Vince and Vince [2024] EWFC 389

The Family Court potentially considers business valuations at various points: in addition to the valuation at close to trial date, they are also on occasion required to consider the valuation of a business at the start of cohabitation. Furthermore, if there is significant incremental value after permanent separation, it may be argued that there should be another valuation when the relationship comes to an end. This is to calculate what is known as the post-separation accrual.

The underlying principle is that, under the sharing principle, the growth in value of a business during the period of cohabitation is normally considered to be marital property, to be divided equally.

Both of these factors featured in this case.

As if this were not enough, it is sometimes argued that conventional valuations at either the beginning or end of cohabitation do not embrace the hidden value within a business: subsequent events may reveal a sudden leap in value. This may be the effect of a springboard, patiently constructed by the business owners out of the sight and imagination of the unraised spirits of the staid business valuers.

Further valuation flourishes may also be necessary: it may be argued that part of the growth in value of a business during the period of cohabitation is not the result of the joint endeavours of husband and wife but reflects merely passive growth in the existing value of the business at the start of the marriage.

We add to these challenges the deep suspicion of the Family Court of business valuation generally. This is due to the variability of values, the prospect of a business increasing or diminishing in value at a rapid rate and the challenges of measurement that can arise in wrestling with some of the above concepts.

This heady brew is made more volatile as judges are concerned to judge each case on its own merits. This means that it is challenging to identify clear valuation principles that are applicable to the Family Court. So much so, that Judge Mostyn has cautioned against what he has described as “judicial caprice.”

The above results in a deep irony: more is expected from business valuers in an environment in which their conclusions are often disregarded.

Mr Vince was the sole shareholder of the Green Britain Group Limited, which had two main subsidiaries – Ecotricity Group Limited ('EGL') and Ecotricity New Ventures Limited. Mr Vince had been a pioneer in the development of wind and other forms of green energy. His restless entrepreneurial drive included a network of charging points for electric cars.

In this case, there was a single joint business valuation expert (“SJE”) and two other experts. The judge took considerable comfort from the fact that the three experts had narrowed their differences and were coalescing around a central figure of the SJE value of £153.3 million in a range from £148.4m to £165.8m.

Despite the above near consensus, the judge still wanted to sound a caution: he summarised thoughts on business valuation generally taking support from an earlier case:

“Whilst of course it is a positive that the accountants' views have largely converged, a fact which shores up to some degree the habitual fragility of such valuations, I must nevertheless keep well in mind the inherent uncertainty which will always come with these figures. In H v H [2008] EWHC 935 (Fam), [2008] 2 FLR 2092, Moylan J (as he then was) said at [5]:

'The purpose of valuations, when required, is to assist the court in testing the fairness of the proposed outcome. It is not to ensure mathematical/accounting accuracy, which is invariably no more than a chimera. Further, to seek to construct the whole edifice of an award on a business valuation which is no more than a broad, or even very broad, guide is to risk creating an edifice which is unsound and hence likely to be unfair. In my experience, valuations of shares in private companies are among the most fragile valuations which can be obtained.'”

The marital relationship for this couple began in February 2000 and ended in February 2022. The seeds of the business had been sown before February 2020. It was therefore an acquest, brought into the marriage. The trial was 34 months after February 2022. The business had increased in the value in that intervening period.

The judge adopted a novel approach: he determined that the business had been in existence (in very embryonic form in its early years) for a total of 356 months to the date of trial; the period of cohabitation was 264 months; the periods before and after aggregated to the remaining 92 months. On this basis, the judge decided that just over 74% of the current business value was marital property to be shared equally.

This approach is similar to the straight-line approach advocated by Judge Mostyn. It sidesteps the subjective measures of springboards and passive appreciation and can be seen to be relatively objective. It is based on the premise that the effort put into the business throughout its life was constant, although the financial benefits may have been uneven.