Divorce & Financial Settlement Case Analysis: CG v DL [2023] EWFC 82

Wife benefits from £1million payment to make “amends” from Husband’s infidelity during the marriage, and consideration as to an ongoing interest in a business set up during the marriage.

Divorce & Financial Settlement Case Analysis: CG v DL [2023] EWFC 82

The parties’ situation in CG v DL [2023] EWFC 82 is not unusual in that they met in 1991, married in 1998 and separated in July 2020. There are two children of the marriage, aged 19 and 13, both in private paying education.

During the marriage, the wife gave up her career to be the homemaker and full time Mother. The husband during the marriage flourished in his career and set up his own hedge-fund business (the initial investments being from the parties’ joint capital), a business that he accepted the wife fully supported him in.

The case involved substantial assets of over £24 million including a London property and a country property (which the parties agreed that the wife would have both). Many of the issues in the case were relatively typical and would have been a standard case for equality but for the below issues:

The £1 Million ‘’Gift’’ for the Affair

  • In 2017, some 3 years prior to the parties’ separating, the husband had a short 6-week affair which he ended and told the wife about. Following the cessation of the affair, the former girlfriend commenced a campaign of private and public stalking and harassment (for which she faced criminal consequences). She also told the husband that she was pregnant (turns out this was not true). The husband took advice on what he would be likely to pay under schedule 1 of the Children Act 1989, and in January 2018, paid the wife the sum of £1 million.
  • Within these proceedings, the wife asserted she should keep this as a gift. The husband on the other hand asserted it is a resource open to the wife and it should be subject to the sharing principle.
  • The Judge concluded that the sum was a payment from the husband to “make amends” for his behaviour and the appalling aftermath, and on that basis, given the circumstances which it was given to the wife, she is entitled to keep that sum to herself in its entirety.

The Post Separation Accrual

  • The husband attempted to run an argument that the Court should ringfence some £2.4m on the basis that this was net income post-separation. The Judge considers the facts and with reference to Rossi v Rossi [2007] 1 FLR 790, where Mr Mostyn QC (as he then was) said that he would not allow a post-separation bonus to be classed as non-matrimonial unless it related to a period which commenced at least 12 months after the separation.
  • The Judge excluded only £203,000 of the income received post-separation.

Whether the Wife Should Have an Interest in the Husband’s Business

  • A significant amount of the judgment was focused on this aspect of the case, the valuations and estimated income streams from it. Despite two experts attempting, the current value of the business could not be reliably ascertained. There was also the issue with regards to how the business could be sold, but the experts did agree that the business would be a large profit generator to the husband over the coming years.
  • The wife’s case is that she should have a Wells v Wells [2002] 2 FLR 97 award in respect of 25% of the business by way of lump sums equal in value to one quarter of the husband’s share of profits and of any capital realisation, unlimited in time. Her reasoning being that the business is the product of marital endeavour in which she has fully supported the husband in every possible way and therefore its current and future profits are from the initial build up. The wife sought 25%.
  • The husband’s case was that the parties should go their separate ways and the wife should not have a claim over the business profits as this is in essence her attempting to share his earning capacity after the end of the marriage and his future endeavours should not be subject to a claim.
  • The Judge considers the case of Cooper-Hohn v Hohn [2015] 1 FLR 745 at length in his judgment. In Cooper-Hohn, the Court had to consider the distribution of enormous personal wealth built up through a hedge fund business.
  • The Judge also considered the comments of Mostyn J in JL v SL (No.2) [2015] 2 FLR 1202 at paragraphs 40-42. The Judge agreed with the analysis of Mostyn J in JL v SL and noted that if the husband were left with all future returns of the business, it would mean he was receiving the benefit of what was built during the marriage – the business is a continuation of what was created throughout the time the parties were together and on that basis the Judge was of the view that for the wife not to have any future share would be unfair.
  • The Judge did accept that the further from separation the smaller the interest, the wife should have but did not accept that it was some claim against the husband’s future income.
  • The Judge concluded that the proper approach was for the wife to receive a fixed percentage for a limited period of time and ordered that the wife should share in the husband’s profits to the tune of 17.5% in the years ending 2023, 2024, 2025, and 2026. In the event of the husband disposing of his shareholding during this period, the wife will share to the same extent of 17.5%.

Sir Jonathan Cohen reminded the parties in his judgment:

“The touchstone in the division of assets between divorcing spouses is always that of fairness.”

He noted that his division of the liquid assets (£12.49m / 51.6% to the wife and £11.69m / 48.4% to the husband) reflected the assets the couple had built up together as well as the £1 million gift from husband to wife. He observed that over the years to come the difference was very likely to be reversed as the husband continues to work in the business and that would be a fair and proper reflection of his future endeavour.

GoodLaw LLP: Divorce & Financial Settlement Solicitors

If you're navigating the complexities of divorce and financial settlement, GoodLaw's experienced family law department is here to guide you through every step.

Whether it's dividing assets, negotiating settlements, or understanding your rights to business interests, our team has the expertise to secure the best possible outcome for you. Contact GoodLaw today.

By Published On: February 9th, 2024Categories: Insights

Send a message

If you need legal advice please contact one of our team by completing the form below.

"*" indicates required fields

Select your closest GoodLaw office.
Please choose the department you would like to speak to.
Hidden
Hidden
Hidden
Used for sending email to the right solicitor depending on custom_field
Privacy Checkbox*
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
I am happy for you to contact me with the details provided. Privacy Policy