties. He will also have free capital of £275,000 in property, including his home, and about £240,000 to come from the boat, the SL shares, H's estate and Miss D's loan. His net income will be just about sufficient to meet his proposed budget.

I must then check my tentative conclusions against the yardstick of 'equality'. My proposals would share the joint pot as to £1,469,640 for the husband, and £1,262,416 for the wife. The question for me is whether 'if the shoe pinches (to use a phrase of Ward LJ in Piglowska v Piglowski [1999] 2 FLR 763, [1999] 1 WLR 1360), and pinches more on one party than the other, as a result of an equal distribution; is that sufficient demonstration that there is good reason, in that case, to depart from equality? I believe that it is. I have looked at my proposals to see if there is any discrimination in them. I do not believe that there is. It seems to me that if I were to divide the assets equally, then I would be discriminating against the husband as a result of his responsibility for his new family. I am satisfied that to deal with the matter in the way I have proposed will result in as fair an outcome to both parties as is possible in this case.

I shall therefore order that the husband shall transfer to the wife his half-share in the matrimonial home, Hunters, his half-share in the joint investments, and shall pay a lump sum of £300,000 to the wife.

Order accordingly.

PATRICIA HARGROVE

Barrister