Wealthy divorcee must pay £5m to husband hit by the recession

A woman has been ordered to pay £5m to her former husband because his property and other assets have plummeted in value during the recession.

The couple are both American citizens but have lived in the UK since they were married nearly 20 years ago. Following the separation, she remained in the family home with the couple’s three children. The husband lived in a nearby house and was paying a substantial mortgage.

The wife was from a wealthy background and still had shares in her family’s business. The husband was a property developer and although he once had assets worth tens of millions of pounds, these had shrunk during the recession so there was now a net deficit.

If he were to liquidate the company he would face a large tax liability in the United States.

During the divorce proceedings, the judge valued the husband’s assets at zero, taking into account the latent tax liability. She divided the matrimonial assets equally and ordered the wife to make a lump sum payment of £5m. This was on the basis that the wife could continue living in the family home and the husband would retain the nearby mortgaged property.

The wife appealed against the lump sum order saying the judge had been wrong to make a snapshot valuation of the husband’s company at a time when property values were subject to dramatic fluctuations. She also submitted that the husband was determined to continue trading so the tax liability was not likely to become an issue in the foreseeable future.

However, she lost her case in the Court of Appeal which held that the original judge had exercised her discretion correctly to achieve fairness. The judge had considered the risks associated with the husband’s determination to continue trading and the outstanding mortgage on his home. She had taken all the important factors into account and reached an impressive judgment.

The wife’s appeal was therefore dismissed.

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March 2010

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