AC v DC & Ors (No 2)

In a long marriage, pre-marital wealth may be excluded from the sharing principle, but the assessment is fact-sensitive. Duration, mingling of assets, the parties’ relationship and the needs of both parties must be considered. Where no reliable valuation exists, the court may use the best available evidence and make a fair evaluative assessment, including an allowance for passive growth. Reattribution of dissipated assets requires clear evidence of dissipation with a wanton element. Mental incapacity does not necessarily prevent reattribution where the dissipation resulted from attorneys’ conduct. A substantial lump sum for children requires justification by their maintenance, education or training needs; tax planning alone is insufficient.

The wife sought financial remedies following a relationship which began with cohabitation in 1996 and marriage in 1998. The parties had three children. The husband owned a substantial shareholding in a successful business, but had developed frontal lobe dementia, lacked litigation capacity and had a severely reduced life expectancy.

The court determined the value of the family assets, including the expected proceeds of a proposed company sale. It considered whether payments promised to company directors should be added back as reckless expenditure, whether the husband’s pre-cohabitation wealth justified departure from equality, and whether provision should be made for the children by lump sums or transfer of shares. The central questions concerned the fair allocation of the parties’ assets and the appropriate orders if the proposed sale did not complete.

1. The court found that the excess £4.55m payable under the directors’ side letters constituted clear dissipation with a wanton element and should be added back. The relevant principle, stated in Vaughan v Vaughan [2007] EWCA Civ 1085, [2008] 1 F.L.R. 1108, requires a cautious reattribution based on clear evidence of dissipation. Mental incapacity was not determinative. The relevant conduct was either attributable to the husband or resulted from the conduct of his attorneys.

2. The case was a sharing case. The husband’s pre-cohabitation wealth was relevant because it formed an important foundation of the relationship, but the parties’ long relationship, the wife’s homemaking and future responsibilities, and the subsequent mingling of wealth reduced the force of that factor. Applying the approach discussed in Jones v Jones [2011] EWCA Civ 41, [2012] Fam 1, and N v F [2011] EWHC 586 (Fam), [2012] 1 FCR 139, the court assessed the husband’s pre-cohabitation shareholding at £8m in present money, deducted it from net assets of approximately £38m, and awarded the wife 40% of the total net assets.

3. The application for £2m lump sums for each child was dismissed. The children’s school fees and maintenance could be met from the husband’s resources. The proposed lump sums were principally justified by acceleration of inheritance and tax considerations, rather than demonstrated maintenance, education or training needs.

4. The husband was ordered to pay each child’s school fees and periodical payments of £20,000 per year during minority or until the end of tertiary education, whichever was later. The wife was to receive the former matrimonial home and an award reflecting 40% of the parties’ net assets. If the proposed sale did not complete within the specified period, the husband was required to transfer shares sufficient to reflect that award, without any later top-up.