S. McM. v M. McM

• Jurisdiction: Ireland
• Judge: Mr. Justice Henry Abbott
• Judgment Date: 29 November 2006
• Neutral Citation: [2006] IEHC 451
• Docket Number: [No. 38 M/2002]
• Court: High Court
• Date: 29 November 2006

MCM (S) v MCM (M)

BETWEEN

S. McM.

APPLICANT

AND

M. McM.

RESPONDENT

[2006] IEHC 451

[No. 38 M/2002]

THE HIGH COURT

FAMILY LAW

Abstract:

Family law - Divorce - Extent of regard to 1991 settlement - Assets and income of parties - Provision - Family Law (Divorce) Act 1996, s. 20

The wife initiated proceedings claiming divorce and ancillary relief by way of proper provision under the Family Law (Divorce) Act 1996. The parties resolved many issues but there were three issues outstanding, namely: (a) the value of the husband’s shareholding in the Group; (b) the extent to which the Court should have regard to a 1991 separation agreement; and (c) the quantum of provision.

Held by Abbott J. that the settlement was a reasonable one. The settlement should not act as a restraint in relation to providing reasonable resources to enable the wife to catch up with modern prosperity and to receive an adequate and proper amount of resources to provide security which she would lose by foregoing succession rights in the post divorce situation.

Reporter: R.W.

FAMILY LAW (DIVORCE) ACT 1996

G (R) v G (C) 2005 2 IR 418

K (M) v K (J) 2003 1 IR 326

A (W) v A (M) 2005 1 IR 1 2005 1 ILRM 517 2004 1 1 2004 IEHC 387

T (D) v T (C) 2002 3 IR 334

SUCCESSION ACT 1965

Mr. Justice Henry Abbott

1 The applicant and the respondent (to whom I shall refer to as the wife and the husband) were married to each other on the 4th day of February, 1967. Three children were born to the marriage, L. on the 24th August, 1967, J. on the 11th April, 1969 and T. born on the 15th April, 1974.

2 The wife had been a secretary and gave up her employment for her marriage. The husband worked in the family firm which shall be referred to as the "Group" which term includes the additional associated or subsidiary firms accumulated since that time. They lived in what was described by the wife in evidence, and I accept, was "cautious comfort".

3 Unhappy differences arose between the husband and wife as a result of which they separated on the 3rd July, 1991. Different reasons were advanced for the cause of the separation. The wife on the one hand stated in evidence that they arose from the lack of attention and intimacy afforded to her by the husband after the birth of their last child in the mid 1970's. The husband on the other hand asserted that they were a number of (3) affairs, the final of which caused the break-up.

4 A deed of separation was executed by the husband and wife on the 3rd July, 1991, which acknowledged that the wife had purchased a house with the proceeds of the sale of the family home and I should say from the outset that the deed of separation does not refer to the conduct of either of the spouses and it has been conceded in evidence by the husband that conduct had nothing to do with the terms of the separation agreement. I can say then that conduct is not a matter to which the court shall have regard in relation to the deliberations which follow.

5 These proceedings were initiated by the wife on the 8th May, 2002, in which she claims divorce and ancillary relief by way of proper provision under the Family Law (Divorce) Act,1996. The separation agreement is admitted by husband and wife to have been made by them having taken legal advice and on the basis of a full and frank disclosure of the assets of the parties. The husband paid the wife £83,000 which represented approximately 60% of the proceeds of the sale of the family home and payment of £25,000 gross per annum by monthly instalments to be varied annually in accordance with the CPI. In the event of fundamental change in the circumstances of either husband or wife, either party should be at liberty to apply to the other for an increase or decrease in the maintenance. There is a further agreement not to sue for additional lump sums etc under existing legislations on "any amendment" thereof. This is technically unenforceable under the Family Law (Divorce) Act, 1996 see(R. G. v. C. G.), [2005] 2 I.R. 418 but nevertheless I will take it as part of the genre which is commonly referred to as a "full and final settlement" clause. In addition the separation agreement provided for valuable pick ups in relation to VHI, provision of second hand motor car, provision of car insurance by the Group, credit facility with the Group for petrol and payment of two sports stops. In addition the husband agreed to procure the continuation of his pension arrangements with his employer insofar as it benefited the wife in the event of the husband's death. There was no extinguishment of succession rights.

6 The separation agreement was clearly made on the assumption that the wife was not and would not be employed. By the date of the separation agreement in 1991 the husband had become joint managing director of the immediate company in the Group and he remains a director of the Group and is also a director of many associated and subsidiary companies within the same. His existing shareholding in the Group was estimated to be worth c. £400,000.00.

7 The husband is 63 and the wife is 62. While the husband has envisaged reducing some of his day to day commitments within the Group, and has done so, he nevertheless intends to continue working in the Group within the foreseeable future, to face the challenges the Group faces in the next few years. This employment up to a reasonably active level will be subject, of course, to his health. He has recently come to realise that he is in a moderate state of health insofar as he will have to take care of himself, with blood pressure and diabetes concerns. The wife's health is excellent.

8 To the credit of the parties and their advisors many issues were resolved in the lead up and course of the hearing of this case which commenced on the 18th July, 2006 and concluded on the 25th July, 2006. There remains a set of three issues outstanding, namely -

9 (a) The value of the husband's shareholding in the Group, and value of his assets relative to the assets of the wife.

10 (b) The extent to which the court shall have, pursuant to the 1996 Act, regard to the 1991 separation agreement when making provision by way of ancillary relief before granting a decree of divorce.

11 (c) The quantum of such provision.

12 The contest on this issue involved wide ranging debate and evidence on the method evaluation. It was necessary in evidence to examine the complex corporate arrangements in relation to the holding and control within the Group. It is not necessary or appropriate for me to set out in full complexity the detail of these arrangements but it is necessary for me to find the following facts, as I do -

13 1. The husband has a minority non-voting shareholding in S. company, which is the main equity holding vehicle in the Group.

14 2. The husband has voting shares and directorship positions in relation to the Group but does not have controlling voting rights, neither is he in a position of king maker in relation to his shareholding of any of his shareholdings, such as to give them a special value.

15 3. The Group was founded by the husband's grandfather and the ownership thereof has expanded and continues to expand pyramid fashion down the generations to various members of the family in diverse holdings of various companies throughout the Group.

16 The Group has shown profit over the last few years from its distribution business, mainly, although recent challenges within the trade have had the effect of reducing this profit, but the husband and his fellow family shareholders are committed to continue the business of the Group in the distribution trade and do not intend to sell their shareholding, or to float the Group on any stock market, notwithstanding similar events occurring in relation to some of their competitors in the recent past. While there was an internal market evidenced by one transaction between members of the family for shares within the Group, I find that that is not sufficient to establish any meaningful internal market within the company and there are no constitutional means within the Group to facilitate arbitrage or exchange of value within the family. The Group was clearly set up by its founding fathers as one which was suitable for keeping the business within the family. It is likely that the family pyramid will continue to expand and that increasingly professional management will take over as the family numbers expand. Perhaps as the pyramid of ownership expands there might be developments tending towards a sale of the Group or major cash realisation of its assets, but I consider that that event is, while possible, is far too far off on the horizon for the practical purposes of this case.

17 The Group is likely to pay a modest dividend based generally on 1% of profits to its shareholders into the foreseeable future. While the dividend is modest, none of the shareholders appear to be agitating to have same increased, and it is the policy of the Group to maintain the business by reinvestment of profits to secure the future of the company. In current competitive conditions such profits may well be jeopardised in the short term and reinvestment of profits may be more to maintain market position than to expand it, but nevertheless such a reinvestment of profits preserves the opportunity for the company to capitalise on changes and vacancies within the market arising from recent turbulence in that area. The evidence adduced to show that the fixed assets of the Group are valued at a sum in excess of €300 million is not conclusive, by reason of the fact that the sampling method of valuation applied to a mark up of the book value of properties and the accounts, fell down when applied to a number of properties which were actually sold, and also by reason of the unsatisfactory nature, not so much the valuers called on behalf...