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	England and Wales Family Court Decisions (High Court Judges)
You are here: BAILII >> Databases >> England and Wales Family Court Decisions (High Court Judges) >> R v B & Ors [2017] EWFC 33 (17 March 2017) URL: http://www.bailii.org/ew/cases/EWFC/HCJ/2017/33.html Cite as: [2017] EWFC 33

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IN THE FAMILY COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		17th March 2017

MR JUSTICE MOOR:-

1. I have been hearing an application for financial remedies dated 18^th June 2014 by the husband (Mr R) against his former wife, Ms B. It is one of the most remarkable cases I have heard. There are several clear lessons to be learned from it by spouses in general relating to the ownership of property and the payment of tax. First, if you own property, you should ensure that the ownership structure is transparent and legitimate. Second, if you earn money or have a financial benefit, you must declare it to HMRC and pay the tax.
2. The costs of this litigation have been completely out of control. The issues have been numerous and complicated. There has been significant satellite litigation, including a ten-day trial of a preliminary issue before Mostyn J which achieved absolutely nothing apart from the waste of over £2 million in costs. At the beginning of this litigation, there was a dispute as to the beneficial ownership of just about every property connected to these parties. I am quite satisfied that this was entirely because of the irresponsible way in which Mr R has conducted the family finances.
3. Despite a high standard of living for over twenty years, Mr R has not paid so much as a penny in tax. He has pretended to all and sundry that he has had absolutely no income during that time. Not only was that a complete fiction, it has come at a very heavy price to Ms B and her family. He has raided her family finances with no consideration to the fiscal consequences of doing so. His claim that everything was entirely above board because he noted the loans in a Sage spreadsheet was, quite frankly, palpable nonsense. I am going to have to make some very serious findings of fact. Very unusually, I have come to the clear conclusion that this is a case where section 25(2)(g) is engaged, namely there has been conduct that it would be inequitable for me to disregard.

The history

4. To understand this case fully, it is necessary to go back to the 1950s/1960s when JB, Ms B's grandfather, established a property business ("the B Family Business"). The first property, M House, was purchased in 1946 and is now worth £4.5 million. The jewel in the crown, in S Square, London, W1 was bought in 1951 and is today valued at £11.1 million. In due course, his son, MB joined the business and, eventually, took it over. Between 1946 and 1969, twenty-one properties were acquired with a combined gross value today of around £48.5 million. These properties were held in a corporate company structure, known as the IEG.
5. A further sixteen properties were acquired between 1971 and 1991. They are now worth approximately £17.5 million. In due course, James B set up SEL and FEL. In total, the properties purchased before 1991 but retained today amount to some 75% of the total portfolio by gross value, although I accept that statistic does not necessarily reflect work done on these properties more recently. JB died in 1988 and there was a significant dispute as to the value of his estate and the tax to be paid upon it.
6. MB had four children, namely Ms B, WB, SB and GB. Ms B was born in September 1961, so she is aged 55. She resides at 23 CR, London with the children. She is an artist and a housewife. I am satisfied that she is financially unsophisticated and is indeed vulnerable to exploitation by those without moral scruples.
7. Mr R is now aged 56. He is currently residing in BP, London, NW1. He lives there with his girlfriend who is very seriously ill. He describes himself as a former financial consultant/property manager. He was born in England and has lived here virtually continuously for the past twenty-seven years but he says he is domiciled in France, where he spent part of his childhood. He started, but did not complete, a degree here. He lived for a short period in the United States and has a green card through his mother. He returned here and ran a fashion business in London with up to eight shops. He did not take a salary as there was "no need for him to do so". He told me his then girlfriend paid the tax. He has a British and a French passport but has no National Insurance number and is not on the electoral roll. He has never filed a tax return, telling me he has never been liable for UK tax, so far as he is aware. In due course, he sold the shops and bought a film studio through some form of offshore structure. The film studio was also sold in due course. He owned a property in Surrey. As far as I can ascertain, this is the only property or asset he has ever held in his name.
8. In August 1983, Mr R orchestrated the purchase of a maisonette on the second and third floors of a property in B Road, London in the name of his then girlfriend. Ms B purchased a property at 7 C Road, London for around £100,000 in 1986 with the financial help of her father.
9. In the late 1980s, Mr R spent a couple of years in Australia where he met Ms B in 1988/1989 and a relationship commenced. They returned to this country and lived together at 7 C Road. In around 1991, Ms B purchased a maisonette at CA Street with the net proceeds of C Road. The maisonette had previously been owned by the B family. Mr R and Ms B moved in. It is clear that Mr R began to be involved in the B Group companies following his return to this country. He also assisted in the administration of JB's estate although top quality professionals had already been instructed by MB, including Grant Thornton. It is Mr R's case that he saved the estate a very large amount of Inheritance Tax as a result of his involvement. I will return to this when I make my findings of fact.
10. The couple returned to Australia to marry in January 1993. Ms B says that this was done as Mr R did not want any record of a marriage in this country. He denies that was the case. In 1994, the FPG was set up. Mr R claims this as his own but it was clearly not in his name. Moreover, it is tolerably clear that it was not his capital that financed it. He says he went into partnership with MB. Ms B denies this but accepts that he was fully involved in the business.
11. There are two children of the family. X who is aged 22. She was studying for a degree at University but has had to take time off due to stress. She hopes to return to study this autumn. Y is 20. He has also suffered from similar problems but is also hoping to start a degree this autumn. Very regrettably, they have had to be involved in this litigation as a result of the financial structure established. They have sat in court virtually throughout although their lawyer has only been involved to the extent of making written submissions at the beginning and oral submissions in closing. I have no doubt the children will have found this whole process immensely difficult and stressful.
12. On 17^th May 1993, MB gifted the sum of £330,000 to Ms B to enable her to acquire a long leasehold interest in CA Street in the sum of £570,000. A loan of £250,000 was taken out from Barclays Bank. There were five commercial tenants who were dentists in the lower floors. In due course, they were removed and the property became a large family home. The property was subsequently enfranchished in March 2000. On 17^th May 1993, Ms B executed a deed of trust declaring the she held the property on trust for herself and her three brothers in equal shares. She says she forgot she executed the Deed and it was eventually discovered in her father's safe in 2014.
13. In around February 1995, Mr R acquired the remainder of the lease of the bottom flat at 22 B Road through his mother, AS. On 13^th June 1995, B Road Properties 1995 Ltd was incorporated. In February 1997, these shares were transferred to CU Ltd and, in June 1998, the enfranchisement of the freehold of 22 B Road was achieved and transferred to B Road Properties 1995 Ltd funded by a mortgage of £1 million. In August 1999, AS and her husband moved to live at 1 TC.
14. On 29^th December 1995, the JB Settlement was wound up. Deeds of Appointment were executed appointing the assets equally to Ms B and her brothers. On 12^th September 1996, six settlements were established in Jersey known as the LV Settlements. It is pretty clear that Mr R was a driving force behind this decision but, equally, it is clear that top quality advice was taken. There were six separate settlements, known as LV C, LV D, LV H, LV K, LV S and LV W. Other than LV C, these were all discretionary trusts for the benefit of the four B children and grandchildren. LV K held the companies in FPG. LV W held those relating to the IEG Group and the SE Group. H contained CRM Ltd. LV B was PE. LV D and S are dormant. LV C contains BE and SER.
15. Other than in relation to LV C, all the Settlements have fourteen beneficiaries, namely the four B siblings and their children, including Ms B and the two children of the marriage. I am satisfied that the intention was that each of the four siblings and their children would benefit from a notional one-quarter of these trusts. At the time, Mr R was a beneficiary of these settlements but he lost that status on pronouncement of Decree Absolute. Three further LV W Settlements known as W1, W2 and W3 were settled on 15^th April 1997 and LV B1 and B2 on 31^st August 1999. All were on the same terms.
16. LV C was different. It is solely for the benefit of Ms B and the two children, although Mr R was again a beneficiary until Decree Absolute. It is accepted that it is a post-nuptial settlement. It holds CU Limited and therefore the property at 22 B Road. It also owns a couple of properties in a company known as SG Ltd. I consider it significant that these properties were treated differently to all the other properties in the B Group. A further settlement, known as LV C1 was settled on 18^th August 1997.
17. In 1996, the B siblings sold shares in what had been the JB Settlement to LV K for loan notes worth in total £394,000. It followed that each received £98,500. These have been described as the UK Loan Notes. In 1997, the B siblings sold shares in SE Group to LV W for loan notes with a value totalling £1,992,240, such that each sibling received loan notes worth £480,560.
18. In 1997, Mr R was involved in some litigation with CB Bank relating to a tenancy the bank had in the Farnham property. The case was heard by HHJ Havery QC. Mr R lost the litigation. Indeed, a costs order was made against him and, after an oral examination, discharged by MB in the sum of approximately £93,000. He says his costs were paid by an insurance policy. Mr Dyer QC and Mr Anderson, who appear on behalf of Ms B, rely on the trenchant findings of the judge:-

"…I found Mr R to be so unreliable a witness that I am not prepared to accept as true, on a balance of probabilities, anything that (he) said that is in issue unless it is supported by other evidence [28]

I think this case has been accurately described as a try-on by the plaintiff. It was so grossly exaggerated that, in my judgment, it can be described as in large measure an abuse of the process of the court [79]."

19. During 1998, MB indicated that he wished Mr R to have 20% of IEG, on the basis that his four children had the other 80%. Mr R's case is that this was because MB recognised Mr R's "excellent stewardship of the family companies". Ms B's case is that Mr R declined this offer and required the shares to be held for the two children as part of his general obsession with not owning anything at all in his own name.
20. In or around 2002, a very substantial property was purchased in Southern France. I will refer to it as BGL. The purchase price was just over £1 million. Mr R claims he financed this. He says there were two sources of funding. The first was an insurance claim in relation to flooding at CA Street. The second was a profit made on a cinema in Dorset. Mr R told me that contracts were exchanged to acquire the cinema but he managed to assign the purchase to a third party at a significant profit and it was the third party that completed. Thereafter, very considerable sums of money were spent on refurbishing and developing BGL into an intended luxury hotel. Although publicity material refers to a total investment of £15 million, it does seem that this is hyperbole. The actual figure appears to have been around £6.5 million. A huge issue in the case is the source of this funding and the way in which it was extracted from the companies in the widest sense. I must make detailed findings. I therefore say no more at this stage other than that Ms B's case is that the entire project was conducted improperly by Mr R both as to funding and as to getting the necessary planning approvals. She argues that the lack of the appropriate planning consents now makes the property virtually unsellable. Mr R denies the allegations, arguing that he had the requisite planning approvals. It is his case that the property is in need of significant further works as a result of storm damage, difficulties with the water supply, problems with the access road and the like.
21. In January 2005, the marriage broke down. Ms B vacated CA Street. A property was acquired in her sole name at 56 VG, Hampstead for £2,691,906 including costs of purchase. This was funded by a loan with HSBC Bank taken out on CA Street. Mr R continued to live in CA Street. The borrowing was refinanced on a couple of occasions. Eventually, the amount owing came to £7.5 million. I will have to analyse exactly how this sum was used.
22. Mr R continued to run the B Group companies, notwithstanding the separation. Mr MB retired as Managing Director of IEG in October 2005 and Mr R was left in sole charge. Mr B continued to run and be managing director of other companies such as SE and FE but his involvement was clearly reducing by the year. He died on 26^th June 2010. From that point, Mr R ran the B Family Business unfettered. In a memorandum dated 9^th February 2010, Mr B had described Mr R as "the Captain of the Ship" and referred to his "excellent stewardship" of the business. A surprising feature is that Mr R continued to take no salary whatsoever for the next eight years. I will have to make findings of fact as to how he financed himself during this period. It is abundantly clear, by their own admission, that, particularly following the death of Mr MB in 2010, the four B siblings paid very little attention to the business during this period. They appear to have signed documents whenever asked to do so by Mr R or the administrator, PJ, but to have had no input into strategy or decision making, notwithstanding their roles as directors. In effect, Mr R was able to do as he wished. His case is that he acted entirely properly throughout. The siblings argue that he abused their trust.
23. Two loans were taken out with HSBC, each in the sum of £5 million. The first was in IEG Ltd. The second was in RE Ltd. The RE money was undoubtedly used for R family expenditure in addition to the £7.5 million mortgage on CA Street. The money went from RE to the R family via Ms B's HSBC account. Again, it is clear that this was at the direction of Mr R. A schedule of the total expenditure from the HSBC accounts from inception to 31^st March 2012 shows £14,003,195 going out of the accounts. There is very significant dispute as to the RE loan. The B siblings say that it was hidden from them. Mr R disputes this vigorously. He describes this money as the "Brunswick" loan. His case is that this money was secured on the B Road property which he viewed as his. He therefore contends that it was legitimate to spend it on R family expenditure. Ms B's position, however, is that it was entirely illegitimate. She argues that RE Ltd was not part of the LV C Settlement. It was a company in the main LV settlements that was held for all fourteen beneficiaries. She says that the loan was not just secured on the B Road but also on some garages held by companies in the main settlements and with a guarantee from IEG. I must resolve these factual issues.
24. On 7th January 2005, Ms B executed a Deed of Trust that she held CA Street for Mr R. She told me in evidence that she viewed the property as being Mr R's as she had an alternative, admittedly much cheaper home. Mr R did not, however, accept the gift. He executed a further deed to the effect that he held the property on trust for the two children of the family also dated 7^th January 2005. There is also a third Deed dated the same day in which he gave the children one-third of the property although the copy in the bundle does not seem to have been executed. There was an issue as to whether or not these three deeds were actually executed in 2010 and backdated but I do not need to make any findings as to that.
25. Press Reports say that Ms B joined an online dating agency following the separation from Mr R and met a lawyer, Mr AD in June 2007. He told her that he had been a barrister, currency trader and property magnate. She formed a relationship with Mr AD and became entirely dependent on him. There appears little doubt that he managed to secure very significant finance from her. Mr Howard QC and Mr Chandler on behalf of Mr R put the total cost to Ms B at £7.5 million. This figure includes £3.8 million loaned by MB in May 2010. This money came from a UBS account in Switzerland that appears to have been a numbered account. Just under £1 million came from the HSBC loan on CR Street. In 2009, Mr AD convinced Ms B to sell 56 VG and purchase a cheaper property. She agreed and 47 CR was selected as her new home. It was bought in the name of a company known as TS Property Ltd, which was owned by Mr AD's Guernsey Trust, the SH Trust. The cost was approximately £1.9 million and there seems little doubt that the loan from MB was used to fund this purchase. As remarkable as it may now seem, when Ms B sold VG, she was made to purchase 47 CR from TS Property Ltd for £2.35 million. Indeed, part of the increase in value is said to have been because of works done to the property that she paid for. Moreover, further money was advanced to Mr AD from the proceeds of sale of VG. In addition, she paid smaller sums on his behalf, such as for a stay in the Priory Hospital, from her Barclays account. The Barclays account was then topped up by PJ from the HSBC accounts.
26. I have not heard from Mr AD but the parties' cases are both that he was a dishonest fraudster. The vast majority of the money disappeared. Eventually, Ms B recognised his true character and sued him with the assistance of Mr R and her family. Just over £1 million in litigation funding was provided by SEL. Mr AD's defence was that the money had been gifted to him although it is difficult to see why that should have been the case. I have no idea what his explanation was for the apparent disappearance/loss of so much money. A settlement was eventually reached on 29^th May 2013 whereby he returned to Ms B all the assets that could be found, namely TS Property Ltd, consisting of three properties, with a net value of approximately £2 million. Remarkably, Mr AD is entitled to continue to reside in one of those properties, 66 JS in East Sussex until June 2018. The settlement also involved her taking on an overseas property at 7 GL that appears to have cost her money when sold due to a mortgage guarantee. Moreover, Mr AD has defaulted on a provision that he makes further payments to her.
27. On 12th March 2010, Ms B presented a divorce petition on the grounds of five years' separation. A decree nisi was pronounced on 19^th July 2010 and made absolute on 11^th February 2011. There were negotiations between the parties. Ms B was represented by a firm of solicitors called HUBBARD, PEGMAN & WHITNEY. The agreement reached says that Mr R was represented by Alen-Buckley Solicitors but he denies that he had any advice on the matter. An agreement was undoubtedly drafted and dated 2^nd September 2010. It was executed as a deed by Ms B but not by Mr R. It is a quite remarkable document in the circumstances as they are now known. Ms B acknowledged that she held CA Street as trustee for Mr R and the children. Mr R acknowledges that all accounts with HSBC in the name of Ms B have been utilised by him. Pending alternative banking arrangements, Ms B consents to his continued use of such accounts. It is the Operative Provisions that follow that are particularly hard to understand. The first is that Mr R would pay or procure the payment of £1 million to Ms B in full and final settlement of all such claims as she might have against him for capital arising out of the marriage. In circumstances where he had no assets whatsoever, it is impossible to see how he could comply other than by using Ms B's resources. The document then says that he shall pay or procure the payment of the gross sum of £150,000 per annum to her in as tax efficient manner as English law permits as maintenance for herself and X/Y. Again, given that he had no income whatsoever, it was an odd provision. The money can only have come from the B Family Business to which she had an entitlement but he did not. Having said that, he did arrange for salary payments to be made to her to comply with this agreement. For the first and only time in the marriage, significant income was received by one party and taxed by HMRC. The third provision was that Mr R would consent to an order in the divorce proceedings whereby his maintenance claims would be dismissed. There was however a term that Ms B would not disturb or interrupt the existing roles played by Mr R in the running of all business entities or companies that are, or were, connected with her or any company in which she has an interest. Finally, provided it did not have adverse tax consequences, Mr R was to discharge all mortgages and charges secured on properties in Ms B's name and, pending doing so, he was to discharge all instalments thereon. Quite how he was to do so without any income is hard to understand.
28. Although it is right that Mr R did not execute this agreement, it is clear that he did participate in it because he complied with its terms in that, on 6th September 2010, he procured the payment of the £1 million from the HSBC funding arrangements. Of this, £900,000 was sent to a firm of solicitors in Romania on the instruction of Mr AD. I have already indicated that Mr R also arranged for Ms B to receive a total income of £150,000 per annum gross.
29. Probate was granted in relation to MB's estate on 10^th February 2011. The gross value of the estate was said to be £3,415,834 and the net value was £3,251,770. His wife, EB was the beneficiary of his estate, such that there was, in general, no inheritance tax chargeable. On 11^th February 2011, 20% of the shares in the SE Group were transferred by EB to CU for aggregate consideration of £467,000 and her shareholding in FE Ltd for £2,155,213. Five loan notes were issued in the sum of £431,042 per loan note which EB then gifted to the four siblings and X/Y. The certificates were executed as a deed by CU Ltd "acting by its authorised signatory, R".
30. On 19^th May 2011, PJ sent an email to WB B which attached "our Combined Schedule of Exposure as requested". The email added that this report only relates to the companies overseen by MB. It said that, in addition, there were two loans in respect of SE in the combined sum of £1.6 million. £1 million remained on deposit in relation to the IEG Bank drawdown. The schedule has a different heading but the name of the file is "Barclays/Combined Schedule of Exposure". It shows total amount owed to Barclays of £3 million and to HSBC of £5 million relating to IEG. There is nothing on the schedule relating to a further loan of £5 million in RE Ltd.
31. On 9^th November 2011, a deed was executed by Capita Trustee Services Ltd excluding the spouses, widows and widowers of the four B siblings as beneficiaries and of their children and remoter issue. Whilst, at first sight, it might have been thought that this was designed to exclude Mr R, the simple fact is that he had already been excluded by the pronouncement of decree absolute. It may have had more to do with a fear that Ms B would marry Mr AD.
32. On 24^th April 2012, EB died. Her Grant of Probate is dated 7^th October 2013 and shows a gross estate of £400,732 and a net estate of only £282,360. By 27^th September 2012, the 20% interest in IEG previously held by MB and EB and then held by Ms B as to 10% and EB as to 10% both in trust for X and Y had also been sold to CU Ltd. Mr R said that the loan notes held by the B siblings has been mortgaged to pay the inheritance tax on EB's estate.
33. In March 2013, PJ was on long-term sick leave. EW, now the Chief Operating Officer of the B Family Business says he discovered a draft email from Mr R to PJ saying that the Group borrowings were £22 million. He checked with Mr R saying he hoped it was a typographical error but Mr R confirmed it was correct and all bar the £3 million owed to Barclays was with HSBC. Mr EW says he was shocked by this and took advice from a solicitor as to what to do. Eventually, in June 2013, he contacted WB B. In an email dated 14^th June 2013, he set out the total group borrowing. According to Ms B, he told WB that Mr R was running the business to the brink of financial ruin with debts of £17.5 million of which £13.5 million had been spent by Mr R on his projects and that there were £500,000 of unpaid creditors.
34. Mr R's response by email on 17^th June 2013 was to say "not sure why on earth WB was given the extra info on loans. Ms B will now be worrying herself to death as will WB" and to PJ saying "I cannot believe Phil has sent this email to WB or that the matter was even discussed. I specifically asked that RE not be mentioned and really don't know what business Ms B's loans is to him?". The same day he sent an email to EW saying that "WB has now seen the "total table you sent him and shit his pants". I did not want to have a "firm position with him. I just want to pay them off and rearrange in my own good time but feel I am about to have him on my back or no good reason. It's the old adage of what you don't know can't hurt you. But I do not want to "pick up the RE loan" just because he is aware of it now. Please ensure all mail to the boys or Ms B is run past me as we will now be under even more pressure to pay the boys out and reduce the debt…All topics were reasonably open to the boys but this level of detail was never on my agenda".
35. On 29^th August 2013, Mr R was summoned to a meeting at E solicitors with the B siblings. He was summarily dismissed. He has had no involvement with the B Family Business since then. In November 2013, he vacated CA Street and moved into the B Road property. A tenant was found for CA Street paying a rent of £365,000 per annum, although, given the costs of setting up the tenancy and the mortgage on the property, a loss was made even at this level of rent. Worse, Ms B was eventually taxed on the full income as the interest on the mortgage was not tax deductible given that the mortgage had not been taken out to fund the property.
36. In February 2014, Mr R moved to a property at 12 BP. The legal title was held in the name of his sister, MS. For most of the time, he has been living there with his girlfriend.

The litigation

37. On 13^th December 2013, Mr R's mother, AS, who was the protector of the LV Settlements purported to remove the trustees of the LV C settlements, Capita Trustee Services Ltd and replace them with a trust company called Aqua. The B family viewed this as a blatant attempt by Mr R to regain control of these Settlements and, on 12^th February 2014, Ms B instituted proceedings in the Royal Court of Jersey for a declaration that Capita remained the trustee of LV C. This was the first step in what can only be described as ruinous litigation for what has now been over three years. Eventually, the Jersey litigation was settled on terms that Mrs LV would withdraw from being protector and that Hawksford Trustees Jersey Ltd would take over the running of the LV C Settlements. The costs, however, were significant.
38. On 18th June 2014, Mr R issued his Form A for the full range of financial remedies and transfer of property orders. As he had now been deprived of access to the bank accounts, he applied for interim periodical payments and a legal services order on 4th July 2014. He sought interim maintenance of £160,000 pa and payment of his costs at £20,000 per month.
39. In his statement in support, he made the claim that the R family ran FI Properties which was separate from the B Family Business. He said that, at the outset, the B Family Business was worth £3 million but, by the time he was dismissed, the value had increased to £100 million "largely as a result of my efforts". Nevertheless, all assets had been placed either in Ms B's name or in trust for him, her and the two children. He made a virtue of the fact that he had taken no salary or income. He added that the B business is owned for Ms B, her siblings, himself, his mother and step-father, his sister and her children. Quite where he gets that from, I am not sure. He made clear his case that he brought B Road into the marriage by acquiring the flats and enfranchising through his mother and his ex-girlfriend. He said he had been left penniless by his removal from the business and his relationship with his children was fractured.
40. Ms B's statement in reply said that, although Mr R never took a salary and was not an employee, director or shareholder, he simply took money when he wanted to fund his lifestyle. She alleged he spent £15 million on BGL although this was clearly based on the statement in the brochure. She said the property was situated in 110 acres and had 29 bedrooms and three swimming pools. She made the point that Mr R had cars and motorbikes worth £810,350 raising the issue of how these acquisitions were financed. She said he should get paid employment.
41. Mr R's Form E is dated 22nd August 2014. He said that CA Street was worth £11 million but subject to the mortgage of (£7.5 million). He claimed 100% beneficial ownership. He said B Road was worth £15 million but subject to an unknown mortgage. He added that the beneficial owners were himself and his mother. He claimed to be owed £841,076 and put the vehicles he owned at a value of £191,500. He said he had liabilities of (£560,000), which he said, gave him net assets of £3,897,528. He claimed income needs of £376,550 per annum and capital needs of £9,100,000, namely a house at £5 million and a pension fund at £4 million. The standard of living was extremely high and Ms B had engaged in conduct it would be inequitable to disregard, namely the loss of at least £5 million to Mr AD. He claimed to have been instrumental in recovering £3 million.
42. Ms B's Form E is dated 2nd September 2014. She valued 47 CR at £2,350,000 but said it was subject to a litigation loan of (£250,000). She claimed that CA Street was owned beneficially as to 25% each for her and her brothers but she owed them very large sums as a result of the mortgages taken on the property for the exclusive benefit of the R family. She said that 1 TC, W1 was worth £1,400,000 but subject to a mortgage of (£525,000). Although the legal title is held by her and Mr R's mother, AS, it is beneficially owned by IEG Ltd although she had funded the lease extension at a cost of £450,000. She had a modest income from IEG of £38,902 pa gross. Her income needs were £49,990 per annum for herself and £22,250 per annum for the children. The source of the entirety of the matrimonial assets is her inherited wealth and Mr R had virtually ruined the business by spending £13.5 million on his personal projects.
43. Mr R had placed a unilateral notice against the title to 22 B Road. B Road Properties 1995 Ltd could not sell whilst it was in place. Mr R refused to remove the notice. B Road Properties therefore instituted proceedings for a declaration that it held the legal and beneficial interest in 22 B Road. Mr R defended the litigation vigorously. This was entirely regrettable. Given that there is no doubt that the LV C Settlement is post-nuptial, it can be varied pursuant to section 24(1)(c) of the Matrimonial Causes Act 1973. It really did not therefore matter who was the beneficial owner. Despite the clearest of warnings by me in a judgment I gave on 5^th June 2015, the litigation continued regardless. It was set down for hearing before Mostyn J as a preliminary issue in June 2016 with a ten-day time estimate. By the end of the litigation, B Road Properties had spent around £1.3 million in costs. I do not have an exact figure for Mr R's costs but they too were enormous. In addition, BE Estates Ltd brought litigation to establish that it was the beneficial owner of 12 BP rather than Ms MS.
44. I heard Mr R's application for interim periodical payments on 5^th June 2015 over two days. It was agreed that BE Estates Ltd would not take action to evict Mr R from BP until the conclusion of the case nor would it charge him rent. Moreover, BE Estates Ltd would pay the main outgoings. There was a recital that Mr R would have no responsibility for the running, maintenance or costs of BGL. I have to say that, at the time, I had absolutely no idea that Mr R was continuing to enjoy what was, in effect, exclusive occupation of BGL. I made an order for interim periodical payments in the sum of £50,000 per annum from 4^th July 2014. I further made an order that Ms B pay Mr R's costs until 27^th May 2015. Thereafter, there was to be no order as to costs.
45. On 29^th June 2015, the B Family Business and Ms B made voluntary disclosure to HMRC under the Contractual Disclosure Facility (COP9) on the advice of the specialist accountants, Blick Rothenberg. I am sure they were absolutely right to do so. It is their case that very large sums of money are due to HMRC as a result of the financial dealings of Mr R. The B Family Business has paid the sum of £2 million on account.
46. The matter came back before me on 27^th October 2015. It was agreed that Ms B was the sole beneficial owner of TS Property Ltd and that it would not dispose of or diminish the value of its property interests without giving six weeks' notice to Mr R. The property at FH, GR Road had been sold. Part of the proceeds would be used by TS to fund its own liquidity issues. The balance would be distributed equally between the parties after an initial £150,000 payment to Mr R in satisfaction of my costs order on the interim periodical payments application. In fact, Ms B also paid him a year's maintenance in advance out of her share of the proceeds. There was also an agreement to the sale of CA Street when the tenants vacated in December 2015.
47. On 3^rd December 2015, the B brothers confirmed through their solicitors that they would not be relying on the alleged deed of trust dated 17^th May 1993 as to the ownership of CA Street. It followed that Ms B did not owe them any money as a result of the mortgaging of the property. X and Y's solicitors sent an open offer in relation to CA Street on 9^th February 2016. Although they were claiming the beneficial ownership of CA Street following to Mr R's declaration of trust, they were content for there to be an immediate distribution from the proceeds of sale to both of their parents of £1 million each to cover the costs of the litigation on the basis that the remainder of the money was held by Ms B's solicitors pending determination of the beneficial ownership but with the children being able to draw money for their costs.
48. Ms B made an application for the sale of BGL on 4^th February 2016 on the basis that it was "a bottomless pit". She said the correct planning permissions/consents were not in place and the structure of the building was not sound. She had been made the Gerant by Mr R. Claims had been brought against her in that capacity, such that she had to appoint another Gerant, Mr EC in her place on 21^st July 2015. It appears that this cost her around £70,000 and Mr McG does not appear to have advanced matters at all. The application came before me on 12^th February 2016. The parties agreed that BGL should be sold at the best available price. There was an order for the sale of CA Street with a guide price of £13.5 million. Mr R's application for litigation funding was compromised on the basis that £1 million from the sale proceeds of CA Street would be paid to him "in full and final settlement" of his litigation funding claims. There was a further hearing before me on 8^th April 2016. Mr R made an application to vary the LV settlements as being post-nuptial. I joined the trustees and Mr R's sister, MS as parties.
49. The respective conduct cases were set out in May 2016. Mr R's case relates to the dissipation of the sum (said to be £8,362,000) to Mr AD. It also alleges the removal of assets from LV C at an undervalue, non-disclosure and litigation misconduct, which is said to relate to the suppression of documents. Ms B's case is that Mr R siphoned off funds from the B Family Business for BGL of £6.1 million; that he set up bank accounts in her name and transferred money from IEG to fund his own spending, including motor vehicles; that he paid no regard for his fiduciary duties or for corporate governance; that his conduct has led to large tax bills together with penalties and interest; and that he has engaged in the reckless management of BGL, doing building works without planning permission such that there is a threat of demolition and up to ten pieces of litigation involving the property.
50. The B Road litigation was heard by Mostyn J over approximately ten days in the summer of 2016. His order is dated 8^th July 2016. Mr R was to remove his unilateral notice over the property and there was a declaration that the freehold title to 22 B Road belongs to the company and not to Mr R. The judgment found Mr R to be a highly intelligent, numerate and articulate man. His life philosophy was centred on avoiding tax. He was "the man who does not exist". His evidence, however, was contaminated by repeated untruths and was almost entirely incredible. Nevertheless, he brought something of great value by the enfranchisement process and Mostyn J said he has a solid claim to a significant part of the value by variation of the settlement. Mostyn J dealt with the costs of the litigation on 11^th August 2016. Mr R was to pay the company's costs of the preliminary issue and the costs of CU Ltd but there was to be no detailed assessment until after conclusion of the financial remedy proceedings. As I have already indicated, Brunswick's costs were in the region of £1.3 million so Mr R's liability may be as high as £1 million.
51. The parties' daughter, X filed a statement dated 14^th July 2016. She said that she was told by her father that the "C" and "C1" Settlements were for the benefit of her and her brother, even though her mother was also a beneficiary. The other settlements were for all four B siblings and their children. She also understood that 20% of the shares in IEG Ltd, which had belonged to her maternal grandparents, were held in trust for her and her brother. She also understood from her father that Schönes BGL had been given to them.
52. By the time of the hearing before me on 21^st July 2016, Mr R was acting in person due to difficulties in paying his legal team. There were two offers to purchase CA Street in the sum of either £12 or £12.25 million. I directed that there should be an exchange of contracts with the first person who could do so. I directed a sale of BGL at an initial asking price of €5.5 million. 1 TC should also be marketed for sale. I joined the children as parties as well as AS, in relation to both 1 TC and SCI de Ch. I directed an accountancy valuation of the B Family Business by Mr Jon Dodge as well as a property valuation of five sample properties where there was the greatest variation in the values provided by the parties. On 5^th August 2016, X and Y confirmed they would not pursue any beneficial interest in CA Street assuming the net equity after all liabilities (including CGT) and payment of £1.25 million to each of their parents would be only around £75,000.
53. On 8^th August 2016, Ms B applied for an order that AS transfer her interest in 1 TC and her share is SCI de Ch to Ms B. On 16^th September 2016, Ms B made an open proposal. Mr R was to be given a life interest in TC. BGL was to be transferred to him as was Ms B's interest in the three French SCIs. There would be a clean break. Mr R made a counter proposal on 22^nd September 2016 when he was still acting in person. BGL was to be transferred to him. He was to receive half the proceeds of sale of CA Street. The lease on 12 BP would remain with MS. The other three French properties would be transferred to him as well as 15 London properties free of encumbrance. He would receive a tax indemnity.
54. The sale of CA Street completed on 4^th October 2016. The sale price was £12 million. After payment of the costs of sale and the mortgage, the net proceeds came to £3.79 million. Each party received £1.25 million as previously agreed and the remaining £1.3 million was retained to pay the Capital Gains Tax. On 13^th October 2016, a Tomlin order was agreed in relation to 12 BP to the effect that BE Estates Ltd was the beneficial owner rather than AS. On 26^th October 2016, MS transferred the legal title in BP to BE Estates Ltd in accordance with the agreement reached.
55. Both parties filed section 25 statements. Ms B's is dated 14^th October 2016. She said that she was extremely fragile and vulnerable at the time of the fraud against her by Mr AD. She had a breakdown and was on medication. The four siblings had been assured by Mr R that their tax affairs had been handled scrupulously. PJ was removed from the business in February 2015. Mr R refused her parents' offer of 20% of the shares in IEG and SE such that they were now held for the children. He had only told the family about one of the two £5 million loans. There had been huge mismanagement by Mr R in relation to BGL. She was liable as she had been the Gerant. She had already had to pay wealth tax of €77,000; up to €60,000 in compensation to an employee and €56,852 for social security. Overall, she had received £7.184 million from the B Family Business which she did not know about. The money now had to be treated as a loan.
56. EW's statement is dated 14^th October 2016. He said he became increasingly concerned over the years as to Mr R's behaviour. It became clear that he was hiding the true financial position. PJ was authorised by Mr R to make unilateral payments. £2,776,515 had been sent to SCI de CD for BGL. £14,252,849 had passed through Ms B's HSBC accounts. £730,000 was transferred into Euros by Remnant Financial Services and taken by Mr R or his girlfriend to France. £257,819 had been used to purchase the property at Central France. £298,641 was spent on the first floor flat at Rue B, Paris. In total, £3,332,975 had gone to France. Of the money that passed through Ms B's HSBC accounts, of which £7.5 million was the CA Street mortgage, only £4,174,544 had been used by Ms B personally, such as for the purchase of 56 VG. Mr R had spent £792,043 inappropriately, including paying costs referable to Ms MS's children.
57. Christine Simpson, an Associate Director of Hawksford Trustees, Jersey filed a statement on 14^th October 2016. She filed as second statement on 7^th March 2017 to update the value of the various companies. Hawksford succeeded Capita as trustee of the LV C Settlement on 18^th April 2016 as part of the December 2014 compromise to the Jersey litigation. The Settlement is the sole shareholder of CU Ltd which holds B Road Properties 1995 Ltd, NAC Management Ltd and SE. SE owns a property in UR Road. Her most recent statement proceeds on the basis that 42% of the debt owed by SCI de CD is recovered on a sale of BGL. On that basis, B Road Properties Ltd has a net value of £1,365,940; NAC Management is in deficit to the tune of (£109,427) and SE has a value of £282,224.
58. Francis Nash, a Chartered Accountant at Blick Rothenburg, who was instructed to deal with the tax affairs of both the B Family Business and Ms B herself, filed a statement on 14^th October 2016. He said that very significant tax liabilities had not been reported and were not paid. Ms B owes £2,265,647 in tax on the basis she has already paid £724,714 on the sale of CA Street. Interest and penalties could be as high as £1.9 million. £2.77 million had been transferred to France but not included in the year-end Financial Statements filed at Companies House or with HMRC until 2015. Ms B's outstanding Director's Loan Account is (£5,813,000) after credits of £1,371,000. The original debt would cost £96,984 per annum in tax on the benefit. If it is written off, the tax liability is (£8,241,268). He subsequently amended the latter figure to £4.02 million.
59. Mr Michael Blampied, a Director of Capita Fiduciary Group Ltd filed a witness statement dated 14^th October 2016. He has been the Lead Director in relation to the LV Settlements since January 2010. He says that the information provided by Mr R was slow and incomplete. There were unapproved transactions, such as the acquisition of 20% of IEG by CU. Mr R paid no regard for the terms of the settlements. He opposes any variation of the settlements of which he retains the trusteeship on the basis that they are inherited assets.
60. On 2^nd November 2016, Mr R made application for further legal fees funding in the sum of £750,000. His statement revealed a bleak picture of litigation and other debt. He only retained £116,900 out of the total of £1.25 million released on the sale of CA Street.
61. AS, Mr R's mother filed a statement dated 4^th November 2016. She resides in the sixth floor flat at 1 Rue B, Paris which is in SCI de Ch. She had incurred legal fees in Jersey of £131,000 and, although the settlement provided for them to be reimbursed, that had not yet happened. She said she was owed £52,000 from a loan of £198,700 she made to FI Properties. She and her husband had moved to TC to enable its enfranchisement. This was not successful but a 90-year lease extension was obtained for £400,000 and funded by Ms B. In January 2007, 1 Rue B was purchased for £302,000. She moved in during 2009. She claimed to have given up her life tenancy in TC but this had only been provided to her to attempt to achieve enfranchisement.
62. I heard the case again on 4^th November 2016. It was agreed that AS would transfer her 5% interest in 1 TC to Mr R. Ms B would transfer her 998 shares in SCI de Ch to Mr R on the basis that LV would retain her life interest in the 6^th Floor flat. She was therefore discharged as a party along with B Road Properties Ltd, MS and SCI de Ch. Due to various defaults by Mr R, I had to give him relief from sanctions to enable him to file his evidence. I did this on at least three separate occasions with significant regret. I took the view that I had to do so to be fair to him and allow me to consider section 25 of the Matrimonial Causes Act properly. It did, however, mean that the sanctions I regularly imposed were, in reality, meaningless.
63. Mr R's conduct statement is dated 19^th November 2016. I have already dealt with his case as to Mr AD. He also made the surprising allegation that Ms B was initially giving money to Mr AD to remove assets from the jurisdiction and thereby frustrate Mr R's claim. Given that he had not made a claim at that point and the agreement reached did not provide for him to receive capital from Ms B, this allegation is frankly nonsense. He further alleged that the B family had undone the tax efficient structure that he had put in place with the assistance of Mr Green. I do not understand that allegation. He made further allegations of non-disclosure against Ms B that have not been pursued in evidence. He alleged that 20% of IEG had been taken away from him by the family although this was also not pursued before me. Given the evidence that he wanted these shares to go to X and Y it is another surprising allegation.
64. In his section 25 statement, he repeats much of what has been said before. He again puts forward his contention that he and Ms B started FI Properties and that this is in some way different to the RE Business. The obvious point to make is that, if that was the case, why wasn't it transferred into LV C for the R family rather than into the other LV Settlements for the entire B family. He says he managed to get HMRC to accept the value of JB's estate to be £2 million rather than £10 million and that this reduced the tax bill enormously. He says he upgraded the properties; achieved minimal taxation; and ensured the business was run with propriety. He said that PJ's work became erratic in 2012/2013. His spending was done from his "entitlement" from his partnership with MB. He considered he was the sole beneficial owner of BGL.
65. Mr Jon Dodge presented his report valuing the business on 19^th January 2017. Further questions were subsequently asked to him which led to a revised valuation. I will have to make findings as to the value of the properties and the correct treatment of the tax. As a result of the five sample valuations, he has uplifted the property values given by Ms B by 36.6%. Mr R, however, contends for a 55.3% uplift. Ms B argues that I should take off all the latent tax. Mr R contends for half on the basis that the assets are investment assets that are unlikely to be sold.
66. Mr Dodge's valuation is a net assets valuation and it is accepted that this is correct. Taking the 36.6% uplift, Mr Dodge's final report values the B properties is £94,600,000. The full latent tax and costs of sale is (£26,155,160), making a net valuation of £68,444,840. There are COP9 liabilities of (£2,712,840) which reduces that figure to £65,732,000 of which £6,058,854 is the 20% of IEG owned by X and Y. In addition, 20% of SE Group is owned outright by the four B siblings with a value of £1,554,433 and the entirety of FE Company is not in the trust. It is also owned in the estate of Ms B's parents, and has a value of £5,186,981. This gives a net value of the LV Settlements of £52,932,002.
67. The matter came back before me for the final time prior to this hearing on 20^th January 2017 to deal with the Pre-Trial Review, as well as Mr R's application for litigation funding and an application made by Ms B to suspend the sale of TC. In relation to the latter property, the highest offer received was then £1.4 million but there has, more recently, been an offer of £1.5 million. After payment of CGT and redemption of the mortgage, the net equity would be £565,000. Ms B said that investigations had shown that the tax payable on extracting 12 BP from the company structure and transferring it to Mr R would cost £2,165,000. Her case was, therefore, that Mr R should receive TC, hence her application to suspend the sale. She proposed that the remaining proceeds of sale of CA Street, namely £1,296,000 should be divided equally between them to fund the final hearing. This would give each £648,000. This money was being held to pay the Capital Gains Tax although she hoped it might be possible to reduce that tax somewhat. In any event, she would take the risk. Mr R asked me to make an order for £750,000 worth of litigation funding.
68. One difficulty that Mr R undoubtedly had was that the previous order for litigation funding was said to be in full and final settlement of his application. Nevertheless, I recognised that Mr R's costs of the final hearing had to be covered. I acceded to Ms B's proposal that the remaining net proceeds of sale of CA Street should be distributed equally between the parties. I was satisfied that Mr R could properly fund the rest of the litigation with £648,000. I also suspended the sale of TC.
69. Mr R's conduct response is dated 10^th February 2017. He is categoric that he did not siphon off funds and that BGL was not his personal project. He repeated his assertion that the "22 M" loan was not funds from the B Group Companies on the basis that the property was a R asset. He said everything had been properly accounted for by PJ. He makes the point that WB B signed the company accounts for RE Ltd, saying that they showed the existence of a £5 million liability. He denies spending £15 million on BGL saying that figure was in the brochure on the basis that it was the value of the works once completed. He said that there were no difficulties with planning permission when he was in charge. His needs statement is also dated 10^th February 2017. He says he holds Ms B and her brothers responsible for incurring huge amounts of tax. He says he is proceeding on the basis that he needs a £3 million home in London and that he will own BGL. He says it costs £160,000 per annum to run and it needs £250,000 spent on it as a minimum, although he accepts that his previous estimate was £500,000. He says it should be able to support its cost in two years. His revised budget is between £110,655 to £123,655 per annum. He does not believe he is employable and cannot go back to running a property business without capital to invest. He has been living off financial assistance from his partner who he owes around £100,000 and he has other debts to family and friends of £90,000. He owes £105,000 to contractors and £14,030 to his dentist.
70. WB B filed his statement on 17^th February 2017. He is now the Chief Executive Officer of the SC Property Group Ltd. He said that Mr R boasted that he had never had any assets in his name and he had never paid a single penny in tax, claiming that "as a man who doesn't exist, I can have no debt". He says he signed the two £5 million loan facilities for IEG and RE Ltd on explicit assurances from Mr R that he would only take one loan and would not draw down on it without permission. What Mr R did was therefore done without Board approval. By 2011, total business borrowing had reached £14.6 million which was £9 million more than the family knew about. Indeed, he claimed the debts had also been hidden from his father. He said the business will have to sell the more valuable properties to cover the debt and the tax and that most of these properties had been held since the late 1960s to 1970s. At the time Mr R was asked to leave, the debt was £15.2 million but, at present, it is £18.8 million due to the costs of the B Road litigation (£1.4million); the Jersey litigation (£700,000); the litigation involving 12 BP (£400,000) and the sum of £2 million placed on deposit with HMRC. They will shortly be borrowing another £2 million. Moreover, he said that his sister will be in no position to repay the sum of £5,813,830 she owes the Group.
71. Mr R has instructed a COP9 tax expert, Tori Magill, who previously worked for HMRC and then for Pinsent Masons. She filed a statement dated 17^th February 2017. She proposes to charge Mr R a fixed fee of £106,000 plus VAT making a total of £127,200 to file a COP9 report on behalf of Mr R. He has paid £44,000 plus VAT for the work she has already done in the relation to the financial remedy litigation. She confirms that Mr R has previously never had any tax advice. She says that the COP9 report produced by Blick Rothenberg is only a draft and therefore of questionable value but she produces no alternative calculations and no critique of the Blick Rothenberg approach. She spends a significant part of her statement saying that there has been no testing of the claim that the R family business under FPG was a separate business entity from the B Family Business. She says that the reclassification of the French inter-company loans as non-business expenditure has created substantial tax charges but does not say how else it could have been dealt with given the different ownership structure. She does make the point that HMRC may decide that the various extractions of value are disguised remuneration and tax the company accordingly although my understanding was that this point is central to the approach of Blick Rothenberg. She then says that, if so, there would be no need for the loans to be repaid. That may well be the case but it does not explain how the very significant resulting tax bill will be discharged.
72. At the beginning of the trial, I allowed into evidence a report on Mr R's health from Dr Fiona McAndrew dated 22^nd February 2017. She says he is under a huge amount of stress and is suffering from severe hypertension and Type 2 diabetes mellitus. He has clinical depression and anxiety. This can lead to a lack of concentration and mental confusion. She had prescribed an antidepressant on 9^th February 2017 although it can take two to four weeks to work fully. She had also prescribed Ramipril for the hypertension. I was not, however, given any blood pressure readings for Mr R to enable me to assess exactly how serious the matter was. The Ramipril dose of 10 mg per day is an entirely normal dose. Having said that, I accept that Mr R has been under huge pressure and it is affecting his health. Nevertheless, he gave his evidence in a spirited manner and did not exhibit any signs of lack of concentration or mental confusion. Far from it, he was as sharp as a pin.
73. AB Real Estate provided a valuation of BGL which is dated February 2017 although clearly refers back to an earlier valuation. Top quality materials have been used in the development along with perfect finishings. The valuer had not been able to get proper planning information so the property may have been re-designated for tourist activity. Nevertheless, the market for large properties in the Cevennes mountains is slow. It is an exceptional site but the property is isolated and there are no real comparables. The valuation is €5 to €5.5 million assuming compliance with laws and regulations. On 24^th February 2017, Libra produced a report as to the tax position in France. BGL had been acquired in February 2003 for €1,535,000, according to local records. If the shares were to be transferred to Mr R, there should not be capital taxation as the value is below the debts. There would be tax of £203,998 on the transfer of the shares in SCI Rue B and SCI de Ch.

The Open Offers

74. Ms B's Open Offer is dated the 15^th February 2017. She makes a number of points about the huge weight of unpaid tax and debt that she will have to resolve following the conclusion of this litigation. A transfer to Mr R of 1 TC mortgage free would cost her £1,436,364 which is a combination of discharging the mortgage, the Capital Gains Tax on transfer and the income tax on the grossed-up figure on the basis that the only source of funding would be deemed remuneration via the companies. A comparison is made in relation to 12 BP, which it is calculated would cost £2,165,500 to be extracted from the company structure and then transferred to Mr R. It is said that it would cost £5,270,000 to transfer BGL to Mr R but this is on the basis that the various loans are waived, creating a huge tax liability. The CGT on CA Street is put at £1,692,000 although this might reduce if it is possible to show that Mr R was the beneficial owner during his occupation. Finally, it is said that the cost to the B Family Business of waiving Ms B's debts will be £4,027,398. It is therefore argued that the only realistic option is for BGL and BP to be sold.
75. The proposal made is to transfer 1 TC to Mr R outright and free of the mortgage. SCI de CD should be liquidated with BGL being sold to repay at least some of the debts to the B Family. SCI de Ch and SCI Rue B would both be transferred to Mr R so he or his relatives would have the benefit of the two Paris flats and the property in Central France. There would be a lump sum payment to Mr R of £1.25 million of which £250,000 was designed to deal with his debts and £1 million was to capitalise his claim for periodical payments on a Duxbury basis. Each party would be responsible for their respective tax liabilities. There would be a declaration that 20% of the shares in IEG are held for the children. The B Road directors will not enforce their costs order. The earlier offer was withdrawn. In particular, the offer to transfer BGL to Mr R was no longer capable of acceptance.
76. Mr R responded on 21^st February 2017 with his Open Offer. He asked for a housing fund in England totalling £3.4 million. This could either be provided by way of lump sum or by a transfer of BP (£2.2 million) plus £550,000 to extend the lease. He purported to accept the September proposal in relation to BGL, namely transfer to him with any loans to be forgiven. He accepted the proposals in relation to the other three French properties. He sought a tax indemnity and periodical payments order of £110,000 per annum with the ability to capitalise this on a Duxbury basis. He sought a transfer of 1 TC to him free of mortgage and a lump sum of £1.35 million to discharge his debts and £264,850 to fund necessary works to BGL to enable it to make a profit in two years. There would be no order as to costs including in relation to the B Road litigation.
77. On 24^th February 2017, he agreed that 20% of the IEG shares gifted to him should be transferred to X and Y in equal shares. His application to vary the settlements should be adjourned pending compliance with his proposal by Ms B.

The Law

78. I have to apply section 25 of the Matrimonial Causes Act 1973 to decide what financial remedies and/or transfer of property orders I should make pursuant to sections 23 and 24. I must have regard to all the circumstances of the case. As the children are grown up, they are no longer my first consideration although they remain a consideration. I must consider all the circumstances of the case and, in particular, the matters set out in section 25(2). They are:-

(a) The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would, in the opinion of the court, be reasonable to expect a party to the marriage to take steps to acquire;

(b) The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) The standard of living enjoyed by the family before the breakdown of the marriage;

(d) The age of each party to the marriage and the duration of the marriage;

(e) Any physical or mental disability of either of the parties to the marriage;

(f) The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;

(g) The conduct of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it; and

(h) The value to each of the parties to the marriage of any benefit which, by reason of the dissolution of the marriage, that party will lose the chance of acquiring.

79. Above all, I must be fair to everyone. It is accepted that this is not a sharing case given the inherited nature of so much of the wealth although Mr R relies heavily on his contributions. It is not a case for compensation. It is therefore primarily a needs case. A classic needs case requires the court to consider the reasonable requirements of the applicant, assessed on a generous basis, for both capital and income and to balance those against the ability of the respondent to pay. This case is made far more complicated than that, however, by the conduct allegations each makes against the other and by the tax and other financial consequences of what has happened both during the marriage and what will be needed to ensure compliance with whatever order I make.
80. As both sides are alleging conduct, I must briefly set out the law as to that. The conduct allegations are not accepted on either side. The burden of proof is on he or she who seeks to prove a disputed fact. The standard of proof is the civil standard, namely the balance of probabilities. The seriousness of the allegation makes no difference to the standard of proof to be applied in determining the truth of the allegation. The inherent probabilities are simply something to be taken into account, where relevant, in deciding where the truth lies.
81. Conduct is only relevant in a few cases. The matter was considered by the House of Lords in Miller/McFarlane [2006] UKHL 24; [2006] 2 AC 618. Baroness Hale said at Paragraph [145]:-

"..once the assets are seen as in a pool, and the couple as equal partners, then it is only equitable to take their conduct into account if one has been very much more to blame than the other: in the famous words of Ormrod LJ in Wachtel v Wachtel [1973] Fam 72 at 80, the conduct had been "both obvious and gross". This approach is not only just, it is also the only practicable one. It is simply not possible for any outsider to pick over the events of a marriage and decide who was the more to blame for what went wrong, save in the most obvious and gross cases."

82. There are three separate main strands to the conduct allegations. First, it is alleged that Ms B has wantonly dissipated or squandered assets, following her relationship with Mr AD. Second, it is argued that Mr R has created very significant unnecessary liabilities, including tax liabilities, by reason of his conduct. It is argued that he has been guilty of fraud but Mr Dyer's fall-back is to argue culpable financial mismanagement. Finally, it is said that Mr R has been guilty of litigation misconduct by pursuing satellite litigation at huge cost that failed completely.
83. Both parties accept that these allegations can amount to conduct that it would be inequitable to disregard. Each simply denies that the factual position justifies such a finding in this case. I can therefore deal with the law in shorter form than would otherwise be the case. The law on "wanton dissipation of assets" was set out as long ago as 1976 in Martin v Martin [1976] Fam 335, where Cairns LJ said at p.342H:-

"A spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to if he had behaved reasonably".

84. At first instance in Charman v Charman [2006] EWHC 1879, [2007] 1 FLR 593 Coleridge J said that contributions and conduct are opposite sides of the same coin. If a spouse has created unnecessary debt or incurred unnecessary liabilities, this detracts from his or her contributions as well as meaning that the assets have been reduced. Moreover, provision needs to be made for liabilities that have not yet been discharged.
85. Mr Howard argued that conduct can only be relevant in a sharing case and that it cannot reduce a party's needs. I am not persuaded by that argument. Conduct features in section 25(2) without a gloss. The conduct may be so serious that it prevents the court from satisfying both parties' needs. If so, the court must be entitled to prioritise the party who has not been guilty of such conduct. A court can undoubtedly reduce the award from reasonable requirements generously assessed to something less. Indeed, that is exactly what happened in Clark v Clark [1999] 2 FLR 498. It may be that, unless there is no alternative, a court should not reduce a party to a "predicament of real need" (see Radmacher v Granatino [2010] UKSC 42; [2010] 2 FLR 1900) but that is not suggested in this case.
86. Turning to litigation misconduct, I have been referred to the case of M v M (Financial Provision: Party Incurring Excessive Costs) [1995] 3 FCR 321 per Thorpe J:-

"Ordinarily speaking, it seems to me that the manner in which the proceedings are conducted is to be reflected in orders for costs rather than directly in the scale of the awarded sum. However, this seems to me to be the exceptional case where the husband's strategy has been so extreme that it would be inequitable to disregard it".

87. I have been asked to draw adverse inferences from the failure of Mr R to call evidence from Mr MG and Ms PJ. Mr Dyer and Mr Anderson rely on the case of Wisnieswki (a Minor) v Central Manchester Health Authority [1998] EWCA Civ 596; [1998] PIQR 324for the proposition that a court may be entitled to draw adverse inferences from the absence and/or silence of a witness who might be expected to have material evidence to give on an issue in the action. If the court is willing to do so, such inferences may go to strengthen the evidence adduced by the other party or to weaken the evidence adduced by the party who might reasonably have been expected to call the witness. There must, however, be some evidence, however weak, adduced by the other party on the matter in question before the court is entitled to draw the desired inference. In other words, there must be a case to answer. The court must, however, consider the reason advanced for the absence of the witness. If the court is satisfied as to that explanation, no adverse inference can be drawn. If something short of a full explanation is given but there is an explanation, even if not wholly satisfactory, the potential detrimental effect of the absence or silence may be reduced or nullified.
88. There are issues in the case as to whether or not parties and witnesses have lied to this court. First, I must decide whether or not anyone did deliberately tell lies. If I find that they did, I have to ask myself why they lied. The mere fact that a witness tells a lie is not in itself evidence that an allegation is proved. A witness may lie for many reasons. They may possibly be "innocent" ones in the sense that they have nothing to do with the allegations in the case. For example, they may be lies to bolster a true case; or to protect someone else; or to conceal some other disreputable conduct unrelated to the issues I have to decide; or out of panic, distress or confusion.
89. It follows that, if I find that a witness has lied, I must assess whether or not there is an "innocent" explanation for those lies. However, if I am satisfied that there is no such explanation, I can take the lies into account in my assessment and findings.

The Witnesses

90. The case was listed for three weeks. I heard oral evidence from Mr R, Tori Magill (Mr R's COP9 expert), Ms B, WB (Ms B's brother), EW (who is now the Chief Operating Officer of the B Family Business), Francis Nash (the accountant from Blick Rothenberg advising the Bs), Michael Blampied (Director of Capita), Jon Dodge (Single Joint Expert accountant) and Christine Simpson (Assistant Director of Hawksford). I heard oral and written submissions on behalf of Mr R, Ms B, the Trustees and the children.
91. Before I turn to my findings of fact, I propose to give some preliminary observations as to the witnesses that I heard. In relation to Mr R, Mr Dyer invited me to rely on the findings already made as to Mr R's credibility by HHJ Havery QC and Mostyn J. I do not consider that it would be right for me to do so. I must make my findings independently on the evidence I have heard.
92. Mr R is clearly an extremely intelligent and able man. I regret to say, however, that he was not an impressive witness. He found it almost impossible to answer the questions that were being put to him. He would regularly go off at a tangent or try to answer a different question that he felt more comfortable with. He was almost completely unable to make any concessions even when they were blatantly obvious. It was almost as if he had to disagree with Mr Dyer as a matter of principle. He clearly has not learned anything from his previous disastrous attempts to litigate. It would, of course, be completely wrong to find that he was lying to me just because he gave his evidence so badly but the simple fact of the matter is that he did lie to me repeatedly. In some respects, it may be that he felt he had no alternative. Important examples are when he was denying that he had created CU Loan Notes without any authority to do so and when he said it was untrue that he had hidden the RE Loan from WB B. On other occasions, I could not understand why he was lying such as when he denied knowing what a "shadow director" was, other than that he clearly did not want to have to admit that he was one. He denied that Ms B simply signed documents that he put in front of her when it is abundantly clear that she did. He told me that he assumed everything was tax compliant. I have come to the clear conclusion that he must have known the arrangements most certainly were not tax compliant. It did surprise me when he said that the family's tax affairs were like those of Enron. I am not sure he meant to say that but I have come to the clear conclusion that he was correct in that respect. His statement in his conduct response that "BGL" was not his personal project was surprising to say the least. Finally, it did him absolutely no credit at all to attempt to blame Ms B for any part of this shambles other than in relation to Mr AD.
93. It is, of course, right to acknowledge that he did make significant contributions to this marriage. They include his hard work for the B Family Business from 1991 to 2013; the introduction of B Road as an asset and his assistance with saving tax. I will have to assess the true value of these contributions when I come to make my findings of fact but I will also have to assess the extent to which they have been offset by other factors such as the catastrophe that is BGL; the very large liabilities incurred for both the B Family Business and for Ms B herself; the tax consequences of putting this right; and the disastrous separate pieces of litigation that have been conducted since the breakdown of the marriage, contrary to my explicit warning two years ago.
94. Ms B was a very different witness. I am quite satisfied that she was a witness of truth who was doing her very best to assist me. She is not dishonest and she has done nothing disreputable during the marriage other than to trust two men who did not repay her trust. She is clearly financially inexperienced. She told me she had never drawn up a legal or financial document in her life. I accept that. She is susceptible to manipulation. One example was the signing of the original declaration of trust of CA Street in favour of her brothers. I am satisfied that was at the instigation of her father. Her one error was to allow her lawyers to include it in her Form E. I find that she was manipulated not just by Mr AD but by Mr R as well. She told me she had been "unbelievably stupid" in relation to Mr AD and I accept that. She did not want to be defrauded of her money but she was warned about Mr AD and she ignored the warnings. The fact that her father, MB, a very successful businessman, allowed himself to part with £3.8 million does not help her as it is clear that he was doing it to assist his daughter although I am of the view that it reduces the losses to Ms B herself. Nevertheless, her foolishness has played a part in creating the financial mess that this family is now in. She was also extremely naïve as to Mr R's financial arrangements. She did not question the financing of BGL or the £1 million lump sum that she paid to Mr AD. It follows that I will have to assess the relative significance of both parties' responsibility for the resulting financial catastrophe.
95. It was quite wrong of Mr R to run any sort of conduct case against Ms B other than in relation to Mr AD. Mr R told me in evidence that Ms B transferred the 20% of the IEG shares held outside the Settlements to CU a week after EB died "with the intention of taking over the LV C settlements". I doubt very much that Ms B had even heard of CU at the time. I do not know if Mr R believes this allegation or whether he was just mischief making. Either way, he was entirely wrong. His allegation that Ms B was trying to defeat his claim by transferring assets out of the jurisdiction to Mr AD was equally devoid of merit. It did him no credit whatsoever. He had made no financial claim at the time the assets were transferred and it is abundantly clear that the reason for the transfers was the undue influence of Mr AD over Ms B rather than any motive relating to Mr R. In fairness, it was not something pressed by Mr Howard and I intend to say no more about it.
96. Ms B's case as to Mr R's dishonesty was supported by both WB and EW. I recognise that, in relation to both witnesses, Mr Howard is able to say "well they would say that wouldn't they" given their status as loyal brother and loyal employee. I do not, however, accept that their evidence is, in fact, tainted in this regard. Both were clear that they were misled materially by Mr R. They were unshakeable as to that and I find that, overall, the documentation supports their evidence. I found Mr WB to be a careful witness. He made appropriate concessions, including, for example, accepting that he had not properly carried out his functions as a director of the various companies such that he had not realised what Mr R was doing. He was actively misled. For example, on 19^th May 2011, he was sent by PJ, but clearly at Mr R's instruction, a document described as a "combined schedule of exposure". The schedule deliberately did not include the RE Loan. Mr R could easily have told him about this loan, explaining it as he has explained it to this court. He did not do so. I must make findings as to why he did not do so.
97. Mr EW was an impressive witness who knew the affairs of the B Family Business backwards. It may well be that he had a difficult relationship with Mr R, particularly towards the end but I am clear that Mr R did not keep him fully in the picture. Mr EW should have realised what was going on earlier and made a report to the B siblings before he did but I accept his evidence that, when he did tell them, he was telling them the truth and he has told me the truth. He has done his best to identify the various movements of funds through the HSBC accounts but all he is doing is setting out movements to and from the accounts. He has not reconciled them which was part of Blick Rothenberg's responsibility.
98. Both main parties called one tax expert. I did not find the evidence of Tori Magill on behalf of Mr R remotely helpful. There were two ways in which she could have helped me. The first would be to tell me how Mr Nash, Ms B's expert, was wrong. The second would be to tell me what tax Mr R owes. She did neither. She did try to explain to me her view that there had not been proper consideration given to the fact that "FI Properties" was a R Family Business but this is a matter for me to make findings of fact about. Moreover, she did not tell me how the figures would change if it was a R Family Business.
99. It follows that the only expert evidence that I had as to the figures was that of Francis Nash. He is clearly very experienced in this work and his firm, Blick Rothenberg, has put in an enormous amount of work into calculating the various liabilities and the tax consequences thereof. I consider he did his best to assist me and the figures he put forward are his best estimate. I recognise that the COP9 disclosure has still not been made. I accept that there will be a real negotiation about the amount of penalties due. Mr Nash has assumed penalties of 50% but he was very clear that this is where he believes agreement will be reached not the figure that Ms B will initially contend for. He was, in my view, entirely realistic about the chances of reducing the CGT on the sale of CA Street, based on a constructive trust in favour of Mr R. He even produced a calculation of Mr R's tax at a figure just over £100,000. Subject to my detailed findings, I accept his evidence.
100. Mr Nash was asked about the tax position if BGL was to continue to be run by Mr R on the basis that the interest of Ms B, including the usufruct, would be transferred to Mr R but the children would remain as the ultimate beneficiaries. It was proposed by Mr Howard that the loans due to both Ms B and the B Family Business would not be waived. Mr Nash confirmed that the very serious tax consequences arose from the waiving of the loans. Whilst the proposal did not involve waiving the loans, he was concerned that HMRC would investigate this very carefully given the entire COP9 history. He considered that the Revenue would want to be satisfied that the arrangements were commercial, not a device and that, if not satisfied, there was a risk HMRC would deem the loans waived. He mentioned the need for the payment of interest and a repayment plan.
101. Mr Jon Dodge is a very experienced single joint expert forensic accountant. Valuation is an art not a science but I accept Mr Dodge's evidence as being as good an attempt at valuing this business as any such exercise could be. It is, of course, right that Mr R believes that the properties in the B Family Business are worth more than Mr Dodge's gross figure of £94.6 million. Mr Dodge conceded that this might be the case. The difference between £94.6 million and Mr R's figure of up to £110 million relates to whether B Road is included or excluded in the sample for uplift purposes. I cannot see any reason why it should be excluded but I recognise that the gross value of the properties could be higher. I will, nevertheless, work on £94.6 million as being as good a figure as any. The other issue is whether Capital Gains Tax should be deducted in full (£26,155,160) or as to only half (£13,077,580). The reason for the different approaches is to be found in a decision of Lewison J in a case called Goldstein v Levy Gee [2003] EWHC 1574 where a property company was held for long term gain and the income it produces. The judge found that a purchaser might be prepared to take on the company rather than the individual properties and be prepared to ignore half the tax on the basis it would be unlikely ever to have to be paid. I cannot accept such a contention in this case. First, it is well established in financial remedy proceedings that you take the assets net of all latent tax. Second, given the COP9 enquiries here, I very much doubt any purchaser would take on the corporate structure rather than the individual properties. Third, one of Mr Howard's points in opening was that the value to Ms B of her share of the B Family Companies was very significant, although he was not suggesting a liquidation of the companies by the conclusion of his submissions. Nevertheless, if I am to consider that aspect, I must do so on the basis of the true net value not an artificial one.
102. The two professional trustees, Mr Blampied and Ms Simpson both gave oral evidence although Ms Simpson did so by video link. They are both experienced trustees who know their legal obligations well. Mr Blampied was clear that he had not authorised the CU Loan Notes and there was no Board Meeting on 11^th February 2011. I accept his evidence. He did tell me that there were no Letters of Wishes and no intimation of MB's intentions. After he had concluded his evidence, he woke in the middle of the night and remembered that there had been discussions, shortly before the death of MB, about Letters of Wishes in relation to the W Settlements. Indeed, drafts had been prepared but were not signed prior to Mr MB's death. The documents and emails were produced. They show Mr Green saying that the Trusts are not liable to UK Capital Gains Tax and the beneficiaries are not liable to UK IHT. The Trusts should be preserved for as long as the fiscal regime remains as it is, or similar to today. The email goes on to say that 20% of IEG remains in the legal ownership of Mark and EB but is regarded by both as being held for the benefit of Mr R. It is said that was his only interest in the structure. Mr B hoped that the capital could remain intact for as long as it is fiscally beneficial to do so. However, if there were reasonable requirements for beneficiaries to have capital, these should be dealt with after consultation with the then protector. Assets should generally be retained by the companies. If realisation was ever appropriate, the money should be reinvested in other property assets. It was MB's wish that the portfolio should be grown rather than shrunk. The companies should continue to be managed for capital growth rather than maximum income generation. It was Mr B's wish that Mr R remain running IEG for as long as the directors of the Group require that but, when MB became unable to look after Seaport Estates, it should be managed professionally and not by Mr R. Mr and Mrs B wanted to step down as protectors and wished Ms B to act with WB as her successor. The draft Letter of Wishes specifically says that "for the avoidance of doubt, in the event of (Ms B) ever becoming divorced, it is my wish that any ex-spouse of (Ms B) should not benefit from the Trust fund".
103. Ms Simpson was asked about the proposal made during the case that Ms B's usufruct interest in BGL be transferred to Mr R and he be allowed to continue to run the property on the basis that the loans would not be waived. As one would expect from a professional trustee, she said that she would consider the proposal carefully. I am clear, however, that she was not endorsing it. At the end of the day, it is a matter for me.
104. Finally, I did not hear any evidence from Mr MG, Ms PJ or Mr JO, a chartered accountant employed in Ms Johnson's organisation. One of my previous orders specifically refers to Mr R intending to call Mr Green and Mr Orwell. Mr R did not do so. In evidence, he told me they were not prepared to cooperate with him. There is no doubt that Mr Green, Ms Johnson and Mr Orwell could have given me pertinent and relevant evidence. It is clear that they have declined to assist Mr R. I am entitled to draw inferences by such a refusal. In fact, I do not need to do so as I can make clear findings on the evidence that is before me.

My findings of fact

105. I now turn to my findings of fact. I will deal with them broadly in the following order:-

(a) Mr R's contributions case;

(b) The allegations against Ms B arising out her relationship with Mr AD;

(c) The conduct allegations made against Mr R;

(d) The standard of living during the marriage;

(e) The assets and liabilities;

(f) The income and earning capacity of each party;

(g) The needs of each party.

Mr R's contributions case

106. There are four main strands to Mr R's case on contributions. They are:-

(a) His involvement in the B Family Business;

(b) Tax saving in relation to the estates of both Mr JB and Mr MB, including the creation of the offshore structure;

(c) The introduction of B Road into the marriage; and

(d) His work in relation to Ms B's properties.

Mr R's involvement in the B Family Business

107. There is no doubt that Mr R ran the B Family Business, initially with Mr MB and, subsequently, on his own from the early 1990s to 2013. Mr Howard described it in closing submissions as "his life's work". I accept that description with the important caveat that it was not an accurate description after the purchase of BGL when Mr R's attentions appear to have been side-tracked to a very significant extent. It is, however, right that he has had no other real employment during his life. He was, in effect, the Chief Operating Officer of the business until Mr MB's retirement and then the Chief Executive. He clearly had a volatile relationship with Mr MB. It seems likely that they were very similar characters and this enabled them to work well together at times but to fall out at others. One example so far as Mr MB is concerned is the machinations in relation to the beneficial ownership of CA Street. Given my findings as to Ms B, it is clear to me that it would not have been her idea to declare the property to be owned beneficially by the four siblings equally. I see the hand of Mr MB in that and it resonates with exactly the sort of thing that Mr R repeatedly does. Overall, I find that, for the most part, Mr MB was very grateful to Mr R, holding his contribution to the business in high regard. Indeed, Mr MB offered Mr R 20% of the IEG to reflect Mr R's valuable contribution. The fact that Mr R did not take a salary for his work was, understandably, viewed at the time as great altruism by MB. Given what we now know, any gratitude based on that was sorely misplaced but I will return to that in due course.
108. On the balance of probabilities, I accept that some of the properties were run down and in need of reinvigoration when Mr R took over but that does not detract from the fact that 75% by value were owned by the business when Mr R became involved. The B Family Business was a non-matrimonial asset notwithstanding Mr R's contributions to its development. I have already described Mr R as the Chief Operating Officer and then the Chief Executive. I have not heard evidence as to what salary would be appropriate for such roles today in a business with a rent roll of just over £3 million and gross assets approaching £100 million. I do not consider Mr WB B's salary of £50,000 pa to be sufficient for a third-party manager. I have a suspicion the correct level of salary is around £75,000 pa for a Chief Operating Officer and £100,000 pa for a Chief Executive together with company car, private health care and some form of bonus scheme, perhaps amounting to 15 to 20% of salary.
109. I am clear that Mr R did much of what he was asked to do very well. After all, Ms B agreed that her father's view of Mr R's stewardship of the business had been "excellent" and that Mr WB B confirmed that there was "no argument" that Mr R made a very considerable contribution. Mr MB thought this justified a 20% shareholding in IEG, now worth some £6 million. In addition, I find that Mr R made significant improvements to the portfolio over the years. It is, however, fair to say that this is what he was there to do. Organising the improvement of properties is not a particularly complex task. Finding capital profits from acquisitions, developments, new projects and the like is considerably more difficult. I am clear that he did find such investment opportunities, such as the Newport cinema Project which generated £250,000. B Road is another example of what he could achieve. It is very difficult to quantify any of this. It was exactly what Jonathan and MB had done. Mr R was carrying on where they left off.
110. The great tragedy is Mr R's complete and irrational obsession with avoiding tax by ensuring he had absolutely no assets or income ever for nearly twenty-five years. It is not for me to be moralistic as to the effect on society of such behaviour but it has undoubtedly cost this family very dear. Moreover, I regret that I am constrained to find that this was not just tax avoidance. It came into the category of tax evasion. Mr R's case is built in part on the high standard of living enjoyed by the family. It was certainly far higher than that which could be sustained from Ms B's relatively modest income from the business and the mortgaging of CA Street. I will deal with the latter aspect in due course but, for the tax position to be legitimate, this family would have had to spend the mortgage money many times over. I accept, of course, that if Mr R had behaved responsibly and taken a salary, there would have been a significant tax bill for the business. If I was to assume tax averaging say £40,000 pa over twenty years, that is around £800,000. The family would then have had to live within their means.
111. Mr Howard makes much of Mr R having increased the value of the business from £3 million when he took over the stewardship to around £100 million today. I am by no means clear as to the true worth of the business in the early 1990s as it was not just the JB business. My best estimate would be that the value of the properties was around £10 million then in total but I might be wildly wrong. I must then take into account the huge increase in residential property prices during the relevant period. The 1992 Edition of "At A Glance" confirms that the 1990 index for Greater London was 236.6. The 2015 figure was 995.1. If the portfolio was worth £10 million in 1990, it would be worth £42 million. This would suggest significant real returns over and above inflation but very great care needs to be taken. If the 1990 figure was £20 million, the gross value goes up to £84 million today. Equally, I am sure that part of the increase in value from 1990 was down to Mr MB and part was due to the prime Central London locations such as, for example, Soho Square. Nevertheless, this very rough and ready calculation does suggest significant gain from Mr R's stewardship. It follows that his contribution in this regard is important and in his favour. This assessment does not, however, include my conclusions as to the tax consequences of the regime he ran.
112. I reject Mr R's contention that he invested £1 million of his own money into the business at the time of the marriage. He did not. He has never produced any documentary evidence and it did not feature in his first affidavit as to his financial contributions. It appears that some money from the sale of his film studio to Sky TV in 1989 did go offshore to a Jersey company but he was unable to help the court as to how much. He did sell his property in Farnham to a B Family Business company in 1996, generating an equity of around £202,000 but he had to pay the costs of the CB Bank litigation in the sum of £93,000. I accept that this sum was paid by Mr MB but it reduces any genuine profit from the sale of the property. On the balance of probabilities, I find that the money from the Sky TV sale and the sale of the Farnham flat was spent during the marriage so it was a contribution but not one to the B Family Business.
113. Finally, in this regard, I must consider Mr R's case that FI Properties was his business rather than part of the B Family Business. I reject this argument as having no merit. First, if it was the case, I am sure it would have gone into the LV C structure for the R family rather than into the main structure for all four B siblings and their children. Second, Mr R put no capital into FI Properties so he was operating with B Family money in any event. This was just another part of the structure that he was managing for the B Family.

Tax saving

114. I am by no means convinced that he made a significant contribution to the saving of tax. It is abundantly clear that Mr MB was as keen as Mr R to save tax on the estate of Mr JB. Mr MB had instructed top professionals to advise and negotiate with HMRC, to include valuers, tax solicitors and, it appears, three firms of accountants. It would have been remarkable if he had not done so. I cannot accept Mr R's evidence that he was the only one to spot that the values of the properties were overstated due to their condition being inferior to other properties situated around them. This would have been a fundamental point that the valuers would have considered carefully. I equally accept Mr WB B's evidence that Mr R's claims as to how much he managed to save have increased as the years have progressed. I do accept that Mr R was involved and he did assist but I consider the overall tax saving was modest. After all, he had no particular expertise in this area. It appears that, eventually, the value of the estate that had been agreed with the Inland Revenue by Cape & Dalgleish at £3.7 million, was reduced to £3.2 million, which reduced the tax bill by £205,000 and the interest bill by £73,000, making a saving of £278,000. I will assess this as being his contribution but even that may be generous to him.
115. The second aspect in this regard is his contention that he made a very significant contribution by setting up the LV offshore structure. I have not found it easy to make findings in this regard because I have been unable to hear from Mr MB. It is clear to me that MB wanted to save tax as much as Mr R. He had instructed Coopers & Lybrand to advise him as early as 1994. I accept that he found it difficult to part with his assets but he was convinced to do so by transferring them to the children so they could sell them to the LV Settlements in exchange for Loan Notes. Mr Dyer says that the LV structure was unnecessary as both Mark and EB survived the seven-year transfer period but I consider that is too simplistic. I am by no means sure that Mr MB would have agreed to outright transfers to his children if it had not been for the plan to transfer the value on. Having said that, it seems likely he would have been advised as to the sense of such a structure in the absence of Mr R. On the balance of probabilities, I find that Mr R did make a contribution by encouraging and cajoling Mr B to agree to the plan. The plan worked in the sense that there was no tax on the LV Settlements on the deaths of Mark and EB. I am not so convinced that the extremely complicated and expensive corporate structure set up in the UK by Mr R was necessary.

B Road

116. There is no doubt that B Road was Mr R's project. The enfranchisement worked and generated significant capital. Indeed, I am bound by Mostyn J's findings in that regard in any event, although I should make it clear that I agree with them. Mr Dyer, however, submits that there are countervailing points that were not before Mostyn J that I must consider. I accept that the original premium of £790,000 for the enfranchisement was paid by a loan financed by the B Group companies but this was discharged from the mortgage on CA Street. There was considerable cost of converting the flats into one home. I accept this was financed by the B Family Companies. It took a very long time and the property remained empty from 2006 to 2010, generating no income during that period. There has been criticism of Mr R for all of this, saying the project was run inefficiently; that it cost far too much; and that it reduced value rather than enhancing it. I have not heard expert evidence as to this so I cannot make findings as to excess cost and inefficient management although the project does seem to have taken an inordinate amount of time.
117. I do accept that much of the gain generated originally from the enfranchisement was later lost by Mr R's subsequent financial dealings. A total of £1,556,000 was sent by B Road Properties Ltd to SCI de CD in relation to BGL. I must, however, be careful not to double count this sum when I come to consider the issue of BGL later in this judgment. Moreover, huge costs were incurred in the litigation as to the beneficial ownership of the property. In total, the trustees incurred £1,318,000 in costs that will have to be written off. I do not have an accurate figure for Mr R's costs but I fear they were close to £1 million. In this regard, I did wonder for a time whether it was sensible for B Road Properties Ltd to bring this litigation rather than just allow it to be sorted out in the financial remedy proceedings. Mr Richardson for the trustees has convinced me that it was necessary to bring the litigation. The trustees wished to sell the property. Mr R had placed a restriction against the title and refused to remove it. The litigation was therefore justified and Mr R should have immediately agreed that he had no beneficial interest. These losses are therefore entirely his responsibility.

Mr R's work in relation to Ms B's properties

118. Mr R claims to have made important contributions by improvement works done to three properties owned by Ms B, namely Curlew Road, Paardeberg Road and CA Street. There is no question that all these three assets came from Ms B and were further unmatched contributions. CA Street was particularly valuable. It came from the B family and her father gifted her £330,000 to assist towards the purchase. The property eventually sold for £12 million and it was the source of the only legitimate funding for this family during the entire marriage, other than Ms B's modest income from the business and the loan notes.
119. I am by no means clear exactly what work Mr R did to Curlew Road or Paardeberg Road but I am prepared to accept some positive contribution from him in that regard. I equally accept a positive contribution in relation to converting CA Street to one property and ensuring the five dentists vacated. At one point, there was a serious flood that did significant damage. The insurance claim came to over £500,000. It was spent on the purchase price of BGL. I pointed out that the works must have been done to CA Street to repair the damage and that I assumed that this would have been yet more expenditure simply taken from the B Family Companies. Mr R denied that and said it was a gift from Mr MB. He may be right. If so, however, it is another important contribution from the B family.
120. My overall conclusion on Mr R's own contribution case is that he did make an important contribution to this marriage, albeit it not as great as he has contended for. I remind myself that it was not a short marriage, lasting around fifteen years from cohabitation to separation. Moreover, he continued to run the business for a further eight years thereafter. There were two children. I have come to the clear conclusion that this would never have been a sharing case given the huge "inherited wealth" aspect but, absent conduct, I am clear that Mr R's contributions would justify an award based on his reasonable requirements generously assessed. The issue for me is the extent to which that is reduced by the conduct allegations and, perhaps more importantly, the ability of Ms B to pay, given the liabilities that undoubtedly now exist.

Mr AD

121. Mr Howard says that the amounts transferred to Mr AD were in excess of £7.5 million. He may well be right as to that but the main figures were:-

(a) £3.8 million from MB;

(b) £1 million from the HSBC mortgage on CA Street;

(c) £1.32 million from the sale proceeds of VG;

(d) £400,000 increase in the value of CR; and

(e) £360,000 lost on the sale of the Gherla Street property.

122. Further money was transferred via her Barclays account but I am unable to put a figure on this. She did pay rent of £10,400 to occupy her own home and gave Mr AD £65,000 for the South Street Property. Overall, I find that around £7 million went to Mr AD.
123. I cannot, however, accept that all this money should be attributed to Ms B. £3.8 million came from MB. I am satisfied that the money had been held in a numbered Swiss account controlled by MB. I do not propose to speculate on its tax status but it was certainly not part of the LV Settlements. Equally, it was not Ms B's money and, at best, she would in due course have been entitled to £950,000 of it. The rest of the loss was to the three B brothers but I cannot see that their loss can form any part of this case. It follows that the total amount lost by Ms B on Mr AD was £4.15 million. The proceedings to recover the money produced, very broadly, £2 million but cost £1 million in litigation fees. The total loss therefore due to Mr AD was £3.15 million. In addition, there are tax consequences of the removal of money from the LV Settlements. In particular, this applies to the costs financed by Seaport Estates.
124. I accept that this satisfies the recklessness test for dissipation. Ms B was warned as to Mr AD and any reasonable person considering the matter objectively would not have allowed him to commit such a huge fraud against her. The repurchase of CR at an inflated price was a particularly brazen episode. I recognise that Ms B was under huge pressure at the time. I accept that she had a breakdown. She accepts that she was "unbelievably stupid" and that this was a financial disaster. I am surprised that Mr MB allowed himself to be taken in as well but he was approaching the end of his life and I am sure he was not thinking as clearly as he would have done at an earlier stage.
125. Rather than categorising this as conduct, I prefer to look at this as a liability incurred to set against the very significant financial contributions made by Ms B, mostly via her family. I intend to deal with the allegations against Mr R in the same way. Nevertheless, despite my findings as to Mr AD, the balance sheet, so far as Ms B is concerned, remains still positive rather than negative. Indeed, everything that is left has come from her side of the family.

The conduct allegations against Mr R

126. I have already found that Mr R has an obsession with not having income or assets such that he did not have to pay tax. It is quite remarkable that he has never had or declared even a penny of income to HMRC. He does not even have a National Insurance Number. Obsession is a strong word but it is thoroughly justified in this case. It has almost taken over his life. As a result, he has lost his judgment entirely. He has spurned offers of very significant assets such as the 20% of IEG now worth around £6 million. The consequences of the arrangements he made have been disastrous. That is also a strong word but it is equally justified in this case.
127. I do not believe that Mr R ever thought it was legitimate for him to run this business for nearly twenty-five years without earning anything whatsoever. I asked him how he paid for his breakfast cereal in the morning and he was unable to give me a straight answer. The £7.5 million borrowed on CA Street did not get close to funding all the expenditure. The rest was simply removed from the B Family Business illegitimately. I reject entirely his case as to the RE Loan. If he had wanted to do this legitimately, B Road should have been in his name and the loan secured against the title alone. This loan fails to satisfy that test on numerous levels. First, Mr R had put B Road into the LV C Settlement. It was therefore no longer his to deal with. You cannot take the tax advantages without the burden. Second, he did not take the loan in B Road Properties Ltd, he took it in RE Ltd, which was not in LV C and was therefore only a quarter R family at best. He is an intelligent man. He knew this very well. Third, the loan was secured not just on B Road but also on garages in IEG companies. It was subject to a cross guarantee from IEG and the interest was met by other companies in the B Family Business. None of this was legitimate and he knew this.
128. He hid this loan from the entire B Family, including MB, for five years. He would not have done so if he genuinely considered this to be legitimate. I accept that he got Ms B and WB to sign the RE accounts but he was right to be confident they would not investigate closely and he obfuscated by getting them to sign numerous documents such that the important one was disguised. Moreover, I do not find the accounts transparent. I am satisfied he only informed MB about one £5 million loan and, by 15^th October 2009, he had told MB that the money was on deposit and he would not use it for anything without the prior authorisation of a full Board meeting of IEG. There never was any such authorisation at a Board meeting. At the AGM on 15th October 2010, held at CR, no mention of the RE loan was made. On 19^th May 2011, PJ sent WB B a schedule of loans that omitted the £5 million RE loan. This proves the deception. It also disproves Mr R's case that he was entirely happy to answer any question and provide any document if it was sought. On 17^th June 2013, his email to EW said that he "specifically asked Sue to ignore RE…" There is no legitimate reason for doing so. The emails that day show his annoyance that the deception had been exposed. Mr Howard urges me to find that this was not deception or fraud but maladministration. I reject that submission. This was clear deception and can only be categorised as fraud.
129. I find that the transactions involving CU are the same. On 11^th February 2011, Redeemable Loan Notes totalling £2,155,210 were issued by CU Ltd. The documents were said to be executed as a deed by CU Limited acting by its Authorised Signatory, Mark R. CU was an asset of the LV Settlement but it is abundantly clear that the trustees knew nothing of this transaction. It follows that Mr R was not CU's authorised signatory. Where the document says that it was pursuant to a resolution of the Board of directors passed on 11^th February 2011, that was simply untrue. Indeed, I remind myself that Mr R was never a director of any company. I regret having to find that this transaction was simply a fraud. Mr R persisted in claiming it was legitimate throughout this case including his oral evidence. In this regard, as with so many others, he lied to me.
130. I have dealt in detail with the two of the three most egregious examples of his illegitimate conduct in the running of the B Family Business. I now turn to the third, namely the acquisition and works undertaken to BGL. Overall, I consider this to be the most serious by a considerable margin. I do recognise that the B family knew about the purchase of BGL. After all, they holidayed there. They saw the extent of the development. I am not sure whether they considered in detail how it was financed. If they asked, I am sure Mr R would have told them it was from the mortgage on CA Street. Perhaps they should have been more concerned, but I am quite clear that this does not absolve Mr R in any way for full responsibility for this unmitigated disaster.
131. The first point that must be made is that the ownership structure of BGL is quite different from that of the LV Settlements. Mr R would have known full well that it was completely wrong for assets belonging to the B Family Business to be used to fund a R family asset. It is clear that whenever he needed money, he took it from wherever he could find it regardless of the ownership structure. His defence to this was that he made a note of the inter-company loan in a Sage spreadsheet somewhere. This was entirely illegitimate. I am satisfied that he knew that as well. It seems clear to me that he did not tell the accountants as no accountant could approve such an arrangement. If there was to be a loan from one corporate structure to a completely different one, at the very least there would have to be Board approval, which there was not. There would have to be a fully documented loan agreement with interest provisions and loan repayment schedules. There definitely was not. I have already rejected the suggestion that it was "alright because it came from the mortgage on B Road" but, the extent of the overall borrowing is such that it is clear other money was used in addition.
132. Mr R contends that the purchase price of €1,535,000 in 2003 came from B family assets. At the time, the exchange rate was €1.44 to the pound so the cost was, very broadly, £1 million. I accept that the insurance money from CA Street was R family money although it does not explain how the repair work to CA Street was funded. I reject the suggestion that the proceeds of the sale of the Newport cinema was R family money. It may have been Mr R's project but it was in the B Group structure and was financed by the B Group. Presumably, the business paid the corporation tax on sale. The proceeds could not simply be removed for R family purposes. In evidence, Mr R gave me a convoluted story about how he had exchanged contracts to buy the cinema which he sold on to a third party who completed the sale. He did not know whether he or a B company bought the cinema. This was untrue as he knew he never bought anything. He then said the profit was "£600k…£400-500k". In fact, the purchase was by Redman James Ltd (a LV C Settlement company) for £110,000 using funds borrowed from Filmore Estates Company Ltd, which was owned by Mark and EB. I accept that on this occasion, Mr B gave permission for the loan. The sale completed. It was then declared that Redman James held it on trust for Southside Green Ltd, a D settlement company. Three years later, in December 2002, it was sold for £385,000, giving a gross profit of £275,000. I do not know if Mr R was deliberately misleading me or if he just could not remember. If the latter, he should have said so. What is clear, however, is that this profit was not his money. It belonged to LV D and all four B family siblings. The proceeds were just purloined for BGL. Moreover, the proceeds of the insurance claim and the Dorset profit come to approximately £750,000 so the balance of the cost of purchase must have come from the B Family businesses, probably including the entire sale proceeds of the cinema, regardless of the original loan.
133. Thereafter, very large sums of money were spent on the property. I do not find that it was as high as the figure of £15 million mentioned in the brochure. That was pure hyperbole. The real figure appears to be around £6.5 million but, in addition, workmen were improperly diverted from the B Family Business. The money came from wherever there were resources available in the structure. In so far as the money did not come from the HSBC mortgage on CA Street, this was entirely improper. Worse, it was done without the requisite planning approvals. Mr R tried to say that there were no such difficulties but that is not the evidence of the valuer, AB Real Estate who said on 25^th February 2017 "moreover the legal issues (planning permit etc) should be solved before marketing the property or at least in parallel since this procedure will take some time. No buyer would want to deal with that nor take the risk to knock down existing buildings". A second email dated 28^th February 2017 said "it would be highly unlikely that a buyer would want to deal with all that to start with. One thing that is sure is that as soon as a new owner will be there, the government will wake up with unpaid taxes and the planning issues. I have not come across transactions with such a problem, concerning major parts of the building. I think it would reduce the number of potential buyers, which is already a clear niche market, even further down the line". Mr R had the opportunity to provide expert evidence that there were no difficulties but he has provided nothing. I find that Mr R was reckless in relation to planning approvals. He simply does not seem to have cared. He has done virtually nothing to rectify the problem despite occupying the property throughout this litigation. Moreover, the total debt owing in relation to the property is £2,776,515 to the B Family Business and £3,799,438 to Ms B. Of this reckless expenditure, £1017,582 was converted into Euros in cash by an organisation called Remnant Financial Services and taken to France to pay contractors by Mr R and his girlfriend. I am quite satisfied that neither Ms B nor her brothers knew that this was happening. Despite all this spending, the valuation is only €5 to 5.5 million and that is without any planning difficulties.
134. Numerous other complaints are made against Mr R. Some amount to litigation conduct rather than conduct during the marriage. For example, he undoubtedly persisted right up to the trial in claiming he owned 20% of the IEG shares when it was clear he had refused MB's offer of the shares on the basis the shares should be held for his children. He was simply unable to give a straight answer as to that in cross-examination although he does at least now accept the shares are held for the children and I propose to make a declaration to that effect. He has continued to fail to take any responsibility for what I find is the accounting chaos caused by his mismanagement of the business. He maintained in cross-examination that everything was "tickety-boo". His letter to WB B dated 9^th December 2009 said "all accounts are up to date, all tax due paid". He knew that no tax had been paid. No reasonable man can have thought that was legitimate.
135. Throughout, he clings to the idea that all the expenditure was legitimate because it came from either the HSBC mortgages on CA Street or the RE Loan. I have already found that the latter was not legitimate but, even if it was, it is clear to me that the total expenditure was far higher. Mr EW has examined the expenditure in great detail. He sets out the following amounts which transited Ms B's HSBC Accounts at Paragraph [40] of his main statement:-

(a)	HSBC mortgage on CA Street	£7,500,000
(b)	HSBC loan in RE	£3,366,362
(c)	HSBC loan in IEG	£2,378,403

136. I recognise that, in relation to the money taken from the IEG, it can be said that money was paid back to the B siblings ("Kids Cos") as to £801,1017. The list of outgoings comes to over £14 million and includes:-

(a)	Ms B's purchase of VG Road	£2,691,906
(b)	Refurbishments on VG Road	£ 200,000
(c)	Lump sum for Mr AD	£ 899,980
(d)	Refurbishment of 47 CR	£ 100,000
(e)	Ms B's expenses including school fees	£ 282,512
(f)	Repayment of the Brunswick loan	£1,020,255
(g)	Works to CA Street	£ 230,000
(h)	Mr R's personal expenditure	£ 265,882
(i)	Total sent to France	£3,070,854
(j)	Payments to Remnant for Euros	£ 728,584
(k)	Mr R's credit cards	£ 126,855
(l)	HSBC charges and interest	£1,271,554
(m)	Payments to B companies	£ 204,813
(n)	Payments to B family (not Ms B)	£ 570,313

137. There is much that can be said about this. Mr R had been separated from Ms B since 2005 but from then until 2013 he was quite happy to spend whatever he wanted even though he had absolutely no entitlement whatsoever. This included arranging for the companies to meet the healthcare costs of himself, his partner and his nephews and paying his nephew's university costs. I am satisfied that he also used company funds to pay for his cars and motorcycles. He could and should have agreed a salary with the directors and lived within his means He could have spent that net salary on what he wanted but it would not have financed BGL or anything like it. Very significant work has been done to reconcile the various figures. In total, Ms B has overdrawn directors' loan accounts in the sum of £7,245,144. It is possible to offset various sums from this amount, such as outstanding loan notes, which brings the total down to £5,874,330. In other words, this is the sum owing by Ms B to the B Family Business, because of improper drawings orchestrated by Mr R. This is not some minor accounting blip. It is a very serious matter. The loans will have to be written off by the companies so this money will be lost to the Settlements and, in particular, 75% of it is lost to Ms B's brothers. She will also lose the benefit of her loan notes. Worse, the only way to write the remaining loan off is by a distribution from the trusts, which must be grossed up. This will lead to a tax liability for Ms B of 81% on the total loan, or £4.02 million.
138. Mr Howard gamely attempted to reduce the loan figure. He argued that I should take off the amounts paid to the siblings and parents from HSBC (£570,313 as above) and the payments to the B companies (£204,813 above) but I am absolutely satisfied that this has already been done. Blick Rothenberg and Mr EW have been working on this for a very long time. They have not made that mistake. I accept there may be more minor errors but these could increase the sum as well as decrease it.
139. I have not, as yet, said anything about the other two SCI entities. SCI de Ch owns Central France and the 2^nd floor flat at 1 Rue B, which is occupied by Mr R's sister, MS and her husband who is frail and wheelchair bound. It is accepted that Ms MS made no financial contribution to these properties. She owns 98 out of the 100 shares and Ms B owns the other two shares. The properties are both unencumbered. The Central France property is valued at between £200,000 (per Mr R) and £225,000 (per Ms B). I will take the mid-point of £212,500. The Paris flat is valued at €803,000 to €876,000. Using a value of €840,000, the value is £716,000. Ms B will have to pay latent tax on sale of €11,405.
140. SCI Rue B owns the 6^th floor flat in Paris occupied by Mrs AS who is aged 81. Mr R said that she had made a financial contribution to its purchase but I find that she did not do so. Ms B owns 998 of the 1000 shares. Mrs LV and Ms MS hold one each. The value of this flat is €756,000 or approximately £644,000. On 4^th November 2016, it was agreed that Mrs LV would be given a life interest in the flat but the shares would be transferred to Mr R. Even this transfer will cost Ms B tax of £198,250. I must deal later with how I treat the amount of around £1.5 million held in these SCIs. All I say at this point is that this cannot be ignored. Ms B has no duty or obligation to fund the housing of Mr R's relatives.
141. All in all, I am quite clear that Mr R has engaged in conduct that it would be inequitable for me to disregard. His substantial contributions have been largely offset by the financial catastrophe that he has brought down upon this family as a result of his behaviour. He still has needs but they must be assessed in the light of what is available because of what he has done and the effect it has had on everyone concerned.

The standard of living

142. I can deal with the issue of the standard of living briefly. As so often, the applicant says that the standard of living was "extremely high" whereas the respondent says it was "comfortable" although her Form E says "good". In one sense, when a family has lived massively beyond its means, the standard of living is neither here nor there.
143. I am, nevertheless, quite satisfied that the standard could have been high whilst living within their means, provided sensible remuneration had been taken by Mr R by way of salary and BGL had not been acquired. The family would then have had CA Street, an extremely desirable and very large property in the heart of London worth around £12 million, mortgage free. They would have had B Road valued at £8,850,000 but subject to a mortgage of around (£1 million) and 1 TC valued at around £1.5 million, but subject to a mortgage of (£525,000). These total over £20 million without giving any consideration to Ms B's inherited interest in the B Family Business. I am also satisfied that Mr R could have had a 20% interest in IEG worth around £6 million net. I find that Mr MB would have given that to him even if Mr R had been taking a sensible salary.
144. The actual position is about as far removed from that as it could be. There will be serious consequences for both as well as for Ms B's brothers. Mr R has only himself to blame. He has brought this upon the family. I acknowledge that Ms B bears some responsibility given her relationship with Mr AD but, the balance comes down firmly against Mr R. If the family had lived within its means and taken proper earned income, my task would be easy. Instead, it is a very difficult task.

Ms B's assets and liabilities

145. Mr Dyer and Mr Anderson produced a comprehensive schedule of the assets and liabilities of Ms B during their closing submissions. Mr Howard made only a few points in response. I have already dealt with and rejected his attempt to reduce the Director's Loan account from its outstanding figure of (£5,874,330). He also challenged the tax on clearing this liability in the sum of £4,811,076. The dispute arose from Mr Nash having to do the calculation "on the hoof" in the witness box. Mr Nash was therefore asked for a considered position. He responded to say that the tax should be £4.02 million so Mr Dyer's schedule should be adjusted to show that amount. It remains a very high figure.
146. Mr Howard's third main point related to the Capital Gains Tax on the sale of CA Street. Mr Nash had included the figure at £1,692,000 although this sum has, of course, now been spent on costs. Mr Howard's point was that the sum could be reduced by virtue of Mr R's occupation of the property as his principal private residence. Such an argument would only succeed if it could be said that Ms B held the property on trust for Mr R. Mr Nash did not think this would work. He put a 30% chance on it succeeding, saying that the difficulties with the COP9 report would make it unlikely HMRC would give this family any leeway. The argument for a trust refers back to the settlement agreement dated 2^nd September 2010. It is not a declaration of trust and, indeed, it was not even signed by Mr R. There is simply an acknowledgment that says that "since (Ms B) moved out of…CA Street…(she) acknowledges that she has owned and held the Property as trustee for the Husband and the two children". I accept Mr Nash's evidence that it will be an uphill battle to get HMRC to agree this point. I do not know what effect the reference to the children has on the matter. I hope that it will be possible to get the tax burden reduced in this way but I am pessimistic. It does not affect my view of the case and I accept Mr Dyer's presentation of this matter.
147. It follows that I accept the schedule save for the tax on the distribution. I incorporate the schedule into this judgement as Appendix A. Very broadly, it shows: -

(a)	Property assets	£2,798,000
(b)	French assets	£ 445,000
(c)	Bank accounts	£ 597,000
(d)	Illiquid assets	£2,079,000
(e)	Other money owed	£1,883,000
(f)	SH Trustees	£ 846,500
		£8,650,921
(g)	Liabilities	(£5,130,137)
	Net	£3,520,784

148. In addition, Ms B has her interest in the LV Trusts. They are worth a net figure of £59,1013,253 but those are discretionary trusts and are for 14 separate beneficiaries. Mr R cannot complain as to this as he was involved in setting them up. I also reject the suggestion that they are not dynastic. The B Family Business has gone from Jonathan to Mark to the current generation. The next generation is also beneficiaries. The money is not there to be plundered. I do not therefore consider it appropriate to attribute one-quarter (£14,918,313) to Ms B. It would be unreasonable to expect it to be liquidated. It follows that it is the fund that will provide her with her income going forward. Moreover, any consideration of the matter must take account of the huge tax demands and loan write-offs that are down to the R Family not her three brothers.
149. The proposals she makes involves her paying/transferring: -

(a)	TC(net)	£665,000
(b)	Mortgage	£525,000
(c)	CGT	£265,000
(d)	Tax to do so	£646,634
(e)	SCI Rue B	£361,306
(f)	Lump sum	£1,250,000
	Total	£3,712,940

150. I accept that, of this figure £790,000 for the mortgage and CGT on TC had already been deducted from her net assets of £3,520,784. Ms B's own proposal therefore reduces her assets to £597,844. There will also be further tax on distributions from the trust to fund the lump sum if she cannot find it from her own resources. One proposal made by the trustees is that she should sell CR to the Settlements and then pay tax on the notional rental value. I consider this to be a very real possibility as the price of the trustees for agreeing the proposal.
151. Mr Richardson produced a schedule at the end of the case showing the effect on the Trustees of having to write off loans; pay tax on doing so; and enable Ms B to comply with her offer. His figure came to £12,289,493 if I assume employers' national insurance will not have to be paid. The correction in Mr Nash's tax figure to £4.02 million reduces this amount to £11,311,000. Mr Howard challenged some aspects of this but by £1.8 million at best. The cost therefore, even on the best-case scenario is £9.5 million to the Settlements. I do recognise that some of this is down to Mr AD but I apportion responsibility as being 1/3^rd to him and 2/3rds to Mr R. The other beneficiaries are entitled to be very annoyed. It is impossible for Mr Howard to sustain his opening submissions that Ms B should be treated as having £15 million in the trusts when the actions of her and Mr R have created such huge debts for these Settlements. Judges should be careful when they use strong language but the word "catastrophe" is apposite.

Ms B's income

152. I am clear that Ms B has no significant earning capacity of her own. Her only source of income is the B Family Business. Her loan notes will all be used to reduce debt so it is just a question of what the Business should generate.
153. The rent roll, after sale of B Road, will be around £2.8 million. At present, staff costs are £1 million pa. Servicing bank debt (mostly due to Mr R) will cost around £750,000. There will be a ten-year inheritance tax charge of 6% which I am told averages around £330,000 pa and corporation tax of £250,000 pa. This leaves around £420,000 pa. I am not an expert on property businesses but staff costing £1 million is not sustainable for a business with a rent roll of £2.8 million although I accept that there will be other overheads. I do not know the correct figure for this but I am clear that the profit should be greater. If it was £600,000 pa, Ms B's entitlement is around £150,000 pa gross, or just under £100,000 pa net.

Mr R's assets and liabilities

154. I now turn to Mr R's position. I am going to ignore his assets which are virtually non-existent. He appears to be owed £250,000 by Ms MS but she cannot even discharge her costs liability. There may be some value in his cars and motorcycles but it is not significant to my determination. He does, however, have very significant liabilities. The vast majority relate to the litigation that has ensued following the breakdown of the marriage, which, on any view, has been ruinous.
155. I ordered litigation funding to him, initially of £1,250,000 and subsequently of £648,000. He had £150,000 in relation to the maintenance pending suit order. This comes to a staggering total of £2,048,000. It was provided by Ms B from that asset that came from her family, namely CA Street. Mr R also put in some money of his own towards his costs from the sale of cars and motorcycles. Nevertheless, his case is that he owes today a total of a further £948,845 in costs as well as other liabilities bringing his total debt to £1,156,471. The main costs liabilities are:-

(a)	Howard Kennnedy and others (this litigation)	£ 63,000
(b)	Pinsent Mason (B Road)	£100,000
(c)	Mayer Brown (B Family Business dispute)	£242,000
(d)	Dewar Hogan (BP)	£380,000
(e)	Ogiers (Jersey trustee litigation)	£ 80,000

156. Of these, the Ogiers bill is to be paid by the Settlements as part of the Jersey compromise. It can therefore be ignored although I should mention that it is in the name of his mother, AS. The Dewar Hogan bill is in the name of MS and relates to the BP litigation. Mr R has, however, guaranteed this debt. Moreover, Howard Kennedy have had to give formal undertakings that they will pay the sums due to Pinsent Mason and Mayer Brown from any recovery Mr R receives from this litigation.
157. I am not going to pull my punches. The extent of the litigation in this case has been financial suicide. Just about all the satellite litigation has been entirely unnecessary. I warned the parties in my judgment dated 5^th June 2015 where I said:-

"There is very serious satellite litigation involving the parties and their respective families, relating to a number of valuable properties. The costs are totally disproportionate and will more than swallow any tax saving, legitimate or otherwise, that has been made. Mr Howard QC, on behalf of the husband, mentioned £2 million per side. He may very well be right. What is certain is that these parties cannot afford such profligacy…It is easy for a judge to say but these parties and their relatives have to sit down around a table and sort this mess out very quickly indeed."

158. Unfortunately, Mr Howard was wrong as to the costs. Mr R's costs have been almost exactly £3 million. My warning was completely ignored. There will be serious consequences of that. I find that the responsibility lies almost entirely with Mr R. He was responsible for attempting to change the trustees of LV C from Capita to Aqua. It was inevitable that this change would lead to litigation. He is lucky that he does not have fund that litigation. He lost the B Road case badly. He expects Ms B and her siblings to write off Brunswick's costs order. Generously, they have agreed to do so. The company's bill is some £1.3 million. I consider it likely it would be assessed at just under £1 million but it would certainly be no less than £850,000. Mr R is fortunate that it is agreed that it can be written off but he is also expecting Ms B to fund the remainder of his costs due to Pinsent Mason and his costs of the BP litigation. I am satisfied that he was the driving force behind the BP litigation. Again, it ended unhappily for him although fortunately he recognised that it would do so shortly before the hearing. How he can have run up all these cost liabilities when he has no assets is hard to understand. How he can now expect Ms B simply to foot the bill for his folly is impossible to see.
159. On top of this, there are some personal debts. The most significant is his tax debt calculated by Mr Nash at just over £100,000. Mr R then wants to spend a further £130,000 on instructing Ms Magill to represent him on a COP9. It is a matter for him how he uses his resources following my order but I am clear that I cannot increase his award for this. He may just have to use Mr Nash's figures. There must be many people involved in a COP9 who are unable to afford £130,000.
160. He says he owes £98,855 to his partner but she has been living rent free with him for many years and they are in a relationship. He sets out several French contractors to whom he says he owes money but I find that he will never pay any such liabilities, arguing these are debts of SCI de CD.
161. The huge debt to Dewar Hogan is in Ms MS's name. She has already had a property purchased for her by the B family. She will now have to sort out the mess of defending this litigation which I consider was extremely ill-advised. I have come to the clear conclusion that I should not provide additional finance for Mr R to clear all these liabilities. He took them on and he must sort them out. There is no such thing as free litigation. Mr Howard submits to me that these debts form part of his needs and I cannot make an order that does not satisfy his needs. I have already indicated that I do not agree. To do so would be to give a licence to anybody to litigate entirely unreasonably. Financial remedy litigation itself is one thing. Satellite litigation is entirely another. It is clear from M v M that extreme litigation misconduct can sound in the award. Finally, and most importantly, I must balance needs against ability to pay. I cannot ignore Ms B's position. I will return to this in due course.

Mr R's income and earning capacity

162. I have found Mr R to be a highly intelligent and able man. I do, however, accept that he has absolutely no employment record. I do not believe he would be taken on by a property business. There is insufficient capital for him to run his own business. He is aged 56 and not in the best of health. I accept he has no significant earning capacity.

The needs of each party

163. In an ideal world, these parties would both be able to live in luxurious Central London properties. That does not mean, however, that a spouse must do so and, in the circumstances of this case, I have concluded that Mr R cannot do so. I remind myself that Ms B may well have to sell her home to the Trustees, which counters the fact that it is more valuable than TC. In addition, she still has responsibility for the children. Mr R complains that TC is too small but it is worth £1.5 million. His plea that he must live in Central London near Harley Street is unsustainable. He can either live in a small property in a good area or in a larger one further out.
164. These parties most certainly do not need two homes. They both need a good income to fund their expenditure but their expenditure must be constrained by Ms B's income which I have assessed at just under £100,000 pa net. An equal division would be no more than £50,000 pa each. They can survive on that. Mr Howard submitted that there had been no cross-examination as to his clients' far higher schedule of income needs. That is true but outgoings are irrelevant if there is no income to match them. I will return to the question of Mr R's debts in due course.

BGL

165. It is entirely right that Ms B originally offered BGL to Mr R. He could have accepted. He did not do so and the offer has now been withdrawn. Moreover, the earlier offer only gave him a life interest in TC and no lump sum so I would not be comparing like with like to say that Mr R should have BGL just because it was previously offered to him.
166. I can see no reason at all to justify Mr R being awarded BGL, even for his life. There are numerous reasons for this. The whole purchase has been an unmitigated disaster. It has caused large loans to be incurred entirely unnecessarily by the B Family Business and by Ms B, without the knowledge of either. It has led to serious tax problems. The property still requires significant work. At one point, Mr R estimated these works at millions of Euros but he has now reduced the quantum in an attempt to justify his retaining the property. Nevertheless, there is not £250,000 available for works let alone £320,000 to run it for the next two years, even if I thought that would be sufficient. There is litigation with neighbours. There are serious planning problems associated with the development already undertaken. There are water access difficulties.
167. The tax situation in relation to the various loans is by no means clear. If HMRC deem the loans to have been waived, very significant tax of £5.2 million will be incurred. I am by no means convinced that it can all be avoided by Mr R agreeing a repayment plan. On the balance of probabilities, I find that HMRC would only agree if there was a commercial arrangement in place. I do not consider that Mr R paying £5,000 per annum would be remotely sufficient. I find there would have to be interest at say 3% and a plan to discharge the entire debt in a reasonable period. I am clear that Mr R could not comply with such terms. I accept the submission made by Mr Dyer that BGL is a "bottomless pit". I cannot see it making any money at all for the foreseeable future. I find it will continue to lose money year after year. Indeed, I believe Mr R's primary motivation to retain it is to improve his lifestyle and standard of living. I have already found that these parties are not entitled to two homes. Perhaps most importantly, if I did accede to Mr R's proposals, I do not believe I could stop the companies suing for the return of their loans. I recognise it would be a matter of French law but I cannot see what the defence would be.
168. I should add that the children are the ultimate owners of BGL. They are adamantly opposed to Mr R's proposal and I accept this is for good reason. I do recognise that it is very uncertain what will be recouped from a sale/liquidation. I find that the figure of €5 to 5.5 million is on the basis that the planning problems are solved, which may be very difficult. I also recognise that dealing with the property may give Ms B and her family further problems but they are entitled to recoup what they can. The problems that Mr R has created are not a reason for transferring the asset to Mr R. He must vacate entirely within three months. His lump sum will not be paid until he has given full vacant possession. I cannot see that he needs all the furniture. Most should remain in place but he can take a selection of items. For the first time, he must be reasonable.

The respective positions

169. I will deal with Mr R's proposal first. I have already rejected his case that BGL should be transferred to him. I equally reject his case that he should have a housing fund of £3.4 million. Such a fund cannot be afforded any longer. A transfer of BP to him would cost Ms B £2,165,500 in tax. Mr R also seeks a further £500,000 to fund an extension of the lease. The additional cost to Ms B of this proposal over and above the cost to her of transferring TC to him is £1.28 million. This cannot be afforded. I have found that the parties do not need two properties. I therefore reject Mr R's proposal that he should have BP as well.
170. Mr R seeks a joint lives maintenance order of £110,000 pa. On my findings, this is more than Ms B's net income. I am also clear that there must be a clean break in this case. The possibility of further litigation is too terrible to contemplate. I consider the correct Duxbury figure for maintenance is £50,000 pa. Mr R will not have a state pension as he has never paid any national insurance. Ms B should not have to fund that. The Duxbury calculation is therefore £839,000 for a man who is 57 in May.
171. Finally, Mr R seeks £1.35 million to discharge his liabilities. I cannot accede to that for the reasons already given. Ms B's offer will give him £411,000 to put towards his liabilities. I do accept that he owes tax of approximately £100,000. He will therefore have around £300,000 for his other liabilities from the lump sum.
172. I have considered Ms B's proposal very carefully. It will give Ms B a nice home and a good income but she may well be living in a trust property and she will be beholden to her brothers. The offer does, however, provide for her needs in a way that is appropriate given her contributions to this marriage.
173. Given what I have found, I consider her offer is more than fair to Mr R. I am satisfied that she cannot reasonably be expected to pay any more. Moreover, I am of the view that I cannot ignore the provision that the offer makes for Mr R's mother and sister. I recognise that both have housing needs but this is not Ms B's responsibility. Neither relative contributed financially to these properties. I find the money came from the B family. As a result of Ms B's offer and what has happened in this marriage, the following assets will end up on the R side of the family: -

(a)	TC	£1,500,000
(b)	Lump sum	£1,250,000
(c)	SCI Ch	£ 941,000
(d)	SCI Rue H	£ 644,000
		£4,335,000

174. I intend to proceed on the basis that Mr R will receive the proceeds of his mother's flat on her death. This will go to boost his overall position although he may not receive anything for many years. He can sell the Central France Chateau immediately to produce an additional £200,000 odd. This will give him about £500,000 for his liabilities. Other than the Dewar Hogan debt, this figure should cover his costs liabilities on the basis the Ogier costs are paid by the Settlements.
175. I have been very troubled by the Dewar Hogan/MS costs. They were incurred recklessly. I am clear that I cannot expect Ms B to have to pay them. The litigation was resolved in favour of the B family and there was no order as to costs. I consider this liability is that of Ms MS. Mr R should never have agreed to guarantee these costs. After all, it was never his case that he was the owner of BP. He was just funding yet more litigation against the B family. Mr R and Ms MS must come to an arrangement between them. Either a mortgage may have to be taken on Ms MS's flat or on Mr R's property. Alternatively, he can buy a home for a million pounds. He will not be consigned to a predicament of real need by this or even if he decides he has to fund Ms Magill to help him with the COP9 enquiry.
176. I therefore conclude that I should approve Ms B's open offer and make an order in those terms. This is in full and final settlement of all claims. There can and will be no further litigation between these parties. The lump sum will not be paid until Mr R has vacated BGL and it must remain in as good a condition as it is in today. Photographs should be taken immediately. I sincerely hope this is the end of this litigation. It is the worst example of how not to deal with the division of finances following marital breakdown that I have encountered. It is made more striking by the fact that, so far as the litigation is concerned, I absolve Ms B of virtually all responsibility.

Mr Justice Moor

17^th March 2017