Work v Gray (Phase II: Computation and Distribution)

In a financial remedies case involving equal sharing, the court must determine the fair market value of assets at the agreed valuation date. Discounts for illiquidity, lack of marketability, lack of control, delay and risk may be appropriate even where an in-specie division would previously have been possible. The court must assess the evidence relating to the particular assets and prevailing market conditions. It should not adopt gross values merely to reflect alleged litigation conduct or the loss of an opportunity to share assets in specie. Where the order has provided a cash default mechanism, a later hearing should calculate the balancing lump sum by reference to the properly discounted net value of the matrimonial estate.

The parties, American nationals who had lived principally in London, divorced after a long marriage during which the husband had generated substantial wealth through private equity investment. At the Phase I hearing, Holman J rejected the husband’s reliance on a post-nuptial agreement and special contribution. He ordered equal sharing of the net assets and made initial lump-sum payments using the husband’s discounted valuations, while leaving open the wife’s case that discounts should be ignored if assets were shared in specie.

The present first-instance hearing concerned the remaining computational issues. They included transferability, the appropriateness and level of discounts, and the balancing payment due to the wife.

1. Outcome. The court provisionally determined that the husband owed the wife a further balancing lump sum of US$5,421,842, subject to any further submissions on adjustments. The Phase I order governed the method of calculation and did not permit the court to impose a later in-specie division.
2. Under Matrimonial Causes Act 1973, s 25, fairness remains the foundation of the court’s discretion. Equal sharing had already been determined in Phase I. The reference to the wife’s right to investigate the husband’s “true and appropriate” net worth required consideration of both fair market value and whether particular discounts were justified at the valuation date.
3. The court rejected the wife’s primary case that all discounts should be ignored because she had lost the opportunity for Wells-sharing. An in-specie division would itself have required assessment of the risk and value of the individual assets. The court could not retrospectively substitute gross values simply because negotiations had failed.
4. The court preferred the methodology of the wife’s expert, Mr Bezant, for private equity and venture capital investments. His approach updated the earlier valuation methodology using the January 2015 Cogent material and reflected market movements by asset category. The husband’s experts had largely reviewed earlier figures and had not adequately explained why discounts from 2013 remained appropriate at 31 December 2014.
5. Applying the evidence, the court allowed a 10% discount for the Lone Star funds, a small discount for marketable securities, no additional discount for four hedge funds redeemed at full value, and revised discounts for other private equity and direct investments. The court treated subsequent events as incapable of determining value at the valuation date, but capable of testing the reliability of assumptions made at that date.
6. The resulting discounted net matrimonial estate was calculated at US$229,110,342. The wife’s 50% share, after crediting the amounts already received and the relevant assets in her name, produced the provisional balancing sum of US$5,421,842.

This was a first-instance Phase II hearing. The earlier Phase I decision was given by Holman J on 10 March 2015 and was reported as [2015] EWHC 834 (Fam). An appeal concerning special contribution was pending, but did not prevent determination of the Phase II computational issues.