Martin v Martin (Rev 1)

This Court of Appeal considered the application of the sharing principle where most of the parties' wealth is shares in a private trading company founded by the husband before the relationship. The court addressed two principal questions: the proper approach to valuing shares in a private company for a financial remedy, and how to identify the marital element of a company founded pre-relationship.

The judge below had fixed a present value for the company and treated that valuation as equivalent to cash when allocating assets, and had apportioned the marital share of the company by a straight-line time accrual from incorporation. The court upheld the judge's permissive use of a straight-line apportionment in this case as a lawful evaluative tool but held that the judge was wrong to treat the company valuation as having the same quality as cash without addressing liquidity and realisation risk, and that there was insufficient evidential foundation for the timetable ordering £20 million to be paid within two years. The court therefore dismissed the wife's appeal on the apportionment point, but allowed the husband's cross-appeal in part by varying the deferred payment schedule.

Background and procedural posture: The appellant wife and respondent husband appealed from a final financial remedy order of Mostyn J dated 9 October 2017. The parties' principal asset was 100% of the shares in a private trading company (Dextra), which had been incorporated in 1978, before the parties began living together in 1986. Mostyn J valued the company at £221 million and treated 80% of that value as marital property by applying a linear time apportionment from 1978. He awarded the wife half the marital property, including cash, a lump sum and a shareholding. The wife appealed on three grounds (challenge to straight-line apportionment, failure to account for the husband owning only half the company from 1986 to 1989, and absence of an exit mechanism). The husband cross-appealed, principally complaining that the judge treated the company's valuation as equivalent to cash and that the two-year timetable for payment of £20 million lacked evidence.

Nature of the application/relief sought: Final financial remedy pursuant to the Matrimonial Causes Act 1973; appeals sought alteration of the division and structure of the award, and variation of realisation/ payment timing.

Issues framed by the court:

• How should courts value shares in a private company when dividing matrimonial wealth?
• How should the court determine what part of a company's present value is non‑marital where the company was founded by a spouse prior to the parties' relationship?

Reasoning and disposition: The court emphasised established authorities that valuations of private companies can be fragile and must be treated with caution (citing Versteegh, H v H, Wells and others). It accepted that a straight-line time apportionment is a permissible evaluative tool to identify the non-marital element and that the judge had applied a permissible holistic evaluative method in this case; the wife's challenge to that approach failed. However, the court held that the judge was wrong to treat the fixed valuation of the company as equivalent to cash without separately addressing liquidity and realisation risk when structuring the award, and that there was no evidential foundation for the judge's order requiring payment of £20 million within two years. The court therefore dismissed the wife's appeal but allowed the husband's cross-appeal in part by substituting a different timetable for the deferred payment (four annual instalments of £5 million) while leaving the overall structure of Mostyn J's share division intact. The court declined to admit post-trial evidence and refused to order a rehearing.

Appeal by the wife dismissed; respondent husband's cross-appeal allowed in part. The Court upheld the judge's use of a straight-line time apportionment as a permissible evaluative method to identify the non-marital element of a pre-existing company but concluded the judge had erred in treating the company's valuation as equivalent in quality to cash without separately addressing liquidity and realisation risk, and there was no evidential basis for the two-year timetable for a £20 million payment. The Court varied the payment schedule to four annual instalments of £5 million.

Appeal from the final financial remedy order of Mostyn J in the Family Division (decision of 9 October 2017). The appeal and cross-appeal were heard in the Court of Appeal (Civil Division) and determined by Moylan LJ, Coulson LJ and Simon LJ on 21 December 2018. The judgment below is reported as WM v HM [2017] EWFC 25 (referred to in the judgment).