SJ v RA

In a long marriage with substantial assets, equality remains the starting point, but the court must assess fairness in the light of liquidity, the nature of private-company shares, and legitimate family arrangements. Private-company shares should not automatically be valued solely by reference to net assets. Maintainable earnings, an appropriate cautious multiplier and relevant asset values may all require consideration. Where an asset is highly speculative, averaging its possible value may create unfairness; a deferred sharing mechanism may be preferable. In a non-needs case, pensions should generally be divided by value rather than by equality of income, without automatic adjustment for age or gender. A clean break remains desirable where it can fairly be achieved.

SJ applied for financial remedies following a marriage of approximately 43 years to RA. Their son, RF, intervened because he asserted that RA held shares in XY Limited on trust for him. That preliminary issue had been determined against RF, and permission to appeal had been dismissed by the Court of Appeal.

The final hearing concerned the valuation and distribution of the parties’ property, private-company shareholdings, pensions, income streams, liabilities and prospective benefits from a development project. The central issues were how to value the company, how to reflect liquidity and RF’s contribution and expectations, and what distribution would produce a fair clean-break outcome.

1. Outcome. The court made a financial remedy order requiring RA to pay SJ a total lump sum rounded to £7.4m. SJ’s shares in XY were to be transferred or acquired, the parties were to share equally in the net proceeds of the development site and future net benefits from Project Z, and a clean break was to follow payment.
2. Statutory assessment. Applying the factors in section 25 of the Matrimonial Causes Act 1973, the judge treated this as an equality case because of the length of the marriage and the parties’ equal contributions. RF’s contribution and legitimate expectation were relevant under all the circumstances, although he was not a party to the marriage for section 25(2)(f) purposes. No conduct adjustment was warranted.
3. Company valuation. The appropriate valuation of a profitable manufacturing company required consideration of maintainable earnings, a suitable multiplier and the balance sheet. The court rejected the submission that profitability should effectively be ignored in favour of a net-assets valuation. Having regard to the concentrated customer base, competition and RF’s control of the business, a cautious multiplier of four was applied.
4. Uncertain assets and liquidity. The value of Project Z was excluded from the assets presently available because its outcome could range from abandonment to substantial profit. The parties were instead required to account to each other for equal shares of the net benefit actually received. The wife’s entitlement was also reduced from strict equality in the company shares because the husband would retain illiquid shares and was unlikely to realise their full assessed value.
5. Pensions and finality. In a case governed by sharing rather than needs, pensions were divided equally by value. Equality of income, based solely on age or gender, was inappropriate. The judge preferred a clean break, while preserving limited future sharing arrangements where immediate valuation would risk unfairness.

The judge expressly agreed with the approach to fragile private-company valuations described by Moylan J in H v H [2008] 2 FLR 2092.

• Court of Appeal: Permission for RF to appeal against the preliminary-issue judgment was dismissed on 3 July 2014.
• High Court (Family Division): The final financial remedy application was determined and orders were made in favour of SJ.