High Court:Neutral citation (2010) IEHC 440. Judgment was delivered on July 14th, 2010, by Mr Justice Henry Abbott.
Judgment
The duty of a family law court involves not the division of assets between the spouses to the exclusion of the creditors, but the provision of necessities such as living accommodation, basic maintenance and in appropriate cases, security therefore.
Background
The couple were given the initials XY and YX by the judge to ensure their anonymity, as the vast majority of the husband’s assets were in the process of being taken over by the National Assets Management Agency (Nama).
They were married in 1982 and had two children, neither of them now dependent.
It was agreed that they were entitled to a decree of judicial separation under the 1989 Act. The only issue to be decided was that of proper provision for the spouses and children.
This was a case involving very substantial assets, but even greater debts.
Apart from the family home with a mews attached, which was in a trust, the husband’s property was in substantial negative equity, though when the case began in 2007 his assets amounted to some hundreds of millions of euros.
The case underwent a number of case management sessions during which the details of the assets and liabilities were presented in a schematic way and discussed with a financial expert on behalf of the wife.
Eventually the case was heard over 10 days between November 2009 and March 2010.
The spreadsheet prepared for the court set out the assets and their ownership and outlined their value under various hypotheses: a forced sale by banks; their market value two to three years out; their long-term market value; the husband’s percentage share and his borrowings and their net value under a forced sale and long-term market value.
The husband’s total present borrowings were €2.3 billion, while the value of the assets was €1.4 billion in a forced sale by the banks and €2.08 billion two to three years out.
At the end of the 10 years of Nama, the husband’s borrowings were expected to exceed his assets by just over €112 million.
Mr Justice Abbott said he accepted the argument against the assets in the spreadsheet achieving a positive net value within the 10-year term of Nama.
During the case it emerged that the family home, valued at €4.4 million, was held by a trust of which the husband was the beneficiary and that the trust could be amended to name the wife as beneficiary.
The wife also had €600,000 in cash and property worth €300,000.
The husband earned €40,000 a year from a company managing the assets named in the spreadsheet, and he expected to continue doing so under Nama.
He was prepared to pay the wife €40,000 in maintenance, and the judge said he expected her to be able to earn €20,000 in rent from the mews attached to the family home.
He said she should ultimately consider selling the family home in order to discharge the considerable amount of tax accumulated through the initial tax avoidance in the trust, provide more modest accommodation for herself and invest the rest to secure an income.
The husband would also need at least €40,000 per annum in living expenses, regardless of whether or not Nama left him managing the assets for his company.
There was some dispute about the contribution of the wife to the business.
The judge said he accepted her evidence that both partners contributed equally to the family and its welfare and resources.
She was certainly entitled to have the benefit of the family home encumbrance-free, rather than let it be immersed in the debt of the husband’s businesses.
Decision
He considered the implications of bankruptcy law and the Nama legislation for provision to be made.
There was no case law in Ireland on the application of the bankruptcy legislation to property transfers made in separation or divorce, although there was English case law, which he considered was persuasive authority for the resolution of any conflict arising from the conflict between the provisions of family law proceedings and the bankruptcy code.
It was the duty of a family law court, while bearing in mind the Bankruptcy Act 1988, to act with probity and only for the purpose of making such provision as was necessary for the spouses in accordance with the 1989 Judicial Separation Act, as amended, he said.
The proper exercise of this jurisdiction involved, not the division of assets between the spouses to the exclusion of the creditors, but the provisions of necessities such as living accommodation, basic maintenance and in appropriate cases security therefore.
This should not be allowed to act in an oppressive manner over the rights of creditors.
Making the orders he outlined earlier, he said it was important to Nama and other creditors that these proceedings were determined and certainty established.
He added that the latitude which a family court had in relation to basic provision in the face of financial difficulties was not to be taken as a licence for unnecessary and extortionate claims of litigation.
Referring to arguments made about the future disposal of any possible gains in net assets at the end of the Nama process, he allocated these speculative gains 80/20 in favour of the husband.
The full judgment is on courts.ie
Gerry Durcan SC and Frank Shields BL, instructed by Gore and Grimes Solicitors, for the husband; John Rogers SC and Nuala Jackson BL, instructed by Beauchamps Solicitors, for the wife