Horohoe v Horohoe: The weight to be attached to a post-separation agreement
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I suppose I should begin my summary of Mr Justice Holman's judgment in Horohoe v Horohoe by setting out his preliminary observations. They certainly bear repeating. Over and over. He said:
"... at a directions hearing on 2 October 2020 I implored both parties to settle this case. I expressly recorded on the face of my order that day the following: " … the court today, in discharge of its duties under FPR rule 1, very strongly urged both parties to make a determined and open minded attempt to settle this case before substantial further costs are expended, and to avoid the destructive effect of a contested hearing." At that stage, the combined costs of the parties were recorded on the face of the order as being about £256,000. The projected combined additional costs to the end of a final hearing were recorded as being about a further £227,000. That has come to pass, and the combined costs are now, in round figures, at least £500,000, and probably more, because the hearing over ran.
"At the outset of the main hearing itself, I again implored both parties to find some compromise basis for settlement. I warned them that a contested hearing could be very damaging to their relationship, as it has proved. I pointed out to them that their open positions were, as they remain, very polarised. The wife sought, and still seeks, £5 million or even £5.5 million. The husband, relying on an alleged post-separation agreement which was substantially implemented, offers her nothing. I pointed out that in that situation there is huge litigation risk for both these parties, and that wise people (which these parties essentially are) would strive to settle on some common ground between these two extremes.
"Despite my very clear urgings, both at the outset of, and repeatedly during, the hearing, and despite my rising for an hour or more at the outset to enable the possibility of settlement to be further explored, there has been no settlement. I deeply regret that fact, and the huge costs which have now been incurred, and the damage which has been done to this whole family."
OK, to the facts:
1. The parties began living together in 1992. At that time neither had any capital.
2. They were married in 1994, and have three children, now aged twenty, seventeen and sixteen. The husband was self-employed as a carpenter and owned a construction company; the wife worked as a nurse.
3. The marriage broke down and the parties separated when the husband moved out of the matrimonial home, in January 2010.
4. We are told that: "The husband clearly has an eye for property development opportunities, and by 2012 the parties owned a desirable, if modest, portfolio of mixed residential and commercial properties. The legal titles to some of these were embedded in a second company, Horohoe Properties Limited, which was also owned by the parties jointly and equally."
5. In 2012 the parties jointly contemplated separating out their assets, which at that time were almost entirely jointly owned. An agreement was drawn up, setting out the values and division of the parties’ assets. Over the course of the next few years the terms of the agreement were substantially implemented.
6. Over the following years the husband's property business thrived, so that by the time of the hearing of the wife's financial remedies application last November his assets were worth some £12 million.
7. The wife eventually commenced divorce proceedings, in March 2019.
The effect of the agreement was that the wife received about 11.5 per cent of the joint net assets of some £14 million, as at the date of the financial remedies hearing. The wife claimed that this was unfair, after a cohabitation and marriage of seventeen to eighteen years, and each party making equal and full contributions.
Holman J began his analysis as follows:
"If there had been no agreement in 2012, but the current respective financial circumstances of each party had been, without any underlying agreement, as summarised above, then in my view the wife would have been entitled to substantial further capital provision now. The starting point would have been a sharing claim, albeit focussed on the assets at the date of separation ("the marital acquest"), and with a very heavy discount for post-separation endeavour on the part of the husband"
There had been an agreement, however, and he had to apply the Radmacher test:
"The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement."
Here, the agreement was freely entered into, the parties understood its implications and, in all respects bar one, the agreement was at the time fair to both parties, and even from the vantage point of eight years' hindsight remained fair to both parties.
At the time of the agreement it had been made clear that matters were "still open for further discussion amongst the parties pending final agreement." However, neither party entered into further discussions, and Holman J therefore found that, at some point before March 2019, the agreement had become final.
The one matter that had not been properly understood in 2012 was the then value of the companies. Both parties believed that the value, and therefore the wife's half share, was zero. However, Holman J found that the value of the two companies in 2012 was £1,500,000. The wife was therefore entitled to a further £750,000, which Holman J discounted to £600,000, to reflect the security to her of receiving cash.
Holman J concluded:
"I am satisfied that it is well within the means of the husband to raise and pay that sum, or to transfer properties to that net value. Even once paid, it will leave the husband very significantly richer than the wife. Essentially, his net wealth will reduce from about £12,450,000 to £11,850,000, and that of the wife will increase from £1,625,000 to £2,225,000. In percentage terms, the wife will have about 16 per cent, and the husband about 84 per cent, of the overall net current wealth.
"That is fair because of, first, the weight which still requires to be attached to the agreement as a whole; and, second, the impact upon his current wealth of the husband's endeavour over the long period since 2012."
The full judgment can be found here.