B e f o r e :
MR JUSTICE MOSTYN ____________________
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Richard Todd QC and Lily Mottahedan (instructed by Vardags) for the applicant The first respondent appeared in person The second to ninth respondents did not appear and were not represented (although the eighth respondent gave evidence by telephone). The second to sixth respondents were disjoined as parties by an order made 10 December 2018 Hearing dates: 10-14 December 2018 ____________________
HTML VERSION OF JUDGMENT ____________________
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Mr Justice Mostyn:
In this judgment I shall refer to the applicant as the wife and to the first respondent as the husband.
This is my judgment on the final hearing of the wife's claim for the full range of financial remedies. In the light of recent events she seeks an order for periodical payments, but that her capital claims should be adjourned, to abide what she says is a foreseeable eventuation of capital in the hands of the husband.
This litigation began in 2012 and has been extremely hard-fought ever since. The overall costs are in the region of £7 million. The case has attracted considerable publicity, and has been the subject of two reported judgments, namely that of Sir Paul Coleridge sitting in the High Court on 27 October 2014 ( Quan v Bray & Ors [2014] EWHC 3340 (Fam) ) and that of Lady Justice King in the Court of Appeal on 16 June 2017 ( Quan v Bray & Ors [2017] EWCA Civ 405 ). The background is fully set out in those two judgments and need not be repeated here.
However, caution needs to be applied when considering the annex to the judgment of Sir Paul ("the annex"). Its contents are not judicial findings. In her judgment at [95] Lady Justice King stated:
At [172] of her judgment Lady Justice King concluded:
Those conclusions define the scope of the proceedings before me. The first conclusion means that no direct provision can be made for the wife from the assets of CTSAT. It is important, however, to understand what the second conclusion in fact means. In Whaley v Whaley [2011] EWCA Civ 617 Lady Justice Black at [40] stated:
This approach was followed in Hong Kong by Chief Justice Ma in KEWS v. NCHC [2013] 2 HKLRD 314 (2013) 16 HKCFAR 1. At [53] the Chief Justice said that "it would be better if the term 'judicious encouragement' were no longer to be used". I agree with that. The term is liable to give rise to irrelevance and confusion.
Given that the husband and the wife are not beneficiaries of CTSAT, and given the primary finding that the sole and continuing purpose of the trust was, and is, for the benefit of the Chinese Tiger Project, it was inevitable that there would be a consequential finding that it was impossible for either the husband or the wife to become beneficiaries and for benefit to be given to one or other of them gratuitously. That is the extent of the second conclusion. It does not mean, however, that it is not possible for CTSAT to reward the husband for services rendered on a full commercial arms-length basis, as has happened in the past, in effect, as I will demonstrate.
The husband does not dispute that it would be open for CTSAT to employ him for a commercial reward but argues that the scale of such reward would be modest in circumstances where the type of financial trading which he orchestrated in the past is now obsolete, and where his skill-set is now redundant. I do not accept this argument for the reasons which I will explain.
There are strong similarities between this case and Joy v Joy-Morancho and Others (No 3) [2015] EWHC 2507 (Fam) , [2016] 1 FLR 815. I set out the report's headnote:
It is noteworthy that in that case Sir Peter Singer found that the trust (into which vast sums, being the fruits of endeavour during that marriage, were poured) was not nuptial and thus not within the dispositive powers of the court; neither was it formally a sham capable of being set aside. Further, he could not find that there was a likelihood of reinstatement of the husband as beneficiary and advancement of funds to him in the immediate future. However, he was satisfied that the trust could employ the husband at a rate of remuneration sufficient to afford periodical payments of £120,000 per annum. At [178] he held:
Mr Joy-Morancho sought permission to appeal against the periodical payments order; this was refused by Lady Justice King: see Joy-Morancho v Joy (Dismissal of Variation Application) [2017] EWHC 2086 (Fam) at [17].
I revert to the facts of the case before me.
On the eve of the trial before me the wife reached an agreement with the fourth and sixth respondents namely Save China's Tigers UK ("SCT-UK") and Conservation Finance Ltd ("CFL"). SCT-UK is the beneficiary of CTSAT. CTSAT is the beneficial owner of CFL.The agreement concerned the former matrimonial home at 66D Royal Mint Street, London E1 8LG ("RMS"), said in the annex to be worth £2m. CFL is the titleholder, but the wife had claimed that the husband was the true beneficial owner. In the agreement she abandoned that claim and conceded that RMS was beneficially owned by CFL. She agreed to vacate RMS by 5 March 2019 or on the payment of a lump sum to her of £10,000 provided for in the agreement, if later. The agreement provides that there would be no order for costs and that no existing orders for costs would be enforced. Importantly, the agreement provides that it is in full and final settlement of any claims the wife may have against SCT-UK, CFL or CTSAT, in this jurisdiction or anywhere else in the world and further that she is making no other claims over any assets/entities legally or beneficially owned (directly or indirectly) by CTSAT; that she will make no such claims of whatever nature against such assets in the future; and that neither she, nor the husband, has any beneficial interest in any assets legally owned (directly or indirectly) by CTSAT.
It is in the light of this agreement that the wife does not pursue before me any claim for capital provision, but, rather, seeks that those claims should stand adjourned, just as the claims of Mrs Joy were adjourned. The fact of this agreement has meant that the scope of the dispute before me has very substantially narrowed so that this judgment can be much shorter than might otherwise have been the case.
For his part the husband has prefigured an inchoate claim against the eighth and ninth respondents, who are respectively the wife's sister-in-law and brother. His claim concerns two apartments in Beijing, which were purchased in the name of the wife's brother in 1999 with funds provided by the husband. The wife's evidence was that initially her brother held the properties as trustee or nominee for her but that in 2004 she gifted the beneficial interest to her brother following her marriage to the husband. Since then her brother has become mentally incapacitated and the properties have been transferred into the name of his wife, the eighth respondent.
In his witness statement dated 24 May 2018 the husband said that:
ii) There was an agreement that any assets ('the Chinese assets') purchased with this sum would be held in trust by the ninth respondent for the benefit of the husband and the wife for as long as they remained together before marriage.
iii) Further, in the event that they parted before marriage the Chinese assets would be held for the sole benefit of the wife and she would have no further claim against the husband.
iv) The arrangement would continue after marriage save that in the event of divorce the assets would no longer be held for the joint benefit of the husband and wife but would be held for the sole benefit of the wife and she would have no further claim against the husband.
v) In circumstances where the agreement has been breached the ninth respondent should repay the husband $1 million plus interest. That interest would be approximately a further $1 million. Thus, the eighth and ninth respondents should be ordered to pay the husband $2 million.
Although this is set out in a witness statement of the husband dated 24 May 2018 it is noteworthy that he has made no claim against the eighth and ninth respondents, notwithstanding that on 31 October 2016 I joined the eighth and ninth respondents to the proceedings on the footing that a claim would be formulated, issued and pleaded formally. At that time the husband was seeking a declaration that the apartments were beneficially owned by the wife.
Had the husband made a direct claim against the eighth and ninth respondents as to the beneficial ownership of those apartments, then such a claim would fail for two elementary reasons. The first is that it is plainly time-barred under the Limitation Act 1980. The second is that an English court will not entertain an action involving the title to foreign realty based on contract, trust or fraud unless the defendant is within the jurisdiction, or has submitted to the jurisdiction of the court, and thus may be subjected to personal process. This principle can be traced back to the seminal decision of Lord Chancellor Hardwicke in Penn v Lord Baltimore (1750) 1 Ves Sen 443. The eighth and ninth respondents are not within the jurisdiction and have expressly not submitted to the jurisdiction of this court.
Quite apart from these formal objections I reject the claim as asserted by the husband. I am perfectly satisfied that there was no such agreement. I accept the wife's evidence.
As the husband has not made a formal claim against the eighth and ninth respondents there is nothing for me to dismiss. However, it is my view that were such a claim to be made in the future it should be struck out as an abuse of process under the rule in Henderson v Henderson (1843) 3 Hare 100 as the claim should have been made in these proceedings and there was no good reason why it was not.
However, the husband can validly argue that the value of these flats represents a resource which can be taken into account if I am satisfied that the eighth and ninth respondents would, if asked, make them or their profits available to the wife. Curiously, the husband did not cross-examine the wife's sister-in-law on this subject, and her witness statement is silent on the subject. However, the wife in her evidence accepted if she returned to China, and was in need, she would expect her brother and sister-in-law, to look after her, in discharge of the moral duty that the donation of the flats gave rise to in the first place.
I refer to the annex where the husband sets out the genesis of the Chinese Tigers project, the provenance of its assets, and its commercial activity. In 2002 the husband purchased 33,000 hectares of land in South Africa for the project for approximately £2.5 million. From that point until 2009 (when £20 million was provided from the settlement of the G bank litigation) the husband told me the project generated very substantial sums from its commercial activities to the tune of £3 million a year, and which, among other investments, enabled it to buy for £3 million a forestry plantation in China. In the annex the husband describes the commercial activity in these terms:
The nature of the trading which enabled these huge profits to be generated was structured finance, a field in which the husband is an acknowledged expert. The husband in his oral evidence explained that he was the "rainmaker" for this greatly successful financial speculation and that he would negotiate the borrowing of vast sums, billions of dollars, which would be traded for a short time making a modest (relative to the principal) profit, and then returned to the lender. The husband says that since the global financial crisis of 2008 this kind of trading has basically become impossible, and that as a result his skill set has become obsolete. It is true that collateralised debt obligations, syndicated loans, and mortgage-backed securities are all examples of structured finance and that these products were the prime cause of the global financial crisis of 2008.
In order to undertake this financial trading a vast network of subsidiary bodies were created. I have seen an organogram of the group structure which shows no fewer than 50 subsidiary bodies incorporated or resident in places as far-flung as Mauritius, Hong Kong, the Cayman Islands, South Africa, the Dutch Antilles, Holland, China, Luxembourg, Ireland and the UK. I asked the husband why so many bodies were needed, and his reply was that structured finance needed many.
In the annex the husband stated: "I am a partner in JAS Financial Products LLP, the operational, financial and marketing advisor to CTSAT". The husband was not merely a partner in JAS; he was, as he admitted under cross-examination, its ultimate beneficial owner. Very large fees were paid to JAS by CTSAT; indeed, it had no other source of income. It was essentially a service company for the receipt of fee income paid to the husband as remuneration for his role as financial and investment adviser to the project. In 2005 fees of £533,000 were paid; in 2006, £636,000; in 2007, £600,000; and in 2008, the year of the financial crisis, £80,000.
As explained above, the burden of the husband's evidence was that the kind of financial speculation opportunities in which he was a specialist basically came to an end in 2008. But the fees did not dry up. In 2009 fees of £545,000 were paid; and in 2010 fees of £1.53 million were paid. The husband explained that the latter of these was referable to the extensive work that needed to be done to secure the £20 million settlement from G Bank. That may account for the abnormal excess, but it does not explain the 2009 fee, nor the fees that were paid in 2011 of £900,000 and in 2012 (the year of the breakdown of the marriage) of £950,000. The husband was not able to give me any kind of coherent explanation for what financial advice or services these fees in 2011 and 2012 were paid. Moreover, it is clear from the BDO report of 13 June 2014, that none of these fees made their way to the husband. Rather, the profit element of these fees was virtually entirely paid to his partner Rumit Shah. In 2010 Mr Shah was paid £850,000 out of the fee of £1.53m. The husband was paid nothing. I was not given any kind of convincing explanation for this surprising state of affairs.
Although the report does not deal with the economic activity of the project directly it would appear that few profits were made in 2013, the first year of estrangement between the husband and wife, as the aggregated bank balances of the group fell in that period from £8 million to £6 million.
Obviously, for the purposes of the claim that is mounted before me (that is, for periodical payments to be paid by the husband to the wife which might be derived from fees which he would be capable of charging directly to CTSAT or through a successor to JAS), it would be very interesting to know, broadly, what economic activity the project has engaged in over the last four years, during which time the husband has described his role as having evolved from rainmaker to elder statesman. But the husband has flatly refused to give that information, notwithstanding orders requiring him to do so, as I shall explain.
On 31 October 2016, at a time when the wife's appeal to the Court of Appeal was pending, I heard an application by the wife for the renewal of a freezing order made by Sir Paul Coleridge on 3 October 2013. I granted the application and made a consequential disclosure order that the husband, CTSAT, and CFL were to demonstrate with documents the cash position of CTSAT on 3 October 2013, 24 March 2016 and 31 October 2016. The reasons for those dates were given in my judgment delivered on that day. The order was expressed to endure until the date 21 days after the appeal was dismissed, in that event (which later occurred).
The husband did not comply. He applied to me to discharge the order, on five grounds, none of which included the impossibility of obtaining the documents. I heard his application on 20 January 2017 and dismissed it for the reasons given in my judgment of that day. I concluded by saying: "I am now going to make a final order that the respondents comply with my order by 4 PM on 23 January, and a penal notice will be attached to that order."
Still the husband did not comply, and neither did CTSAT or CFL. The appeal was heard between 31 January and 2 February 2017, but judgment did not emerge until 16 June 2017. The appeal was dismissed. Under the terms of my order of 31 October 2016, the disclosure obligation therefore lapsed 21 days after 16 June 2017, i.e. on 7 July 2017. It can therefore be seen that for a period of eight months the husband was in defiant breach of the disclosure obligation.
On 12 April 2018 I heard an application by the husband for variation of the order for maintenance pending suit in the monthly sum of £1500, awarded by Sir Paul Coleridge on 22 April 2015. I varied it down to £1000 a month by reference to the sole factor of the extraordinary length of time that interim order had been in force. I referred in my judgment delivered on that day to the husband's defiant breach of the disclosure obligation in these terms:
Before me, the husband's new argument is that he has tried to obtain disclosure of the relevant documents but that the trust has refused to supply them. Inevitably he was cross-examined about this and was asked to point to the letter or email incorporating the refusal. He referred to his email to Ameer Seetohul, an employee of the second respondent in Mauritius, dated 11 November 2016 where he asked for "an update on the information I requested pursuant to the order of the family court in the UK in the matter of my divorce". The reply from Ameer Seetohul on the same day was: "Please note that we are seeking guidance from our legal representatives and shall revert in due course". And there the trail runs cold. The husband was not able to point to any message incorporating a refusal to provide the documents, and I am satisfied that one does not exist.
In his final submissions to me the husband was unrepentant. He explained that he felt justified in defying the order. He stated that he considered that he could just wait until the order expired. He explained that he felt confident after the appeal hearing that he would win. He stated to me:
This epitomises his contemptuous and arrogant approach to these proceedings. The view I have formed of the husband is that buoyed by his success before Sir Paul Coleridge and the Court of Appeal he believes that he is in effect immune from any substantive financial provision being made in the wife's favour.
The husband's contemptuous and arrogant attitude is further illuminated by the following passages in his principal witness statement dated 21 September 2018. At paragraph 13, when speaking of his earning capacity, he stated:
A witness statement is made primarily for the court and to write this is not only childish and facetious but is directly and grossly disrespectful to the authority of the court.
But it did not stop there. In the next paragraph he wrote:
This goes beyond childishness and facetiousness. It is grossly insulting and reflects the husband's detestation of the wife's advisers. It is completely unacceptable that he should use a witness statement written for the court as a platform to vent his spleen in this manner. On top of this he has stooped to making ugly threats, as well as using illegitimate tactics. For example, in para 71 of his written final submissions he wrote:
It is certainly the case that in his original skeleton argument before me the husband quoted passages from the draft judgment provided by Lady Justice King which were removed from the final version as handed down and promulgated. The husband pretended that he did not know that he was not allowed to do this, but this is patently false as I have seen correspondence written to him at the time of the hand-down in the Court of Appeal reminding him that he was not allowed to use for any purposes the expurgated passages.
The object of this paragraph was solely to menace the wife and her advisers because, of course, I have no power to deal with alleged wasted costs incurred in the appeal. It is another example of the husband's gross litigation misconduct.
As stated above, in April 2018 the husband applied to vary the maintenance pending suit order made by Sir Paul Coleridge on 22 April 2015. In his witness statement in support of his application suggested that the wife should pay him maintenance pending suit. He claimed that he had no means of paying the £1500 per month that had been awarded. As stated above, I varied the order downwards to £1000 per month, with effect from 1 March 2018. The husband has flatly refused to pay this amount, and £10,000 of arrears have now arisen. I am wholly satisfied that at all times the husband has had the means to pay this reduced award and I conclude that his refusal to do so is a further example of him seeking improperly to pressurise the wife. Further, it is another example of his arrogant and contemptuous disregard of the court's authority.
In considering the evidence as a whole I am now even more satisfied than I was on 12 April 2018 that the husband, in collusion with CTSAT, is seeking to hide something highly material in the finances of the trust which, if revealed, would be significantly to his disadvantage. I draw the inference from the brazen nondisclosure, coupled with his arrogant and contemptuous attitude as detailed above, that the trust has been successfully active economically, with the husband as rainmaker, but that he has arranged for his commercial reward to be deferred until these proceedings are safely concluded.
I am satisfied, having regard to the history of fees paid to JAS, and having regard to the inference which I have drawn as set out above, that the husband has the capacity to receive very significant fee reward, on a fully commercial arms-length basis, for financial advisory work for this well-endowed trust. Alternatively, given his skills, I am satisfied that he could earn comparable fee remuneration working for other clients. I have reached the same conclusion as to this husband's earning capacity as Sir Peter Singer reached about Mr Joy-Morancho's.
Such reward would be on top of the provision of free accommodation, I have no doubt. Ever since the sale of RMS by the husband to the sixth respondent in 2008 the husband and wife were allowed to live there without paying any rent. In a statement made on 26 November 2018 James Synge, a director of the sixth respondent stated: "It is misleading to say that [the wife] and [the husband] never pay any rent. [They] pay rent in kind for their work for the tiger project." In my opinion it is more misleading to describe this as the payment of rent. However, it does give some insight into the scale of reward available to the husband given that the rental value of RMS is about £6,500 per month. Another example of financial assistance kindly given by CTSAT to the husband was the loan given by a subsidiary of the trust to the husband of £200,000 in February 2015. This was secured on the property in Chamonix but was not conventional in that interest was not periodically payable but rather rolled up and paid when the property was ultimately sold.
It will be clear from what I have written above that I have, in contrast to the finding made by Sir Paul Coleridge, found the husband to be a thoroughly unsatisfactory witness. I conclude that he has been dishonest, manipulative, arrogant, menacing and contemptuous of the court's authority. I do not accept any of his evidence unless it is either agreed or is corroborated by clear contemporaneous documents. By contrast I found the wife to be a credible witness.
I turn now to deal with the wife's claim.
The wife also has an earning capacity but of a much more modest scale compared to that of the husband. She is fluent in four languages, Mandarin, English, French and Italian. However, she has been out of work for many years. She has applied for jobs, as a PA, thus far without success. Mr Todd QC realistically accepted that she should be attributed with an earning capacity and suggested that on the evidence no more than £25,000 gross, £20,000 net would be a reasonable estimation of such capacity. I agree.
I turn to the question of needs. For the reasons set out above I have no doubt at all that the husband's needs for accommodation (whether that is in Thailand or elsewhere) and to meet his periodic requirements will be amply met by his reward for work done for the trust. Further, for the reasons I have set out, I am wholly satisfied that he has the "faculties", to use the old language, properly to provide for the wife. From March 2019 the wife will be homeless, and it is for this reason that her revised budget incorporates £30,000 per annum for rent. I am satisfied that this is reasonable. On top of that she has claimed £54,184 for periodical living expenses; again, I am satisfied that this is reasonable having regard to her objective need and to the standard of living enjoyed during the marriage. Indeed, she was not challenged in cross-examination as to the reasonableness of her budget.
Having regard to her earning capacity I am satisfied that an award of periodical payments of £64,000 per annum is reasonable. This should be CPI index-linked.
The next question is for how long the award should endure.
In every case where an award of periodical payments is made the court must consider, pursuant to sections 25A and 28(1A) of the Matrimonial Causes Act 1973, whether the award should be term limited, and, if so, whether that term should be extendable or not. These provisions have been strangely neglected since they were enacted, but recent decisions have emphasised their key importance. A limited term should be imposed unless the court is satisfied that the claimant would not be able to adjust to a cut-off without undue hardship. Normally that decision is easily reached because the claimant will have a capital base to fall back on in her later years. Generally speaking, there would have to be shown good reasons why a term maintenance order should not be made. And, generally speaking, where a term maintenance order is to be made there would have to be shown good reasons why it should not be non-extendable. Ultimately the court's goal should be wherever possible, to achieve, if not immediately, then at a defined date in the future, a complete economic separation between the parties.
In this unusual case I am not satisfied that were a term maintenance order to be imposed, even if extendable, the wife would be able to adjust without undue hardship to the prospective cut-off. This is because she has no capital base at all; indeed, she is indebted to her solicitors in a vast amount. The Chinese assets held by her sister-in-law do not, in my judgment provide a sufficient safety-net to mitigate the prospective hardship. Therefore, exceptionally, I make, just as did Sir Peter Singer in Joy v Joy-Morancho and Others (No 3) , a joint lives award. In my judgment, only this meets the justice of the case.
The periodical payments order should take effect when the wife leaves RMS. I therefore order that with effect from 1 March 2019 the husband shall pay to the wife periodical payments of £5,333 monthly in advance during joint lives or until the wife's remarriage or further order. The existing maintenance pending suit order will continue until that date and all arrears under it must immediately be discharged. The figure of £5,333 will be adjusted on each successive 1 March by reference to the most recently ascertainable annual movement in the CPI.
Finally, I turn to the question of the wife's capital claims. Should they be dismissed, or should they be adjourned? In Joy v Joy-Morancho and Others (No 3) Sir Peter Singer adjourned the wife's claims. He held:
I have reached the same conclusion in this case. It is equally exceptional, and it is foreseeable that at some stage in the future the husband will have accumulated sufficient sums to make a proper clean-break capital settlement on the wife.
The wife's capital claims will therefore be adjourned.
In preparing this judgment I have had at the forefront of my mind the terms of sections 25, 25A and 28(1A) of the Matrimonial Causes Act 1973. I have also sought to give effect to the oft-cited words of Lord Devlin that the judicial function is not just to render a decision but is also to explain it in words which will carry the conviction of its rightness to the reasonable man. However, I have also borne in mind the wise words of Lord Justice Lewison in Fage UK Ltd & Anor v Chobani UK Ltd [2014] EWCA Civ 5 at [115], echoed by the President in Re F (Children) [2016] EWCA Civ 546 at [22] – [23], that there is no duty on a judge, in giving his reasons, to deal with every argument presented by counsel in support of his or her case, nor to deal at any length with matters that are not disputed. In trying to keep this judgment to manageable proportions I have written it in medias res . I have had in mind para 89 of Lady Justice King's judgment in this very case:
Following distribution of this judgment in draft I have received from the wife's advisers some modest typographical and allied corrections which I have adopted. I have received a swathe of purported corrections from the husband which were a poorly disguised attempt to cause me to revise my core findings of fact. These were accompanied by a lengthy request, which I take to be made pursuant to FPR PD30A para 4.6, for me to consider whether my judgment contains material omissions by virtue of inadequate reasons. I have considered those representations and reject them. I am satisfied that I have made the essential findings needed to dispose justly of the wife's claim (see para 54 above) and that no correction or amplification of the judgment is needed.
I have later received an application by the husband for permission to appeal my judgment. These are expressed discursively over 13 paragraphs. I have considered them carefully, but I am not satisfied that either individually or collectively they demonstrate a real prospect of success of an appeal or that there is some other good reason for an appeal to be heard. The application for permission to appeal is therefore refused.
That concludes this judgment.