Atonement and post separation endeavour: wife keeps £1m gift from husband after his affair and will receive a share of his business’ future profits

The case of CG v DL would have been a “paradigm case for equality” but for the issue of post separation endeavour and whether the wife should share in the husband’s business going forwards. Deciding how to approach the husband’s hedge fund business was “much the hardest issue in the case” for Sir Jonathan Cohen.

The wife had been seeking lump sums equal to 25% of the husband’s future share of profits and of any capital realisation from his business, for an unlimited period of time. In comparison, the husband’s position was that the parties should go their separate ways and that the wife’s proposal was an attempt to share in his earning capacity after the end of the marriage, saying it was wrong (in law) that his future endeavours should be the subject of any claim by the wife.

Sir Jonathan Cohen awarded the wife a 17.5% share of the husband’s profits in the years ending 2023, 2024, 2025 and 2026. His reasoning for giving the wife a share of the future profits was that “If H were left with the entirety of the future return of the business it would mean that he would receive the whole of the benefit of what was built up during the marriage and W would receive no part…The business is the continuation of what was created throughout the time that the parties were together. It would in my judgment be plainly unfair if W were not able to share any further in the benefits.” The share of 17.5% was a reflection of the percentage of the husband’s profit share attributable to marital endeavour and the period of four years was based on the husband’s evidence that by 2026 he would then be in the process of handing over to a successor (as part of his retirement).

Another issue decided at the final hearing in May 2023 was whether a gift of £1m which the husband had given the wife in January 2018 (after he had an affair in 2017) should be regarded as one of the matrimonial assets to be shared in the financial settlement. The judgment indicated that the husband had given his wife the sum of £1m because the husband’s former girlfriend had told him that she was pregnant and he was advised that he would likely have to pay her £1m in respect of proceedings she could bring against him under Schedule 1 of the Children Act 1989 (although, in fact, the former girlfriend was not pregnant and so no such payment was made to her). The husband’s former girlfriend had caused a great deal of stress for the family (after the affair ended) because she “began a campaign of public and private harassment and stalking of both H and W. Its effect was difficult for H, but it was acutely traumatic for W.” Sir Jonathan Cohen decided that the wife should be entitled to keep the £1m in its entirety, as was intended when it was given to her: “It was a payment that the husband had made to his wife to “make amends” for his behaviour and its appalling aftermath”.

 As Sir Jonathan Cohen reminded the parties in his judgment “The touchstone in the division of assets between divorcing spouses is always that of fairness”. He noted that his division of the liquid assets (£12.49m / 51.6% to the wife and £11.69m / 48.4% to the husband) reflected the assets the couple had built up together as well as the £1m gift from husband to wife. He observed that over the years to come the difference was very likely to be reversed as the husband continues to work in the business and that would be a fair and proper reflection of his future endeavour.