26th July 2016
Judgment of Bodey J considering when the value of company shares should be valued; whether a discretionary trust of which the husband was the primary beneficiary was a financial ‘resource’ available to him; the discount to be applied to the value of a husband’s shares in a company; how to take into account the husband’s unmatched contributions; and whether to make a sharing or needs based-award.
Facts
- The parties met in 1996, married in 1999 and separated in 2012 with 4 children. The children live with the husband and have no contact with the wife due to her past alcohol addiction.
- The husband was working for an investment bank and had saved up $1.5 million by the time of the marriage. This was subsequently put into the family’s matrimonial home.
- The husband’s father purchased a company in 2000. The husband left his job at the bank and started building up the company. The husband’s father put some of the shares in the company in a discretionary trust, of which the husband was the “primary beneficiary.” The husband bought a similar number of shares himself.
- After the parties separated in 2012, the company’s share price was down. The husband put in substantial work to ensure that the company survived and flourished.
Held
- The value of company shares should be valued at the time of the hearing, not at the time of judgment.
- A discretionary trust of which the husband was the “primary beneficiary” was a financial resource available to him. The trustees had unfettered discretion to appoint trust capital to him.
- On the basis that undue pressure should not be placed on the trustees , a discount of 50% was applied to the value of the trust assets to balance the husband’s status as the “primary beneficiary” with the interests of other beneficiaries.
- The value of the husband’s shares was subject to a discount of 8% on the basis of the husband’s unique importance to the company. Computing this discount is a difficult exercise, as it is speculative, notional, and revolves around the market’s likely reaction to any transaction perceived as reducing the husband’s alignment to the company. Therefore Bodey J applied a broad brush approach.
- The husband’s contribution of pre-marital assets was taken into account in a broad way when considering the reduction from equality, as was his post-separation endeavours.
- The husband did not establish a special contribution as he improved someone else’s idea rather than having a spark of innovative genius.
- It would be unfair to take into account the husband’s child care contributions as they result from the wife’s diminished contributions as a result of her illness and the children’s refusal to see her again.
- The wife received 37.5% of the total assets, based on a discounted sharing claim subject to a cross-check against her needs.
