Richards J
IN THE GRAND COURT OF THE CAYMAN ISLANDS FAMILY DIVISION CAUSE NO. FAM 0125 OF 2017 BETWEEN: SM PETITIONER AND: AM RESPONDENT Appearances: Mr. John Meghoo for the Petitioner Ms. Natahsa Bodden for the Respondent Before: The Hon. Justice Cheryll Richards Q.C. Hearing: 15th May 2019 Respondent’s Further Submissions: 17th May 2019 Draft Judgment Circulated: 26th June 2019 HEADNOTE Family Law – Final Ancillaries – Sharing of Matrimonial Assets - Debt between Spouses JUDGMENT 1 INTRODUCTION 2 1. This is an application by the Petitioner for final ancillary orders pursuant to s.21 of the Matrimonial Causes Law (2005 Revision). 5 2. The Parties were married on the 30th July 2010 in Grand Cayman. This is the second marriage for both; their first marriages having ended in divorces. The Petitioner SM ('the Wife') was 55 years old and the Respondent AM ('the Husband') 50 years old at the time of their marriage. There are no children of the marriage. Both parties separated for six months in the first half of 2012 and ceased cohabiting in May 2016. The Wife filed a Petition for divorce from the Husband on the 9th June 2017. The Husband acknowledged service on the 26th June 2017 and indicated that he did not intend to defend the matter. The Petition was ordered proved on the 17th July 2017.
Pursuant to directions given by Williams J on the 4th September 2018, both parties filed Affidavits on the 5th October 2018 for this hearing. The Wife filed a further Affidavit in response to the Husband's on the 9th April 2019. This matter came before me on the 15th May 2019 for a final ancillary hearing and I heard oral evidence from both parties.
The parties are professionals each with their own companies. The Wife is an accountant and the Husband is in the diving industry. Neither party seeks or appears to need ongoing assistance from the other. They are almost at the stage of a clean break and on the road to independent living. They have indicated through their Attorneys that they agree and have made it clear that there are only two outstanding issues between them which require the Court's determination. These are whether the Husband had an interest in the matrimonial home in Prospect, Grand Cayman and whether the sum of $54,750.00 which was loaned by the Wife to the Husband amounts to a matrimonial debt or was a corporate loan to his company. This sum is agreed between the parties as being the amount loaned by the Wife which remains outstanding.
The first issue arises in this way. Following their marriage in 2010 the couple resided at the home in Prospect, Grand Cayman. This home was then registered in the sole name of the Wife. She and her first husband acquired the property which is a strata lot, with the aid of a mortgage from a local bank in 1999. That marriage ended by a separation during which the first husband had left the Island and finally in divorce in 2010. This was shortly before the Wife’s re-marriage to the Respondent Husband in July 2010. The Husband had been living in the home from 2009, about a year prior to the marriage. Following their separation in May 2016, the Wife sold the home and did not share the proceeds of the sale with the Husband. It is the evidence of the Wife that upon their marriage, the Husband’s name was not added to the title for that property and that there were no discussions between them that he should own a part of the home.
The Husband’s position is that he is entitled to a share of the proceeds of the home and that the Court should take into account the contribution which he made to the home by way of labour, maintenance and payment of household bills. The Wife’s position is that any contribution which he made was non-financial and insignificant and that the proceeds from the sale of the house are solely hers.
As to the second issue, about one year prior to the commencement of the marriage, the Parties each began their own self-employed businesses under the umbrella of two companies. The Wife’s company was an accounting business, and the Husband’s company operated a dive training school. In the latter company the Wife who is Caymanian held 60 % of the shares and the Husband, a non-Caymanian held 40 % of the shares.
By all accounts, this dive company was not a success. Not only was it never profitable enough to be able to provide dividends to shareholders, it was unable to discharge its ongoing expenses on a regular basis. The Husband says that during the course of the marriage, the Wife provided several cash injections in order for that business to remain open. The Wife said that she was able to lend him money by increasing her working hours as an accountant. There is no documentation evidencing or recording the fact and terms of these loans. From about September 2011, the Parties began to experience personal difficulties, with a significant contributing factor, according to the Wife, being the financial difficulties, of the Husband’s failing business. In March 2017, the Wife transferred her shares in the dive company for a nominal payment of $1.00 to another shareholder and resigned as a director and shareholder at that time.
The Husband’s position is that the loans made by the Wife over time were loans to her own company. Further that these were cash injections into the company as their shared business, as directors and shareholders would usually do, and were not to him personally. Alternatively he says that they were loans to herself as part of the matrimonial unit which is a single entity, and thus cannot be recouped by her. The Wife’s position is that the Husband’s claim that this is a corporate debt lent to his company which claim he first made during the directions hearing in September 2018 is not true. Further that this is a recent invention of his in an attempt to be difficult and to avoid repaying her what he owes. She says that many times during their marriage they discussed the loan of these monies and not once was it discussed or agreed that it was a corporate debt between their respective companies. THE STATUTORY PROVISIONS
The Court’s powers in respect of these ancillary proceedings are contained in sections 19 and 21 of the Matrimonial Causes Law (2005 Revision).
Section 19 provides that in dealing with all ancillary matters arising under this Law, the Court shall have regard, first of all, to the best interests of any children of a marriage and thereafter to the responsibilities, needs, financial and other resources, actual and potential earning power and the deserts of the parties.
Section 21 provides that at the time of pronouncing a decree under this Law, the Court shall, as appropriate, make orders for: "(a) the custody, care and control of the children of the marriage; (b) the disposition of matrimonial property, including the matrimonial home; (c) varying any settlement of the property of the spouses made in consideration of the marriage, whether such settlement was made before or upon the treaty of the said marriage. (d) varying any other settlement of matrimonial property; (e) making financial provision from the property of either spouse for the children of the marriage and for the other spouse; (f) providing for periodic payments to be made by either spouse for the benefit of the children of the marriage and for the other spouse; and (g) costs."
The subsections which are most relevant to this application are sections 21 (b) and (e).
There is guidance from the Cayman Islands Court of Appeal in the case of McTaggart v. McTaggart¹ as to the interrelationship between these two provisions of the Law and their application. This includes that a court will need to consider whether having regard to the s.19 factors, an order under s.21(b) of the Law for the disposition of matrimonial property will make appropriate provision for the relevant party with regard to their needs, the level of compensation and sharing. If disposition of matrimonial property will not allow for the appropriate provision to be made, then the court should go on to consider whether to make an order under s.21(e) that financial provision be made from the property of either spouse. A court should not make an order for periodic payments under s. 21(f) without good reason. Such good reason would arise where the combination of orders under s.21(b) and (e) are insufficient to satisfy the three strands of need, compensation and sharing.²
Additionally the appellate Court made it clear that although the s.19 factors are less extensive than those in England and Wales, in the Matrimonial Cause Act 1973 as amended by the Matrimonial and Family Proceedings Act 1984, the approach in the Cayman Islands should be the same as in that jurisdiction.³ A court in exercising its powers under the statutory provisions should therefore consider all the circumstances of a case to include the following: “(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; ¹ McTaggart v. McTaggart [2011] (2) CILR 390 ² McTaggart v. McTaggart [2011] (2) CILR 390 - Paragraphs 42 and 43 ³ McTaggart v. McTaggart [2011] (2) CILR 390 - Paragraph 39 (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 each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it; (h) in the case of proceedings for divorce . . . the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring."4 APPLICABLE PRINCIPLES
In considering the division of matrimonial property pursuant to s.21 of the Matrimonial Causes Law (2005 Revision) a court should first determine what constitutes matrimonial property.5
The leading cases from England and Wales which have been cited with approval in this jurisdiction are the cases of White and White 6 and Miller v. Miller, McFarlane v. McFarlane.7 In White and White, Lord Nicholls of Birkenhead in considering inherited money or property and property owned by one spouse before the marriage said this: "In fairness, where this property still exists, the spouse to whom it was given should be allowed to keep it. Conversely the other spouse has a weaker claim to such property than he or she may have regarding matrimonial property. Plainly, when present, this factor is one of the circumstances of the case. It represents a contribution made to the welfare of the family by one of the parties to the marriage. The judge should take it into account. He should decide how important it is in the particular case. The nature and value of the property, and the time when and circumstances in which the property was acquired, are among the relevant matters to be considered." 4 Statutory Factors in England and Wales 5 See Wight v. Wight [2010] CILR 60 and McTaggart v. McTaggart [2011] (2) CILR 390 – paragraph 34, B-H v. H. [2009] CILR 185 6 [2000] UKHL J1026-3 7 [2006] UKHL 24
The guidance from the case of Miller v. Miller, McFarlane v. McFarlane includes that in considering division of financial property, there is no place for discrimination between a husband and wife and their respective roles. The homemaker role should be given equal weight. A court should consider the three strands of need, compensation and sharing which should guide the court in arriving at a fair division of property on the dissolution of a marriage.
I note also from the case that, the third strand, sharing - which is the important factor for consideration in the instant case, applies to a short marriage just as it does to a long marriage, although for the former, this may have an impact on the quantum to be shared.
In his judgment in the case, Lord Nicholls stated that fairness requires that when a partnership ends, each partner is entitled to an equal share of the assets of the partnership unless there is good reason to depart from equality. The Learned Judge emphasized that the yardstick of equality is not a rule but an aid.8
The Learned Judge further stated that there is a real difference between matrimonial property and non–matrimonial property and pointed to the difference being the source of the acquisition. Property which is acquired during the marriage otherwise than by inheritance or gift would usually be matrimonial property. Matrimonial property is the "financial product of the parties’ common endeavor." As to the matrimonial home, the Learned Judge said this: "The parties’ matrimonial home even if this was brought into the marriage at the outset by one of the parties, usually has a central place in any marriage. So it should normally be treated as matrimonial property for this purpose. As already noted, in principle the entitlement of each party to a share of the matrimonial property is the same however long or short the marriage may have been." 8 Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24 - Paragraphs 16 and 17
The Learned Judge went on to say that the position is different with regard to non-matrimonial property. This is property which the parties bring with them into the marriage or acquire by inheritance or gift during the marriage. With respect to such property, the duration of the marriage may well be relevant although this may take second place to the needs of the parties.
In discussing the import of the duration of the marriage, Baroness Hale of Richmond in her judgment in the said case stated that it is recognized that where the starting premise is separate property, there is still some scope for one party to acquire and retain separate property which is not to be shared equally between them. The Learned Judge said that in such cases, the nature and source of the property and the way in which the couple have run their lives may be considered in deciding how property should be shared.9
In McTaggart v. McTaggart10, the appellate Court provided guidance as to the way in which a Court should approach the issue of what is matrimonial property under s.21 of the Law: "It can be seen that the section gives recognition to the concept of "matrimonial property." That concept is not defined in the Matrimonial Causes Law, but it is generally understood in the sense described by Lord Nicholls of Birkenhead in Miller v. Miller (5), that is to say, it comprises "property acquired during the marriage otherwise than by inheritance or gift" ([2006] 2 A.C. 618, at para. 22). Its distinguishing feature is that it is "the financial product of the parties' common endeavour"11 The Court further stated:- "It is necessary therefore to identify those assets which are owned or under the control of one or other (or both) of the parties as at the date when the order is made and then to identify which of those available assets are matrimonial property and so capable of being the subject of an order under s.21(b).12 "There may be cases (of which, as I shall explain, the present provides an example in relation to the husband’s potential retirement benefits) where an asset which did exist at the date of final separation does not exist—or does not exist in the same form—at the date of the hearing. In such cases it will be necessary to consider whether the former asset can be traced into an after-acquired asset which can itself be treated (in whole or in part) as matrimonial property; and, if not, whether some other order (say, under s.21(e)) should be made to reflect the fact that the former asset has ceased to exist. The power conferred under s.21(b) of the Law is a power “to make an order for the disposition of matrimonial property.” There is no requirement under the Law that the disposition should give effect to an equal division of the matrimonial property as between the parties; and there is no invariable rule that the power should be exercised in a manner which achieves that effect. The requirement—imposed by s.19 of the Law—is that, in exercising the power, the court shall have regard to “the responsibilities, needs, financial and other resources, actual or potential earning power and the deserts of the parties.” It is plainly open to the court—if, having regard to those factors, it thinks it appropriate to do so—to make an order which effects an unequal division of the matrimonial property as between the parties. The order made in Wight v. Wight (11)—and upheld in this court—provides an example of such a case. In Miller (5) ([2006] 2 A.C. 618 at para. 16), Lord Nicholls observed that “the yardstick of equality is to be applied as an aid, not a rule.” But, as Lord Nicholls had pointed out in White v. White (10) ([2001] 1 A.C. 596, at 605)—in a passage expressly adopted by Lord Cooke of Thorndon (ibid., at 615)—“as a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so.”
In Valerie Gordon v. Jefferson Watler13, the Appellate Court stated: "The correct approach, as I have indicated, was to ask what provision should be made for the wife in order to recognise the three strands of need, compensation and sharing. If a division of the matrimonial property could meet those needs, then it was unnecessary to go further. But if and so far as a division of the matrimonial property could not meet those needs, then it would be necessary to consider whether to make an order under section 21 (e) in respect of the husband’s other assets."
In the case of \( B-H \ v.\ H'4 \), the parties had been married for 12 \( \frac{1}{2} \) years and had two children. The issue for the Court was to identify what was matrimonial property in circumstances where each party had brought properties of their own into the marriage 12 McTaggart v. McTaggart, Supra - Page 390 13 CICA Civil 13/2014- 22nd August 2014 14 [2009] CILR 185 and had acquired more thereafter. They had maintained separate financial affairs during the course of the marriage. Foster J. (Actg.) reviewed a number of local and English cases and said this: "In my opinion, it is clear, both from the remarks made in the various authorities and as a matter of common sense, that in determining whether particular property is to be considered matrimonial property or the separate property of one of the spouses for these purposes, the court must have regard to all the circumstances relating to the property concerned. Such circumstances include but are not confined to, the circumstances and timing of its initial acquisition, the party by whom and how it was acquired, the apparent intentions of the parties with regard to and the use of the property during the marriage, amongst other factors. For example, it does not, in my opinion, automatically follow that just because the property concerned was acquired solely by one spouse prior to the marriage, whether by purchase, gift or inheritance, and the title remained throughout the marriage in the name of that spouse, the property may not nonetheless in some circumstances be considered to have become matrimonial property—"put into the melting pot of the marriage" (see Levers, J. at first instance in Wight v. Wight (10) (2006 CILR 1, at para. 55))."
Foster J. (Actg.) held that the parties had seen their relationship as a partnership and that viewed in that light the three properties brought into the marriage would be categorized as matrimonial assets "since they had both benefitted from them as matrimonial homes and used them to raise money to finance purchase of other property and spent money on them and generally treated them as assets for the benefit of both of them."
In the case of Billes v. Anco15, the sole issue was whether the husband had an interest in the matrimonial home which had been purchased by the wife with her own funds and was registered in her sole name. She contended that the husband had made no financial contribution towards the purchase and that it had not been acquired by the common endeavor of the parties. Smith J (Actg.) considered that although it had been purchased 15 [2011] 2 CILR 74 with the inherited wealth of the wife, it was acquired during the marriage for the welfare of the family. Additionally there was evidence from a pre-nuptial agreement that the parties intended as at the date of separation to share the matrimonial home equally. The Court noted also that the husband encountered restrictions on his ability to work in circumstances where he had disposed of his assets in Canada and moved to the Cayman Islands as a result of the marriage.
In the more recent case of *Ebanks v Ebanks and Smith*¹⁶, the husband’s case was that he had brought the marital home into the marriage and there should be a departure from the yardstick of equality. By reference to the cases of *McTaggart v. McTaggart* and *Miller v. Miller*, *McFarlane v. McFarlane*, Mangatal J. thought it plain that given the fact that the parties lived at the property as their matrimonial home, the property was to be treated as matrimonial property and stated: "96. In my judgment, the Court has to look at all the circumstances of the case. The Property was property brought into the marriage by the Husband. On the facts it is plain that the Wife made no significant improvement or alteration to the Property. However as stated in *Miller v Miller* the parties’ matrimonial home, even if this was brought into the marriage at the outset by one of the parties, usually has a central place in any marriage. So it should normally be treated as matrimonial property for this purpose. It was also noted that in principle, the entitlement of each party to a share of the matrimonial property is the same however long or short the marriage may have been." 97. However as recognized in *White v White*, the source of the assets may be a reason for departing from equality. In this case, there is also a need to take into account that both parties had been married previously, and indeed, the Property was owned by the Husband prior even to his second marriage to Eileen." ¹⁶ Fam 83 of 2013, 31st October 2016
I now turn to consider the issues and facts in the instant case with the general principles in mind while being mindful that each case must be decided on its own facts with the objective being to arrive at financial arrangements which are fair to both parties. THE EVIDENCE IN THE CASE i) Matrimonial Home
In his Affidavit, the Husband asserts that he had an equitable interest in the matrimonial home which the Wife sold without his knowledge or consent. He says that during the marriage he maintained the home for them to live in, and either carried out or paid for repairs to be carried out to that home. These included installation of hardware such as shelving, repainting the home and landscaping. He says that he contributed to the marriage by the paying of the cleaning lady/helper and the health insurance for the Wife and himself, and he purchased all the groceries for the home and cooked meals very often for them. He also cleaned up the pots and dishes every evening after the Wife ate.
The general maintenance on the home which he says that he did included repainting the entire kitchen ceiling after it was repaired following a ceiling leak. The Wife paid to repair the ceiling leak. He assisted with putting in flower beds to the front and back yards of the home which areas were not maintained by the Strata. They had a very nice yard which he seeded with grass and watered it and he raked the lawn all the time.
He accepted that the deck to the home on which he had worked, sanding it down, power washing and staining it, was in fact common property which was also used by their neighbors and which was to have been maintained by the Strata.
In his oral evidence he agreed that his wife might have paid the cleaning lady once or twice and said that on one occasion in 2014 when he added up the bills, which he had paid for that year to include payment for the cleaning lady, regular bills, groceries, food and entertainment bills, it came up to about $27,000.00.
He said that the wages for the cleaning lady and everything else was on his company’s books, the Wife had set it up that way. He used his company’s business account as his personal account. He had a personal account but never used it. He never received a paycheck and had never been paid by the company.
The Wife takes issue with a number of his assertions and does not agree that he made any contributions of significance to the home during the marriage. In her responsive Affidavit filed 9th April 2019, she states that he did not pay for any repairs or maintenance of the home. She says, further, that the repairs of the home to which he refers were the resurfacing of existing metal shelving in a small bathroom closet using material left over from the remodeling of the kitchen in order, she says, to make them look a little nicer. It was her oral evidence that she does not believe that he even did this himself. He in turn in his oral evidence agreed that he did hire help to assist him with this shelving.
As to the painting, the Wife said that she purchased the paint for the re-painting of the interior of the house and the Husband’s nephew volunteered to do the work as a thank you. She also said that before the wedding, without her permission, the Husband painted two walls of the home bright red which she hated. He did re-paint them in a different colour at a later date using paint which she bought.
As to the landscaping: She paid for this twice per month through the Strata. On occasion she would purchase small plants which they planted together and on two occasions when friends were coming over to visit, the Husband raked the leaves on the grass.
Her evidence was that, they had agreed that they would share the expenses of the home. She would pay, electricity, water, cable, land line, and strata fee, and he was to pay for the helper, their health insurance and food. She said this was not a fifty-fifty arrangement between them and moreover that there were numerous occasions when the Husband said that he had no money and she had to pay the helper. She said that their health insurance was cancelled on occasion due to non-payment for three months. She then had to pay it together with the insurance for his employees. Many of the loans to him were to ensure that the health insurance got paid. She paid his phone bill for his business and personal use for two years. She says also that he would buy the least expensive food for the home and often they would have grilled cheese sandwiches and a can of soup for dinner. The cleaning-up which he did after they ate was to put the dishes into the dishwasher.
She said that he had made no mortgage payments towards the home as she had completed mortgage payments on the home before their marriage. She said further, that she paid for everything - any repairs, replacement of items needed for the home, including the replacement, delivery and installation of a new washer and dryer, new oven, new dishwasher, new refrigerator and vent hood, as well as for any ongoing maintenance needed such as air conditioning service every six months.
In her oral evidence she denied selling the house without his knowledge and consent. She said that he knew the house was for sale. She had told him that it was and they had viewed properties together to buy a new home. The Husband in his evidence accepted this and said that the Wife told him that she wanted to move closer to town but before the sale and new purchase was effected, they parted ways. ii) Loans
It was the Husband’s evidence that the idea of the diving business came from the Wife who had the initial idea in 2006, when she was visiting the Dominican Republic. She changed her mind about this but later in 2009 she encouraged him to move to the Cayman Islands from Canada and to start the business, which he did. The agreed amount of $54,750.00 is the amount owing for all the years of running the business. This amount is made up of loans from the Wife’s company to the dive company. Whenever the dive company was in financial need, he would go to her and she would sometimes agree to move money over.
He gave evidence that she was very involved in the administration side of his dive business. She had one of her own employees doing the company books on a weekly basis and whenever they negotiated new leases at different hotels and different properties, she was always involved and knew what was happening all the time. She would attend company functions and assist if they were trying to take out any company loans. For example, they had tried, without success, to get a car loan for his company, and she was involved with that.
While he said that he did not think that there was any company income or expenses that she was not aware of, he did say that she did not have access to his company banking. He was the signing authority on his company bank account and he did not believe that she could go online and see the company finances. He also said that she was not involved in the diving aspects of the business. Of the quantum of the loan he said this:- "Between the two of us that is what we hashed it out. It is over years and different things. Neither of us is real clear on what it was for. We hashed it out down to that number."
It was the Wife's oral evidence that the loans were made to the Husband personally and were not to his company. She said there were no discussions to characterize them as a capital contribution. They were several payments over a period of time which had started before they were married, and initially he had always paid her back. They had always had an agreement that if she loaned him money, he would pay her back. She thought that this outstanding sum was from monies loaned over an 18-month period between 2014 and 2016. She knew that he struggled with money. She said this in oral evidence:- "On occasion he rowed with me that I should be investing money into his business. I reminded him of our agreement when we got married, that I start my business and you start your business and we would not interfere with either one. That was our agreement. You run yours and I run mine."
She said that when she loaned him money it was for him to use it to live and this had always been the case. He could use it as he wished. He denied this and said that all his expenses were on his debit card.
In her Affidavit of 5th October 2018, she stated that he had begun to pay her back slowly by paying several small payments of $100.00 into her company account from his company account. She asserted that the fact of these payments rebuts the presumption of 'a gift' and indicates that this was a personal debt17.
She also produced bank statements for her accounting company for the period October 2017 to March 2018. There are fourteen (14) deposits of $100.00 into the company's account each from the dive company. Each bears the description, "car loan."
In cross examination during her oral evidence, she sought to explain this by saying that the reference to car loan was because of a bank template document which if used once would then continue to give this designation if not changed. The Husband's evidence was that this was for repayment of a car loan and not an error and that the reference could be changed each time a payment was being made.
The Wife did also say that she had loaned him money to buy a personal motor vehicle and when asked about what the $100 payments were for, she said that she could have put it towards the $3000.00 which she had loaned him to pay for the vehicle but that she did not believe his intent was specifically for this amount to go towards the car loan. She then said that she does not know and that despite the fact that the deposits say car loan, she believes that these payments were towards the larger loan amount.
I was left with a sense of lack of assuredness from the evidence of the Wife as to what these repayments were for and on this aspect I preferred the evidence of the Husband that the repayments were for car loans and not towards the larger debt. 17 Affidavit of 4th October 2018, paragraph 5
The Wife produced, as attachments to her Affidavits, a number of emails. One of these is an email dated 21st February 2018 at 10:55pm in which the Husband stated that he would repay her if it is the last thing he does and asked that they come to a weekly agreement as they had done originally. He also said that the company cannot afford the payments that she seeks and would have to close down.
In another email sent by him to her on the 20th April 2018, he stated that he had made changes from her original claim on 15th October 2013 and 'had now applied it to September 17, 2014. He had also changed the STCW investments into loans and updated each change. 2013 was a good year and all were repayments except for one injection on 19th July.' According to the Husband, STCW investments was a reference to a boat safety training course and had nothing to do with diving. This was an investment by the Wife into that part of the company after they had sat down and done projections and she had indicated that she thought it was a good investment.
She also produced an email from the Husband dated 10th July 2018. This was to her Attorney copied to her in which he expressed surprise that the company business is being mixed up with the family business. He then said that perhaps if they are not settled he will go after his rightful share and stated his case therein which is that she was a sixty percent shareholder in the diving business and lent the money to her own company. He said that he tried his hardest to recoup her investment from the company.
It was the Wife's evidence that by the time of these e-mails, the Court process was ongoing and the Husband was fully live to the attendant consequences of a loan as distinct from a cash injection and was using the latter terminology so that he would not have to repay her. This was despite that fact that there had been no discussions between them about any such cash injections at the times of the loans, which were never intended to be business to business.
The Husband’s evidence is that he earns approximately CI $24 000.00 or US$30,000.00 per annum and that the Wife did not contribute to a pension scheme for him and did not allow him to do so, stating to him that she could invest the money better than the Pension Plan. The Wife denies this and disputes his earnings, stating that he receives $4,000.00 per month from another company in addition to whatever he makes from the dive company.
Both agree that the assets of the dive company are valued at approximately CI $40,000.00. The Wife’s evidence was that she stepped away from the business, receiving no monetary value for her shares and in the belief that as promised he would pay her back “every penny he owed her.” THE SUBMISSIONS
There was an initial issue as to whether or not the Wife could rely on statements made by the Husband in the course of mediation. Counsel for the Husband referred to the cases of Chocoladefabriken Lindt & Sprungli AG v. Nestle Co. Ltd18 and Ofulue v. Bossert19 and argued that such communications which are made with the intention of settling litigation on a reasonable basis without admission of funds owed are protected by the without prejudice rule. At the start of the hearing, Counsel for the Wife indicated his agreement with this position. 18 [1978] RPC 287 19 [2009] AC 990
I have also considered the case of Tim Brown, (as Trustee in Bankruptcy of the estate of Jane Elizabeth Rice) and Stephen Rice and Smita Patel20 which considers the rule in a mediation setting and makes it very clear that no distinction is to be made between party-to-party negotiations and negotiations conducted within a mediation; both are to be treated as subject to the without prejudice rule. The rule applies to protect such negotiations which do not result in an agreement. The Court stated:- "Mediation takes the form of assisted without prejudice negotiation. In Aird v Prime Meridian Ltd [2006] EWCA Civ 1866, the Court of Appeal recognized that "with some exceptions not relevant to this appeal", what goes on in the course of mediation is privileged, so that it cannot be referred to or relied on in subsequent court proceedings if the mediation is unsuccessful: see at para 5, per May LJ, with whom the other members of the court agreed."
Consequently and for the avoidance of doubt, I make it plain that any reference by the Wife to statements made in the course of mediation are disregarded.
On the central issues, Counsel on behalf of the Wife urged the Court to find that the Husband has no interest in the proceeds of the sale of the matrimonial home and shall repay the sum of CI $54,750 to the Wife. In support of his submission, he relied on her evidence as to the factual matters in dispute and submitted that the Husband has not produced any evidence to support his claim to an interest in the matrimonial home. He asked the Court to note that the Husband was never added as a proprietor to the title of the home which would have given rise to a presumption of an equitable interest. Counsel for the Wife further argues that, as the home was acquired by the Wife prior to the marriage, the Husband has no equitable interest in it or the proceeds of the sale of it. He further submits that the Husband’s assertions of improvements were either discredited 20 [2007] EWHC 625 or minimal and were the kinds of things that a decent husband would do and would not be sufficient to establish equity. Additionally, the exterior improvements claimed to have been done by the Husband were done on Strata property which is not matrimonial property. These are voluntary works done which benefit the Strata.
Counsel’s alternative submission was that the administrative assistance provided by the Wife to the Husband’s diving company would neutralize any possible equitable interest that the Husband may have in the home.
Finally he submitted that costs should be awarded in favour of the Wife on the basis that the Husband brought up the issue of corporate debt rather than resolving the matter by consent.
In response, Counsel on behalf of the Husband submitted that the Husband had an equitable interest in the matrimonial home and that the loan is a corporate loan. Further, that given the shareholding ratios, the diving company is more the Wife’s than the Husband’s and that all the funds injected into the company by her were capital investments made by the majority shareholder and director of the Company and did not constitute a matrimonial loan. According to Counsel, given that the Wife sold her shares in the company, and therefore realised the capital investment, there is no longer any liability by the company. There is thus no liability in relation to the Husband, the company being separate from the person.
Alternatively it was submitted that even if the Court found that the funds injected into the Company constituted a matrimonial loan or debt, it is trite law that monies between spouses during the marriage are communal property and thus the loan would be a loan from the Wife to herself, namely the single entity at law of married spouses and not a recoverable amount. Counsel also submitted that while a married woman can own property, a loan between spouses when matrimonial assets are used amounts to a loan to one’s self.
In support of this latter submission Counsel referred the Court to the cases of Phillips v. Barnett21 and Jansen v. Jansen22. In the first case it was held that an action could not be sustained for injuries caused by one spouse to the other as a husband and wife are one person in law. Blackburn J. stated that the authorities show that the objection to such an action is because a husband and wife cannot contract with or convey to each other. Lush J. stated that neither can acquire any civil rights against the law or apply to any civil court to enforce them. As to the effect of divorce on this, the Learned Judge said that it "merely terminates the relationship of husband and wife from the time of the divorce and their future rights with regard to property are adjusted according to the decision of the court in each case."
In the second case cited by Counsel on behalf of the Husband, Jansen v. Jansen23, Lord Denning pointed out that before 1882 a husband and wife were one person in law and neither could sue the other but that the passage of the Married Women’s Property Act, in England served to give rights where none before existed and that where those rights could be ascertained, effect should be given to them. 21 [1876] 1 Q.B. D. 436 22 [1965] P. 478 23 [1965] P. 478
Counsel also drew my attention to a discussion paper by Glenda Laurence entitled Family Law and Debt Creation24 which I have read carefully. Much of the discussion and cases referenced therein deal with debts to third parties including loans by family members to married couples.
Section 3 of the Married Women’s Property Law (1997 Revision) is in the following terms: “(1) Subject to this Law, all property which- (a) immediately before 1st June, 1941, was the separate property of a married woman or held for her separate use in equity; (b) belongs at the time of her marriage to a woman married on or after 1st June, 1941; or (c) on or after 1st June, 1941, is acquired by or devolves upon a married woman, shall belong to her in all respects as if she were a feme sole and may be disposed of accordingly.”
Section 10 of the said Law provides as follows: “10. (1) Every woman, shall have in her own name, against all persons, including her husband, the same civil remedies, and also (subject as regards her husband to the proviso hereinafter contained) the same remedies and redress by way of criminal proceedings, for the protection and security of her own property, as if she were a feme sole, but, except as aforesaid, no husband or wife shall be entitled to sue the other for a tort.”
I accept that the argument put forward by Counsel goes beyond these statutory provisions. As I understand it, the argument is that the monies used to loan the Husband were the joint property of the couple and therefore constituted matrimonial property which the Husband was entitled to share, and which did not constitute the separate property of the Wife. Thus she is not therefore entitled to be repaid. This then becomes 24 June 2103 , Argyle Private by Rockwell Olivier essentially an issue for factual determination as to whether the property used by the Wife to make the loans were part of the couple’s joint property. ASSESSMENT
There are no children of the marriage whose needs I must first consider and neither party has expressed or appears to have needs for which provision requires to be made out of the matrimonial assets or the non-matrimonial assets, if the matrimonial assets are insufficient. The strand to which I must have regard in considering this case is that of sharing and possibly but to a more limited extent that of compensation. This was neither a very short nor a long marriage and was a marriage between middle aged adults who have their careers and are able to maintain themselves in the future.
The evidence in this case is that the parties resided at the Prospect property which was their matrimonial home. On the basis of the general principles outlined above, despite its sole legal ownership by the Wife, it was property which was placed into “the melting pot of the marriage” and which would fall to be considered as matrimonial property. Thus the property or in this case given that it has been sold, any proceeds from it, is to be shared between the parties. The check point is equality, with the Husband and Wife each having an entitlement to a fifty percent share of the proceeds from the sale, unless there is good reason to depart from this.
Following the hearing, Counsel on behalf of the Wife advised that the home which was purchased some 19 years earlier was purchased at a price of CI $186,900.00. It was sold for CIS$211,000.00. After deduction of the agent’s fee of 7%, the net proceeds received by the Wife was $196,230.00.
On behalf of the Wife, the submission is that the Husband is entitled to no share given the source of the property, the intention of the parties as demonstrated by the absence of any change to the legal ownership of the property following the marriage as well as the Husbands’ limited contribution to the home. Counsel on behalf of the Husband, argued that he is entitled to a modest or at the very least a minimal share of the proceeds.
I have to consider all the circumstances of the case in order to arrive at a decision as to in what proportions this sharing should be made. Applying the starting point of the yard stick of equality, what would be the fair result in all the circumstances of this case?
In the case of Miller v. Miller, in her judgment Baroness Hale of Richmond referred to the case of White v. White where it was recognised that the source of the assets might be a reason for departing from the yard stick of equality. It was stated therein referring to that case:- “There, the reason was that property had been acquired from or with the help of the husband’s father during the marriage, but the same would apply to property acquired before the marriage. In White, it was also recognised that the importance of the source of the assets will diminish over time (see p 611b). As the family’s personal and financial inter-dependence grows, it becomes harder and harder to disentangle what came from where. But the fact that the family’s wealth consists largely of a family business, such as a farm, may still be taken into account as a reason for departing from full equality: see P v P (Inherited Property) [2004] EWHC 1364 (Fam); [2005] 1 FLR 576. So too may be the nature of the assets, where these are businesses which will be crippled or lose much of their value, if disposed of prematurely in order to fund an equal division: see N v N (Financial Provision: Sale of Company) [2001] 2 FLR 69.”25
It was further stated: “152. My lords, while I do not think that these arguments can be ignored, I think that they are irrelevant in the great majority of cases. In the very small number of cases where they might make a difference, of which Miller may be one, the answer 25 Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24 - Paragraph 148 is the same as that given in White v White [2001] 1 AC 596 in connection with pre-marital property, inheritance and gifts. The source of the assets may be taken into account but its importance will diminish over time. Put the other way round, the court is expressly required to take into account the duration of the marriage: section 25(2)(d). If the assets are not 'family assets', or not generated by the joint efforts of the parties, then the duration of the marriage may justify a departure from the yardstick of equality of division. As we are talking here of a departure from that yardstick, I would prefer to put this in terms of a reduction to reflect the period of time over which the domestic contribution has or will continue (see Bailey-Harris, "Comment on GW v RW (Financial Provision: Departure from Equality)" [2003] Fam Law 386, at p 388) rather than in terms of accrual over time (see Eekelaar, "Asset Distribution on Divorce – Time and Property" [2003] Fam. Law 828). This avoids the complexities of devising a formula for such accruals."
In the instant case, the Husband has made earnest efforts to detail his contributions to the home and Counsel on his behalf has invited me to consider this. The Wife is in sharp disagreement with the extent of his assistance in the household. On the whole, having observed the parties as they gave evidence, where there is disagreement on this area of the facts, I prefer the evidence of the Wife to that of the Husband, I accept the Wife's' evidence that the Husband was always struggling financially and although they had worked out a sharing of responsibilities, he did not contribute very much to the household. Indeed it appears that he was financially unable to do so. He mentioned a figure for a single year and gave a general description of what this was for (that is, to include matters such as entertainment and food). The source of this funding was not detailed by him. Additionally I did not get a clear picture from the evidence as to how much of this was spent on the house and how much was spent on the general care of the household as distinct from his own entertainment. The Wife's evidence was that she rarely went out with him because if she went, she had to pay for whatever entertainment and meals he wanted.26 26 Affidavit of 9th April 2019 paragraph 18
It does appear that he endeavored to assist with maintenance of the home on occasion and I accept that he did assist with the lawn, yard and deck from time to time. I accept also that he did do or caused to be done some minor shelving work and either painted two interior walls and the kitchen ceiling himself or arranged for the painting to be done using paint that the Wife bought. All of this must have been done by him in an effort to make their joint lives in the home more comfortable. However as to the scale and continuity of his assistance, I accept the evidence of the Wife that any maintenance work which he did was relatively minimal and inconsistent. I also accept the Wife’s evidence that for the most part she paid the cleaner, although it had been agreed between them that he would do so and that she undertook payment for all major repairs required to the home and in respect of minor repairs or upkeep such as painting, she provided the funding for the needed supplies. I believe her evidence when she said that he had only raked the lawn twice in the six years they had been together and only because guests were coming over and that his further lawn assistance consisted of helping her to plant small plants which she bought. The impression I had was that the Husband sought to make his home maker efforts appear more than they actually were. My overall sense is that both in terms of financial resources and home maker support, the Husbands’ contribution to the welfare of the family was very limited. I also noted that the Wife in response to his needs took on additional work hours in order to assist him financially.
While this issue of contributions has been raised by both parties, my view is that this has to be approached with some care, and it would not be wise to try to weigh to a fine balance the ratios of contributions in order to arrive at a monetary conclusion. I have in mind the recommended approach to contributions as set out in the cited cases.27 I also bear in mind the general principles that financial and domestic contributions rank equally in value, the importance of the home maker role to the family unit and that one party as for example the Husband in this case, may not have the financial resources but may have otherwise contributed all that he or she could.
I thought it significant that in his email of 10th July 2018 exhibited to the Wife’s’ Affidavit of 5th October 2018, the Husband describes himself as the one that believed the Wife when he married her, that she would financially take care of him and be the bread winner and the one who lost his Cayman rights to work, being married to a Caymanian and was stuck with a failing company.
In considering contributions, what I have to consider is whether on all the evidence, there is such a disparity in the respective contributions to the welfare of the family that it would be inequitable to disregard it. Additionally in my view contributions are but one of a number of factors which fall to considered.
Thus in arriving at a conclusion on this aspect, I have regard to all the relevant circumstances including, the source of the property, the length of the marriage, the age of the parties, the income and earning power of the parties and the parties contributions to the acquisition and maintenance of the value of the property. I do not think that the marriage was long enough such that the importance of the source of the home had diminished over the time period of the marriage. The Husband made no contribution to the acquisition of the property. The Wife had paid off the mortgage before they were 27 Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24 - Paragraph 146 married. With respect to maintenance contributions, I have considered the duration and nature of the contributions by each and the efforts made by each, whether sustained or not. I have noted the relatively minor and apparently un-sustained nature of the husband’s non-financial contributions and the absence of financial contributions as against the wife’s far more significant and sustained contributions. I think it would be inequitable to disregard the extent of the Wife’s contributions.
Consequently while no one factor is determinative, in all the circumstances of this case I think there is good reason to depart from the yard stick of equality. In my view to award a 50 % share to the Husband in these circumstances would be deeply unfair. The Husband’s own Counsel acknowledged in the course of her submissions, that any share to which the Husband could lay claim would, depending on the evidence accepted as to the level of his contributions, be minimal.
Against this background, I find that the Husband had an interest in the matrimonial home and I consider it fair to assess that interest to be 10 %. He should therefore receive the equivalent share of the proceeds from the sale of the matrimonial home.
Counsel on behalf of the Wife urged that any share in the home to which the Husband may be entitled should be set off against the value of the work done by the Wife on the administrative aspects of the Husband’s dive business. In response Counsel for the Husband submitted that the value of such work would not exceed the Husband’s interest in the matrimonial home given that the Husband’s assistance was daily in the home while the Wife’s accounting /administrative assistance was weekly. On this issue there was no detail from either party as to the level and value of this assistance and how this was to be calculated over time. Weekly assistance of a certain number of hours may well be of more value than minor daily assistance. Counsel for the Husband submitted that the assistance provided by the wife was not free assistance but assistance as a shareholder and director. On this issue there was an absence of evidence as to the circumstances surrounding the assistance and the reason and basis for it. On the available evidence I was not able to say on balance, that this was assistance provided by the Wife for which she expected to be paid or whether it was agreed that she would be paid and was not. Neither was it clear whether this was assistance to the Husband personally in order to assist him in building his business or assistance to his company.
Against this evidential background, I do not consider that it would be appropriate to set off the Husbands’ interest in the home as against the work carried out by the Wife for the dive company and I decline to do so.
On the second issue of whether the funds provided to the Husband by the Wife was their joint property, I reviewed the evidence of both parties carefully. No doubt there will be cases where such an argument would apply to the factual circumstances. Examples may be where the parties co-mingle their finances either formally by way of a joint account or more informally or where the earnings are made against the background of assistance and support from a homemaker for the benefit of the family as a whole and there is "personal and financial interdependence28."
In the case of Miller v. Miller, McFarlane v. MacFarlane,29 Baroness Hale of Richmond gave the example of a genuine dual career family where each party has 28 Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24 - Paragraph 148 29 [2006] UKHL 24 worked throughout the marriage and certain assets have been pooled for the benefit of the family and others have not. In such a case where there are no needs requiring compensation, and family assets are divided equally, it may well be fair for there not to be a distribution of additional surplus assets.30
Family assets are defined by reference to the landmark case of Wachtel v. Wachtell31 :- "It refers to those things which are acquired by one or other or both of the parties, with the intention that there should be continuing provision for them and their children during their joint lives, and used for the benefit of the family as a whole."
In the Grand Court case of Millwood v. Seymour-Ebanks32, McMillan J. emphasized that one must bear carefully in mind the distinction between common endeavor and separate endeavor and the intention of the parties themselves. The Learned Judge said this: "11. The Cayman jurisprudence has accepted and recognized the modern concept of marriage as a union of presumed equal partners, per Forte JA in Wight v Wight33. In short, what the union has created by its common economic endeavours, the parties are entitled to share upon the dissolution of the partnership. One must also bear carefully in mind a distinction between common endeavour and separate endeavour. 12. In addition, although the starting point for the division of any matrimonial assets is equality, nonetheless the Court may depart from an equal division of the matrimonial assets only where there is good and clear reason to do so. Essentially, the overall aim of the Court at that point is to achieve fairness in all the circumstances. 13. In order to address and determine the issue of beneficial interests, the role of the Court as described by Baroness Hale at paragraph 60 in Stack v Dowden34 can be summarized as follows: 30 Miller v. Miller, McFarlane v. McFarlane [2006] UKHL 24 - Paragraph 153 31 [1973] Fam. 72 32 FAM 177/2011, 6th March 2015 33 2010 1 CILR 60 at page 78 paragraphs 47 - 48 34 [2007] 2 AC 432 The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it.'"
In the instant case, the Wife’s evidence which I accept having found her to be a truthful and honest witness is that they had agreed to keep their businesses separate at the start of their relationship and that she constantly reminded the Husband of this. The fact of the placement of funds into company accounts as distinct from personal or joint personal accounts is an added factor in that it may well be said that the monies were the property of the company and not the property of the Wife personally.
As to their intentions, notably on the Husband’s own account, his company business account which he also used for personal spending was not accessible by the Wife. He was the signatory on that account. There is every indication that the couple kept their finances separate and there is no evidence that I can see of a common intention between them that the accounts of the Wife’s company business or indeed her own personal accounts were treated by them as a joint pool or that they intended to treat them as such. Indeed the fact that the Wife expected to be repaid and the Husband initially repaid her sums borrowed, belies any such conclusion.
Due regard must be had to the clear intentions of the Parties. Against this background, I conclude that the money in the bank account of the Wife’s company was separate property and was not matrimonial property. It was not a product of their joint endeavours, neither was it intended by them to be used for the benefit of the family. The loans which were made to the Husband from her company’s account were not made using matrimonial property and thus are subject to repayment by the Husband.
The fact that the Wife was on the books as a majority shareholder of the company does not give rise to the automatic conclusion that the Wife must therefore have been investing in her own company when the loans were made. This is particularly so in circumstances where despite the shareholding ratios, the dive company was agreed by all to be the separate business of the Husband which he ran as he saw fit.
There is no formal paperwork as to the loans between them. This is not surprising and one would hardly have expected, between a married couple, the formalities of such paperwork. I preferred and accept the evidence of the Wife that these loans were made not to a company but to the person of her husband in order as she says for him to live. I do so against the backdrop of the Husband’s own evidence that he never drew a salary from the business and the agreed position that the business was by no means profitable.
I note also that it seems unlikely that if in fact the Wife had made loans to the company as a corporate transaction, she would have then effected a nominal transfer of her shares for $1.00 without securing from the company the return of her funding. She struck me as an astute professional and I was inclined to believe her on a balance of probabilities that the Husband’s claim that this was a corporate loan is a late claim on his part so as to delay or avoid having to pay her back.
I do not consider that this was a marital debt in the sense of being a debt incurred for a marital purpose which was to benefit the marital estate and for which both should bear joint responsibility. On the evidence which I have accepted, I find that this was a personal debt which is owed by the Husband to the Wife in the agreed sum of $54,750.00. In my view it is appropriate and fair that this be taken into account when considering the disposition of matrimonial property, to wit the respective interests in the matrimonial home. I do so to the extent that, taking this into account, would serve to reduce the amount to be distributed to the Husband on the sale of the property. The ultimate effect of this is that the Husband’s interest in the proceeds from the matrimonial home (of 10% in the sum of $19,623.00) is extinguished leaving a balance of $35,127.00 which is still owed by him to her. COSTS OF THE HEARING On the issue of costs, I have taken into account the submissions of both parties. However neither party has been entirely successful. In these circumstances I would exercise my discretion to say that each party should bear their own costs in respect of this matter. Dated this the 17th day of July 2019 Honourable Justice Cheryll Richards Q.C. Judge of the Grand Court