ES v SS
[2023] EWFC 177
GA v EL (No 2) (Post Separation Accrual)
27 November 2023
[2023] EWFC 206
Family Court
A couple divorced after building a successful business together. When they sold the business for much more money than it was originally worth, they argued about how to split the extra profit. The judge decided that the husband, who worked hard to grow the business after they separated, deserved a larger share of the extra money, but also gave the wife a significant portion, reflecting her contributions during the marriage.
Key Facts
- •Financial remedies application at the end of a 14-year marriage.
- •Significant dispute over division of proceeds from sale of a jointly owned business, X Ltd.
- •X Ltd sold for £70m (with some deferred and uncertain consideration).
- •Husband argues post-separation labour significantly increased X Ltd's value.
- •Wife seeks equal division, arguing the business was matrimonial and post-separation growth shouldn't affect the division.
- •High legal costs incurred by both parties (£684,918 for the Wife, £1,121,979 for the Husband).
Legal Principles
Fairness in the division of assets.
Matrimonial Causes Act 1973, section 25; White v White [2000] UKHL 54
Sharing of matrimonial property, compensation for relationship-generated disadvantage, needs balanced against ability to pay.
Miller & McFarlane [2006] UKHL 24
Sharing principle usually leads to equal division of matrimonial property, but rare exceptions exist for non-matrimonial property.
Various case law (discussed in sections 41-74)
Post-separation accrual is complex; the court must consider active vs. passive growth, the domestic party's contribution, and whether the increase in value was solely due to one party's efforts.
Various case law (discussed in sections 48-74), particularly Cooper-Hohn v Hohn [2015] 1 FLR 745 and JL v SL (no. 2) [2015] EWHC 360 (Fam)
Unless there's undue delay, post-separation asset growth should usually be considered matrimonial property.
E v L (financial remedies) [2021] EWFC 60
Outcomes
42.5% of the proceeds of sale of X Ltd to the Wife; 57.5% to the Husband.
A 'by and large' approach balancing the significant post-separation growth (partially attributable to the Husband's work) with the passive growth from pre-separation assets and the Wife's domestic contribution. The court considered various factors including the unreliability of the initial valuation, active vs passive growth, market conditions, and the Husband's post-separation efforts.
The lower valuation of X Ltd (£28.1m) from the Single Joint Expert's report was preferred over the higher valuation (£39.2m) based on post-separation information.
The judge found the lower figure more reasonable, reflecting a more accurate foresight of growth at the time of separation. The higher figure was deemed to unfairly incorporate the Husband's post-separation work.