Martin v Martin (Rev 1)

In financial remedy proceedings, the court must compare assets by quality as well as nominal value. Private-company valuations may be fragile and should be treated with caution, even where the court adopts a figure for calculation. The allocation of assets must fairly balance risk and liquidity between the parties; a valuation is not automatically equivalent to cash proceeds. There is no single mandatory method for identifying the marital element of a pre-marital business. A straight-line apportionment may be permissible if it forms part of a broad evidential assessment and produces a fair overall allowance for the value brought into the relationship. The court must also have an evidential basis for fixing the timing of substantial payments to be funded from a private company.

The wife appealed and the husband cross-appealed from Mostyn J’s final financial remedy order in proceedings concerning a long-established private trading company, Dextra Group Plc. The husband had founded the business before the parties began living together, and its shares comprised most of their wealth.

The judge treated 80% of Dextra’s present value as marital property, using a straight-line apportionment from incorporation to the hearing. He valued the company at £221 million, treated that value as equivalent to cash, and ordered £20 million of a £40 million lump sum to be paid within two years. The wife challenged the apportionment and the absence of an exit mechanism for her shares. The husband challenged the treatment of the valuation and the timing of the deferred payment.

The central issues were how to value and allocate private-company shares under the sharing principle, how to identify the marital element of pre-marital business wealth, and whether the deferred payment had an adequate evidential foundation.

1. Disposition. The wife’s appeal was dismissed. The husband’s cross-appeal was allowed only as to the deferred payment: the single £20 million payment due by June 2019 was replaced by four annual instalments of £5 million. No rehearing was ordered.
2. Valuation and asset quality. Following Wells v Wells [2002] 2 FLR 97 and Versteegh v Versteegh [2018] EWCA Civ 1050, assets have different levels of risk, and liquidity or illiquidity may be relevant independently of risk. The court must compare like with like when applying the sharing principle. A valuation of shares in a private trading company may be fragile because there may be no obvious market, valuers may produce differing results, profitability may be volatile, and opinion evidence is materially different in quality from cash. Even where the court fixes a value, it must assess the weight to place on it and consider both the amount and structure of the award, including the fair balance of risk and illiquidity.
3. The judge below was wrong to state that the only difference between Dextra and its cash proceeds was the auctioneer’s hammer. That analogy was confined in its original context to prime agricultural land. The judge’s factual valuation of Dextra at £221 million was nevertheless not shown to be wrong. The court declined to impose a rule requiring a conservative figure within a valuation bracket; the use made of the valuation was the critical issue.
4. Marital property. There is no single route to identifying the marital element of a pre-marital business. The exercise is a broad, partly evaluative and possibly discretionary assessment. A straight-line approach may be used as a tool, but it is not a rule and must be justified by the evidence and the overarching requirement of fairness. The judge was entitled to conclude that his apportionment made fair overall allowance for the husband’s introduction of Dextra, and the wife did not establish that the co-ownership issue had been disregarded.
5. Liquidity and payment timing. The judge had prevented adequate exploration of Dextra’s ability to fund the second £20 million payment and had no evidential basis for fixing payment by June 2019. Determining how substantial sums can be withdrawn from a private company may require specific analysis. The Court of Appeal considered that four annual instalments sufficiently addressed the error and that further litigation before the first-instance judge would be inconsistent with the overriding objective.
6. The judge was entitled, within his discretion, not to impose a mechanism for the wife to realise the Dextra shares.
7. Obiter. The court drew attention to the utility of including a recital addressing potential variation of a payment arrangement, as discussed in Hamilton v Hamilton [2014] 1 FLR 55, although that issue did not arise for decision.

• Court of Appeal (Civil Division): [2018] EWCA Civ 2866. The wife’s appeal was dismissed. The husband’s cross-appeal was allowed in part, substituting four annual instalments of £5 million for the £20 million payment due by June 2019.
• High Court, Family Division: Mostyn J made the final financial remedy order appealed from, reported as [2017] EWFC 25. He valued Dextra at £221 million, treated 80% of its value as marital property, awarded the wife 40% of the total wealth, and ordered £20 million of the lump sum to be paid within two years.