Acrimonious divorce proceedings cost husband millions

The acrimonious aftermath of a brief marriage cost a husband millions of dollars, the High Court has heard. Opening his judgement, Mr Justice Peel explained:

“The parties were married for no more than about five months, and have no children. They are both in their fifties. Such cases should be easy to resolve. Not so here; the parties have litigated bitterly, at enormous cost and in minute forensic detail for over a year and a half.”

The husband in this case was a US citizen, a successful software engineer who worked on the west coast of the United States. Meanwhile, the wife had a Scandinavian background but lived in London, where she enjoyed a successful career as a classical musician and composer.

They met while travelling on Eurostar and began living together a number of months later. The wife claimed this took place was in November 2018, while the husband insisted they did not begin to cohabit until December the following year, when they moved into a house in Kensington, London. They had already been engaged for well over six months by that point. The husband spent no less than £125,000 on an engagement ring.

The couple were married the following month (January 2020). Mr Justice Peel noted:

“The marriage became fraught almost immediately, although I am satisfied that it did not finally end until June 2020. Thus, the total period of cohabitation and marriage was no more than about 7 months (December 2019 to June 2020), according to [the husband}, or 19 months (November 2018 to June 2020), according to [the wife].”

Divorce proceedings soon began. The estranged couple argued over the value of the husband’s interest in a technology start-up, which he had left after only a year. Under the terms of his departure, the husband was entitled to 700,000 ‘units’ of ownership in the firm, once it had been listed on the stock market.

In 2021, he ‘pre-sold’ more than 400,000 of these units – i.e., sold a future entitlement to the units, receiving more than $11.5 million in return. Their eventual value of on the stock market remained uncertain at that point. He kept this sale from his estranged wife, fearing she might attempt to inform the company founder and cause trouble.

Not long afterwards, the company was floated on the stock market, and the value of the husband’s unit entitlement soared into the hundreds of millions before dropping again. However, the husband was unable to sell any of his units during the initial surge because the wife and her solicitor had secretly contacted the start-up, insisting the husband’s units not be released until a financial settlement had been reached in the ongoing divorce proceedings.

This prevented the husband from fulfilling his pre-sale obligations and also from realising the initial value of his units. Combined, these two factors amounted to a substantial, multimillion dollar loss for the husband.

Mr Justice Peel’s ruling concerned five issues:

• How long the couple lived together before marriage.
• The extent to which the ‘sharing principle applied to the husband’s assets- i.e., to what extent could his assets be considered joint marital property subject to division on divorce?
• The wife’s financial needs following the divorce.
• Whether the husband had wrongly concealed the unit pre-sale, and whether the wife had wrongly prevented their release to the husband.

The Judge established that the couple’s total assets amounted to £11,801,754, and that the great majority of that belonged to the husband. He had offered a clean break settlement of £400,000 – meaning there would be further financial ties between the couple. But he had already given her an advance of a similar amount to cover her legal fees. Meanwhile, the wife claimed 50 per cent of both the remaining units and of the profits generated by the sales to date: this would amount to over £6 million in total.

Mr Justice Peel sided with the husband on the issue of cohabitation, accepting that this had not begun until they moved into the house in Kensington. This meant that the ownership units were not marital property which should be divided between the estranged couple, because his entitlement to them predated the period in which they lived together. Engagement was not sufficient to give the wife any rights to the units.

The Judge was also sympathetic to the husband regarding the unit pre-sales, but he did conclude that failing to disclose this to the court had amounted to litigation misconduct.

“[The husband] H sold part of his entitlement to units prior to release day. H failed to disclose this to W or the court. I accept that his reason was because of concerns that W would speak to the founder, who might seek to interfere with a smooth realisation of value. As it transpired, his concerns were well founded but, whatever the reason, he should have informed [the wife] and the court. I regard his failure to disclose these matters to [the wife] or the court as litigation misconduct, which would ordinarily sound [result] in [a] costs [order]. However, I am satisfied that [the husband], in pre-selling units, was acting, as he saw it, prudently. He was not a man of vast wealth, and it was logical to attempt to hedge the outcome of the [stock market] listing.”

Mr Justice Peel continued:

“Although he concealed the fact of pre-sales, I do not think that they were carried out to defeat [the wife]’s [financial claims]. Apart from anything else, it was not in his own interests to sell at a below achievable price. All the monies went into an account which has been disclosed, and upon which he has not drawn save to meet his, and [the wife]’s, legal fees; there is no suggestion that [the husband] has concealed monies.”

By contrast, the wife’s behaviour in preventing the release of the husband’s units on the day the firm was listed on the stock market did amount to “gross and obvious” misconduct “which the court is entitled to take into account.”

She had been “reckless” in interfering with the husband’s rights under his contract with the start-up, the Judge declared. She should not have acted unilaterally by writing to the firm, instead of first making a claim in court. The wife had “directly caused [the husband] financial loss running into tens of millions of dollars.”

She was awarded a divorce settlement of £750,000. But at a second hearing a few days later concerning liability for legal costs, the wife was ordered to make a substantial £100,000 contribution to the costs of the case as a result of her misconduct, with Mr Justice Peel noting that this sum:

“…might well have been higher had it not been for [the husband’s own] litigation misconduct.”

The full judgement is here, while the judgement concerning costs is available here.

If you’d like to discuss any aspect of this case, or these issues affecting your separation, please contact Simon, Kathryn, Jeremy, Gail, Adam or Tricia on 01223 443333.