A follow-up to our article looking at the key issues for business owners when considering the scope of a financial settlement on divorce.
We have previously examined some of the common issues that arise in cases involving a business including how a business structure can shape the court’s approach on divorce. The recent decision of HHJ Rowland in LE v EL [2024] EWFC 481 (B) illustrates what can happen when the main asset is a private trading company and one spouse wants to keep it and pay the other out over time.
The background
The parties were married for more than 20 years. The husband owned 75% of G Limited and the wife 25%. He had run the business throughout and it was, by a distance, the largest asset. The court treated it as an "archetypal sharing case": needs were not in issue, and all the assets were matrimonial. The husband had started as a sole trader before the marriage, but he did not pursue any argument on pre-marital property. The judge said that, had he done so, the "embryonic" business he brought to the marriage would not have justified departing from equality.
Valuation: still fragile, but not a free-for-all
The judge began with the familiar warnings from H v H and Versteegh v Versteegh about the fragility of private company valuations. He then worked through a detailed dispute between the single joint expert and the husband's own shadow expert, who was permitted to give evidence following a successful Daniels v Walker application. Several points stand out:
Independence. The judge found the shadow expert "fell foul" of the risk of subconscious influence, having started out as part of the husband's litigation team. His starting multiplier came from a "sector specialist" introduced by the husband, and the related indicative valuation was disclosed only shortly before the final hearing.
Evidence over assertion. The judge accepted the joint expert's multiplier of 9 (against 6.5) and his approach to weighting, but preferred the shadow expert on chief executive remuneration, relying on industry salary data. He also accepted the joint expert's reduction for sponsorship spend, which he found reflected the husband's personal passions, and rejected the shadow expert's uncritical acceptance of the husband's account.
A cautious figure, not the lowest one. G Limited was valued at £7.87 million, and the judge noted that his figure could be described as "cautious" but was not the "lowest possible figure". He observed that the value of an associated company had been taken on the husband's say-so and that the current management accounts had not been produced.
Instalments or sale?
The husband proposed to make payments to the wife totalling £1.8 million in four annual instalments, with the wife's shares to be transferred to him. That was about 28% of the net business value. The judge held that this could not be a fair outcome in an equal-sharing case, and the purpose of the valuation is to test the fairness of a proposal, not to be adjusted to make it work.
The husband's own evidence also undermined his case. He described the business as facing "existential" risks, yet said he wished to continue and fund the payments. When pressed, he could not show where the money would come from. There was no evidence of bank lending, and the suggestion of loans from colleagues had no documentation or agreed terms. The judge found the company could not realistically generate the profits needed to fund the later instalments.
The order for sale
The court accepted its "understandable reluctance" to order the sale of a business that provides one party's income. It nonetheless ordered the sale of G Limited and its subsidiaries, and division of the net proceeds equally. Key points in the reasoning:
Counsel for the husband pointed out that there was no reported case of a sale of a private company being ordered. The judge said that did not mean it should not happen in an appropriate case and drew a comparison with orders for the sale of farms.
He declined to order a structured series of lump sums with sale in default. He thought a sale would be a "near inevitability", that the wife faced continuing risk from further write-offs, and that the alternative invited enforcement or extension applications.
Because the valuation would probably prove wrong "rather than right", he considered that the market would determine the actual value and achieve fairness.
He rejected the argument that a court-ordered sale would be a forced sale at a discount.
Points for business-owning clients
Liquidity evidence matters. An offer to pay by instalments needs credible, documented funding, including tax on any extraction from the company.
Experts. Shadow experts and outside valuers must be transparent, and disclosure directions must be followed.
Consistency. Evidence about the business's difficulties will be tested against the proposals put forward.
Sale is a real option. The court may order a sale where other routes are unworkable.
A note of caution
This is a first-instance decision, heavily dependent on its facts and on the husband's evidence. It does not change the law, but it is a useful illustration of how the court may approach a business-owning spouse whose plans cannot be shown to work.
For further support on any areas discussed, please get in touch with our team of expert family law solicitors.
