Susan Maria Clarke v Richad Walter Clarke

In a financial remedy appeal, a director’s loan owed to a company must be included consistently in valuing the company interest and the shareholder’s personal assets. A valuation discount is binary where it depends on whether a future disposal is likely to attract a discount; the court should not adopt an artificial middle position. In a needs-based assessment, the court may adjust the capital division to meet a spouse’s reasonable lifetime income needs. The court must also actively consider an immediate clean break under s.25A and should make periodical payments only where necessary to avoid undue hardship.

The appellant appealed against financial remedy orders made by HHJ Farquhar on 5 July 2022 following the parties’ matrimonial proceedings. Permission was granted on whether the order should guarantee her a minimum sum from the sale proceeds of the former matrimonial home and whether maintenance should exceed £26,000 per year. A further issue was remitted concerning the treatment of the respondent’s director’s loan account and the valuation of his business interests.

The central issues were whether the respondent’s business interests had been undervalued, whether the appellant’s needs justified a greater capital award, and whether the original order should be varied.

1. Ground 3. The respondent’s director’s loan account was an asset of the company and a personal liability of the respondent. Excluding its value from the company valuation while deducting the same debt from the respondent’s assets undervalued his business interests. The corrected valuation was £1,049,534.
2. The 20% valuation discount was inappropriate. The evidence showed that the respondent was unlikely to dispose of his shares separately from the fellow shareholder. A discount either applied or did not apply. There was no proper basis for adopting an intermediate discount. The full value, £941,759 before inclusion of the director’s loan account, should have been used.
3. The corrected figures required an adjustment of £136,026 from the respondent to the appellant. The former matrimonial home was therefore to belong solely to the appellant.
4. Ground 2. The original assessment of £26,000 net per year was too low. After allowing £650,000 for housing, the remaining capital could reasonably provide approximately £48,000 per year for life, having regard to the appellant’s age, the length of the marriage and the marital standard of living. The resulting unequal division of capital was justified by need.
5. The clean-break order was correct. Where periodical payments are actively pursued, the court must diligently apply s.25A and consider whether an immediate clean break is possible. If continuing maintenance is necessary, it should be limited in amount and duration so far as possible and should avoid undue hardship.
6. Ground 1 was not pressed and had become irrelevant. The appeal was allowed on Grounds 2 and 3. The order below was varied by setting aside the provisions for sale and distribution of the former matrimonial home and confirming the appellant’s sole ownership. There was no order as to the costs of the appeal, and the costs order below remained undisturbed.

• High Court (Family Division): Appeal from the judgment and order of HHJ Farquhar dated 5 July 2022. Permission was granted on two grounds, with a further issue remitted by Sir Jonathan Cohen. The appeal was allowed on Grounds 2 and 3 and the order was varied.