As referred to in paragraph 2.5 of the Guide to Good Practice
WITHOUT PREJUDUCE – FOR USE AT THE FDR ONLY Case No.:
IN THE PRINCIPAL REGISTRY OF THE FAMILY DIVISION Or
IN THE [ ] COUNTY COURT BETWEEN:
ANITA JANE SMITH Petitioner
-and-
JOHN HAROLD SMITH Respondent
HUSBAND’S POSITION STATEMENT/CASE OUTLINE FOR FDR ON 23 JULY 2012
1. This case summary is intended to be read in conjunction with (1) the chronology and asset schedule and (2) the bundle of relevant correspondence, attached hereto.1
2. Mrs Smith shall be referred to as ‘W’ and Mr Smith as ‘H’ throughout this document.
Background
3. The parties separated just over 2 years ago (27.11.2006) after a 23-year marriage. There are two children, David (17) and Lucy (18). David lives with W at the former matrimonial home (‘the FMH’) in Lower Witham, he is at King Edward’s school (West Laughton) and it is anticipated he will go on to university. Lucy has until recently resided at a friend’s house and is on a gap year. She will attend Cambridge University next year to study medicine. H lives in a rented flat in West Laughton.
4. H (49) runs The Vine Garage in Burnham. He also has a 50% share in a pub/hotel, The Newick Arms Hotel, and he owns a shop, 16 Terminus Road, which is rented to Paddy Power at a rent of £28,000 p.a.
5. W (48) works as a secretary for a local firm of surveyors.
Assets
6. There is agreement as to the value of all the main assets, essentially as per the Order made at the First Appointment (16.10.08). Since the Order, W has had a valuation completed on the hotel, but ‘does not seek to rely on it’, so we presume it is a lower value than that put forward by H. The only fine- tuning to the assets is that W says £450,000 for the shop, whereas the husband says £440,000. Notwithstanding the agreed business valuation, H accepts that a separate figure should be included for stock. As at 31 March 2008, the trade value of the stock was £128,000 (the anticipated sale value of the stock was £186,000) since then the stock has reduced further to £100,000.
7. Accordingly, the main assets are:
(i) Equity in the matrimonial home £1,428,000; (ii) Pension £373,000 (£322,000 of this is H’s);
(iii) Business assets of £1,280,000, without taking into account the business overdraft, running at £300,000.
There is also a flat in Spain owned by H with a small equity of £49,400.
Liabilities
8. H has very significant liabilities, totalling (excluding the mortgage on the matrimonial home and Spanish property) in excess of £2.4 million. The Vine Garage was purchased in March 2007 for £1,470,000 (£1,200,000 for the building and £270,000 for the goodwill), effectively on 100% borrowing.
9. The business has not been able to sustain the high level of borrowing repayments, hence (notwithstanding H’s significantly reduced drawings) the rise of the overdraft from around £100,000 to its current £300,000. Ideally H would agree with the bank to reschedule the repayments but he is nervous to approach the bank given the reduction in turnover and profit and the bank’s concern at his high level of indebtedness.
Proposals
10. H accepts that W should share equally in the fruits of the marriage partnership. On the basis of our schedule, a strict 50:50 split would give W total assets of £1,379,220. If we separate pension and non-pension assets, this would give her £1,192,698 of capital assets and a pension pot of £186,500 (ie involving a pension transfer to W of £135,500). H’s proposals of 31 October provide W with capital of £1,413,044, ie a lump sum of £1,040,000 plus a pension transfer of H’s entire pension fund giving W a pension fund of £373,044.
11. W is in the process of purchasing a property for £990,000, plus setting up costs of £50,000 (her parents are ‘loaning’ her the money to complete the purchase before the matrimonial home is
sold). H’s view is that a figure of around £800,000 is a more appropriate housing fund, but nevertheless he has agreed that W receive a lump sum of £1,040,000 out of the net proceeds of sale of the FMH. This will leave him with approximately £400,000.
12. In order to bring W up to the 50% mark, she would need a further £288,220 (ie the balance of £339,220, less her own pension fund of £51,000). Put crudely, if W requires £1,040,000 from the net proceeds of sale, then the only way H can fund the balance of the lump sum is by way of pension share. This will be a very attractive option for W, as she would be left with a pension fund of £373,000, which she can either draw at age 50 (including taking 25% of the fund by way of lump sum) or it could be left untouched to draw down at a later stage.
13. W has expressed a desire to take the Paddy Power shop but the only way it can be achieved is if she takes less of the liquid capital, hence our alternative offer, dated 1 December 2008
(£950,000 plus the shop worth £440,000). The difficulty is that the bank, who are becoming increasingly concerned about H’s overall level of indebtedness, have made it clear that, in addition to the two loans secured on the shop (ie £300,000 in total), once they lose the ‘comfort’ of H’s interest in the FMH (ie once the home is sold), they will also require the
company overdraft to be repaid. Consequently, if the house is sold and the shop is transferred, H will need £600,000 to reduce his borrowing to an acceptable level to the bank. However (even ignoring his own housing needs) he will only receive a maximum of £400,000 cash from the net proceeds of sale.
14. Our proposals of 31 October 2008 provide W with 50% of the overall assets (including H’s business assets). W would receive just short of 75% of the liquid capital, plus the entire accumulated pension. H would only be left with his business assets (the £400,000 equity he receives from the house would be swallowed up by the bank) and a very significant level of indebtedness. H would face immense difficulties raising sufficient funds to re-house himself.
Maintenance
15. In relation to maintenance, the court is referred to BDO Stoy Hayward’s letter of 12 October, which says ‘prior to the purchase of The Vine Garage Mr Smith’s drawings (including pension contributions) were in the region of £300,000 per annum. However the financing of the acquisition and the difficult trading conditions referred to above have adversely affected both cash flow and profits, such that our client’s drawings in the year ended 31 March 2008 were reduced to £42,500 (ie £3,500 per month). They continue currently at this figure which in our view, given the current levels of borrowing and profitability, is the maximum that the business is able to sustain.’
16. H has never received an income from the hotel, as it is has not yet made a profit, and his only other source of income is the rent from the flat at £14,000 per calendar month gross [£11,000 net] (though he hopes that this will increase to around £17,000pa after the rent review in October of this year). Accordingly, H’s total net income is £53,500.
17. It is submitted that, on the basis H will remain responsible for the children’s school fees (£9,000) and, in due course, university fees (probably for both children), his proposal of £25,000 global maintenance is more than generous. Indeed, even to pay maintenance at this level, H is relying on the (far from certain) fact that the financial position of the garage will improve.
18. If W accepts the alternative offer and the Paddy Power shop is transferred to her, she will have a net income of £20,000pa (ie £14,000 gross [£11,000 net] from the shop, plus her own net earnings of £9,286pa). If £17,000 rental income is achieved at the October rent review, this would give W a net income of just in excess of £22,000pa. Conversely, H (deprived of the income from the shop) would have income of £42,500pa, plus a significant liability for school and university fees, plus children’s maintenance.