K v K (Ancillary Relief: Prenuptial Agreement) [2003] 1 FLR 120

Here is a bit of case law for you so you can see what went on in a real case.
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This is an application by Mrs K (to whom I shall refer as the "Wife") for full ancillary relief arising upon the breakdown of her marriage to Mr K (to whom I shall refer as the "Husband"). The marriage took place on the 10th December 1969 and lasted, therefore, in excess of 30 years.

B e f o r e :

THE HONOURABLE MRS JUSTICE BARON D.B.E.
____________________

Between:

	K	Petitioner
	- and -
	K	Respondent

____________________

N Mostyn Q.C and R Carew Pole (instructed by Messrs Sears Tooth) for the Petitioner
B Blair Q.C. and R Todd (instructed by Messrs Mischon de Reya) for the Respondent
Hearing dates : 9th – 17th May 2005 
____________________

Crown Copyright ©

Mrs Justice Baron:
1. This is an application by Mrs K (to whom I shall refer as the "Wife") for full ancillary relief arising upon the breakdown of her marriage to Mr K (to whom I shall refer as the "Husband"). The marriage took place on the 10th December 1969 and lasted, therefore, in excess of 30 years.
The Children of the family
2. The parties have two daughters namely L who was born on the 24th October 1975 and J who was born on the 14th March 1979. Both women are independent. L is married to a successful businessman and has 3 young children, whilst J (who has been plagued with emotional problems) is now in full time employment. The parties generously provided each girl with a home of their own. Thus, L has a property in North London which is worth in excess of £500,000 (and is subject to a mortgage of some £170,000) whilst J has a mortgage-free flat in Knightsbridge which is worth in excess of £300,000. The daughters are also the owners of a French company which owns a flat in the South of France. This property is worth some €1,200,000 (£827,500 at a conversion rate of €1.45) and is subject to a loan in favour of the parties worth £512,000 inclusive of compound interest at 6%. The net equity in the property (after the payment of costs of sale and French taxes) is about £200,000 (perhaps a little more). Prima facie, therefore, the girls' interest totals some £100,000 each. For much of the trial the true ownership of this apartment was a matter of heated debate. It was the Wife's case that, in reality, the flat belonged to the Husband and had only been placed in the girls' names for tax reasons. She pointed to the following facts in support of her contention (i) the property had been found and chosen by the parties are their holiday home; (ii) they had always used it as their home without reference to the girls; (iii) the Husband had a power of attorney which enabled him to do as he wished with the premises; (iv) there were many documents in which he (and others) referred to the apartment as belonging to him and (v) such was his character that, even if the girls were legal owners, the Husband would extract the funds from them as soon as this case was over. The Husband asserted that (i) the flat had been given to the girls from the outset subject to his ability, pursuant to the power of attorney, to use/operate it for as long as wished and (ii) that the Wife had been aware of these facts from the outset. The girls were drawn into this litigation as a result of these polarised positions. In 2004 in accordance with their Mother's wishes they attended an independent solicitor, who wrote a letter in which they acknowledged that the flat had been placed in their names only for tax reasons. However shortly before this trial, in accordance with their father's wishes, they signed affidavits in which they recanted their previous positions and stated that they regarded the South of France property as belonging to them absolutely. They were due to attend Court to be cross examined on the veracity of their
statements.
3. This vignette (about a relatively small amount of capital in the context of these parties' wealth) indicates the ferocity with which this litigation has been fought and how it has caused a haemorrhage in family relationships. I cannot begin to imagine how much money and legal energy has been spent in pursuit of this issue.
4. The documents proved that, from the outset, the children had been the legal owners of the apartment. Mr Mostyn Q.C. (on behalf of the Wife) asserted that, although there was no application to set aside the original transaction, I should ride roughshod over this point and deal with the flat as if it belonged to the Husband. He pointed to the case of J v V 2004 1FLR 1042(the facts of which are wholly different from this case). On an analysis of the documents, I was clear that the most that these parents had was the right to (i) repayment of the loan and (ii) use the flat for so long as they wished. Moreover, it is not for the Court to override established legal rights unless the individuals who hold them are joined to the proceedings and are represented. The prospect of these "children" having to give evidence (one of whom is emotionally vulnerable) seemed to me to be undesirable if it could be avoided. Consequently, I suggested that the parties might consider a formula whereby the property was sold, the loan repaid with the net equity being paid to the daughters upon the basis that would undertake that were they to decide to make funds available to one parent then they would make the exact same sum available to the other. Eventually, this formula was agreed and I will accept the formal undertakings from L and J.
5. There seemed to be a tacit assumption at the beginning of this case that L's outstanding mortgage should be deducted from the parties' assets before division. But this does not seem appropriate in the overall circumstances of this case and I decline to follow that route. L can use her share of the proceeds of sale of the South of France property to reduce her mortgage if she wishes. As the daughters appear to have "sided" with their Father more recently, and subject to any further submissions from Counsel, I intend to provide that the Wife's 50% share of the loan will be paid to her from other assets – so as to enable the Husband (who still holds a power of attorney) and the girls to sell the French property in their own time.
6. The Husband has asserted that he "owes" his daughters a significant amount of capital because, when his father died (intestate), he promised that these funds would be paid to the girls when they were 30 years old. That inheritance came into being in about 1989 and was intermingled with the Husband's own funds. By 1999 it was said to be worth some £117,000 and it was suggested by the Husband that it should be paid to the girls. I reject this argument. These young women have been treated very generously to date and the capital which they now have represents such sum as may have been due from their paternal grandfather.
The Open Positions
7. The Wife seeks an equal division of the assets which have been accumulated during this lengthy marriage. Until very recently this point was not conceded by the Husband as he sought a 55-45% split in his favour. The basis for this differential being his alleged wealth at the commencement of the marriage. Commendably, this point was not pursued before me and it was conceded that the assets should be divided equally.
8. However, despite this concession, the trial has taken some 5 days because there has been a huge and acrimonious dispute about the true level of the assets. >
9. Overall, this litigation has lasted a number of years and was originally due to be heard in June 2004. But, at the last minute, it had to be adjourned because the Husband was suffering from a psychiatric condition which rendered him unfit to give instructions to his legal team. The opening submissions prepared by Mr Mostyn Q.C. for that Hearing state, and I quote: "On W's case the assets amount to some £6.2 million. There is no earned income in this case: the parties are living on their capital. H has set up a network of trusts and companies to hold his wealth and to disguise his ownership". Despite this earlier assertion in 2004, Mr Mostyn Q.C. has sought to show that the assets should now be regarded as greatly in excess of this sum because (i) monies have gone missing from the sale of the former matrimonial home in Spain; (ii) monies have gone missing from the sale of a flat in Basil Street, London and (iii) the Husband has spent excessive sums – particularly in relation to consorting with other women/prostitutes. He also made the point that some $600,000 had been drawn in cash by the Husband after June 2004 for which there seemed to be little proper explanation, at least so far as some $425,000 was concerned. >
10. Mr Blair Q.C. informed me that he was surprised by these assertions (save for those in relation to monies spent on other women and recent spending) as they had never been made in the written documentation supplied. He was highly critical of what he termed these "Sunday" musings by which he meant assertions which had only arisen in the course of final weekend preparation. I accept that the submissions were not advertised but, nevertheless, I thought it right to permit the investigation to proceed.
>
11. This marriage has been unhappy for some considerable period of time. The first breakdown came in October 1998, when the Wife filed a petition for divorce and launched an application for ancillary relief. In consequence, the Husband filed a Form E. On that occasion, although a Decree Nisi was pronounced, the parties reconciled and the decree was set aside by consent. >
The Form E discrepancy
12. The rapprochement was short lived and by 2002 the Wife had issued a second set of proceedings. In the light of this the Husband filed a second Form E. A comparison of the two documents shows a huge disparity. >
13. The table shows >

	Form E 31 Mar 99	Form E 21 Mar 03
FMH in Spain	285,000
Warehouse in Spain	45,000	37,525
Basil Street property	405,000
FMH in Eaton Sq	1,900,000
Bank accounts	169,958	1,758
Ogier Nominees portfolio	3,623,377	413,712
Insurance claim	9,189
Chattels	41,600	183,000
Cash	3,000
Liabilities
credit cards	(1,146)	(28,713)
money owed to children	(117,100)	(172,516)
debt due to Zhejiang	(223,600)	(225,876)
Spanish customs fines	(307,370)	(447,370)
building costs Eaton sq	(200,000)
Anticipated Spanish fine	(312,000)	(228,759)
Mortgage LK Trust		(306,000)
Hambros loan		(200,000)
"RS" Trust charges		(21,067)
Coutts o/d		(20,468)
Sundry debts		(41,157)
Spanish back taxes		(1,031,418)
"RT" Trust	0
"RS" Trust		0
TOTAL	5,317,908	(2,084,349)

14. The reason for this surprising difference was the failure by the Husband (and his then legal team) to include properties/a portfolio supposedly held in an entity called the Royal Star Trust. Although the existence of the assets/properties was set out within the body of the Form E, a nil value was ascribed to them. In addition huge debts were posited as due. This defective presentation is most regrettable because, even if assets had been held through numerous entities, the Courts of the Family Division are accustomed to piercing the corporate/trust veil where the Husband is, in reality, the alter ego of the relevant entities. In this case the presentation is even more surprising because it is now clear that at the time the second Form E was sworn the Husband was the sole legal and beneficial owner of all the relevant assets because none had been placed in this new trust structure. >

There is a lot, lot more to this and you can read it here:- http://www.wikivorce.com/divorce/Case-Law/Ancillary-Relief/-K-v-K-2005.html