VV v VV  EWFC 41 is a recent judgment of Mr Justice Peel in relation to a case dealing with the division of assets in financial remedy proceedings following a short marriage.
The couple were married for five months and did not have any children. The wife (W) said they began living together in November 2018, while the husband (H) said the date was in December 2019. This case is compelling in the way he considered the following significant issues:
- The extent of pre-marital cohabitation and the effect of this on the sharing principle
- Whether the parties were guilty of misconduct
- The needs of the W
The parties incurred significant costs, upwards of £600,000 each, due to issues they were unable to resolve in this case.
The parties were in their late 50s and met in 2018. H worked in the software industry while W was a classically trained musician and composer. When the parties met, H lived in the United States and W lived in the United Kingdom.
In August 2018, H accepted a job with AB Company, a start-up which specialised in digital technology. H was given the right to acquire shares in the company, as part of his remuneration, if he remained in the role for one year. On signing the contract, he was awarded the right to 600,000 units at a value of $0.42 per share and then a further 1,000,000 units in February 2019 to reflect his significant role.
In March 2019, the parties were engaged. In September 2019, H left AB Company and was awarded 700,000 share options as part of the negotiated severance package. In December 2019, H left the USA, and the parties began living in Kensington, London. The parties married in January 2020 and separated in June 2020.
Parties’ conduct during proceedings
H initiated the financial remedy proceedings and initially stated that the share options in AB had no value. W stated that H must have known the value of the shares due to the pre-listing market and stated that he deliberately did not disclose their value on his Form E. However, Mr Justice Peel agreed with H that the value was highly speculative as nine out of ten start-ups in the sector fail.
When H became aware that he could in fact sell some of the shares in the pre-listing market, he did not disclose this information to W. He feared she would then inform the managing director of AB, who could make it difficult for him to obtain the value he was due. In early 2021, H pre-sold a number of his units. He did not inform W or the court of this and omitted these transactions from his replies to the questionnaire and updating disclosure.
It later became apparent, that W was in fact in communication with the managing director of AB and he encouraged her to prevent H from selling his shares when the company was officially listed. W instructed her solicitors to write to AB Company, requesting that the units not be released to H until the conclusion of the divorce proceedings. AB complied therefore H was unable to list his shares when the value peaked on the first day. He therefore lost the opportunity to acquire millions of dollars.
Mr Justice Peel’s considerations
The first consideration related to seamless cohabitation prior to the marriage and the effect on the sharing principle; the principle that the matrimonial assets will be shared equally between the parties unless there is a good reason they should not be. Mr Justice Peel found that until December 2019 the parties had been in a committed relationship, but cohabitation did not begin until H moved to the UK. W asserted that she was entitled to the proceeds of the sale of AB shares, as she played a significant role in helping H acquire the role at AB Company. However, Mr Justice Peel rejected this as the parties were at an early stage in their relationship and W had little knowledge of the technology industry. The engagement in March 2019 was also not considered a factor capable of invoking the sharing principle. Mr Justice Peel stated: ‘The essential inquiry is whether the pre-marital relationship is of such a nature as to be treated as akin to marriage.’ As a result, it was decided that as all relevant assets had been acquired before cohabitation began in December 2019, the sharing claim should be rejected.
Mr Justice Peel went on to consider the respective conduct of the parties during the proceedings. Both parties took steps to deceive the other. However, H’s conduct was considered to be ‘litigation misconduct, which would ordinarily sound in costs’, whereas W’s conduct was ‘gross and obvious conduct which the court is entitled to take into account’. Mr Justice Peel placed significant weight on the fact H’s actions were not to ‘defeat W’s claims’ but a rational attempt to secure a successful listing. He did not act to directly harm W whereas ‘W directly caused H financial loss running into tens of millions of dollars’.
The final consideration was W’s needs. It was recognised that although the marriage was short, H was in a significantly better financial position than W due to his earning capacities. W was provided with funds to redeem her mortgage, pay her liabilities and three years’ worth of maintenance. However, her obstruction of the sale of AB shares was noted and Mr Justice Peel stated that she would have been awarded more if she had behaved differently.
The case sheds light on the sharing principle including that it will not be rigidly followed by the courts. Although the parties were engaged to be married which demonstrates their substantial commitment to one another, without sustained cohabitation which reflects a marriage, the sharing principle will not, as a matter of course, be invoked. The judge has placed a certain emphasis on showing commitment to the relationship through cohabitation.
Furthermore, the parties’ conduct during proceedings had a considerable effect on the judge’s ruling. Not only did W’s conduct affect her award, but she was also ordered to pay £100,000 of H’s costs. The courts will also make a distinction between conduct which serves to disrupt the proceedings, e.g. lack of disclosure, and that which personally damages the other’s position.
Regardless of the length of marriage, the court will always strive to make a decision that is fair and considerate of both parties’ positions. However, beware, any misconduct will undoubtedly affect this.
If you are seeking advice regarding a breakdown in your relationship, now or in the future, get in touch with our Family and Matrimonial team.
Florence Bedford, Paralegal in our Family and Matrimonial team contributed toward this article.