Fair shares
Supreme Court to consider ‘matrimonialised’ assets
If most of a couple’s assets were earned by one partner before they married, how much should the other partner receive when they divorce? That’s what the UK Supreme Court will begin considering today.
What the justices must decide is when money brought to the marriage — “non-matrimonial property” — becomes “matrimonial property”. And when it does, how should it be shared on divorce?
The sums at stake are huge. Anna Standish is appealing against a decision of the Court of Appeal nearly a year ago that she was entitled to £25 million. That might look like quite a good share of the money that had been earned by her former husband Clive Standish, who had been a leading banker at UBS. But it was an unprecedented cut of nearly half the £45 million that Mr Justice Moor had awarded her in May 2022 — as Mail Online reported under a comprehensive headline last May:
Lord Justice Moylan said last year: “The judge's application of the sharing principle was flawed and has resulted in an unjustified division of the family’s wealth in the wife’s favour.” Lord Justice Phillips and Lady Justice King agreed.
For convenience, the parties are referred to in court proceedings as husband and wife even though their marriage broke down in 2020. They began cohabiting in 2004 and married in 2005.
How the law has developed
In 2000, the law lords confirmed that the work of the “breadwinner” and the “homemaker” during a marriage should be treated equally upon divorce. Relying on which spouse owned an asset risked discrimination
Six years later, the law lords established the sharing principle, which has guided outcomes in financial remedy claims in England and Wales ever since. Where assets are generated during the course of a marriage, the starting point is usually that each partner is entitled to an equal share of those assets — even when they are very significant.
In the third such case to reach the UK’s final court of appeal in a quarter of a century, the Supreme Court is now expected to decide when, if ever, assets generated outside a marriage can be shared.
The story so far
This summary of the facts is based mainly on an account provided by the husband’s solicitors, Stewarts:
The husband had a highly successful career in the financial services industry and generated the vast majority of his significant asset base prior to the parties’ relationship. Both parties had been married previously. They began cohabitating in 2004, leading into their marriage in 2005. They have two children together and lived in Switzerland and Australia before moving to England in 2010.
The husband retired in 2007. The wife was a homemaker throughout the parties’ relationship. Up until 2017, all of the husband’s wealth was held in his sole name, apart from two joint bank accounts and the former matrimonial home — a property worth approximately £20 million which was funded by the husband’s wealth but purchased in the joint names of the parties.
In 2017, as part of a tax planning scheme, the husband transferred nearly £78 million to the wife by agreement, with the intention and expectation that the wife would put the transferred assets into a trust. She did not do so but instead began divorce proceedings in April 2020, at which point the husband’s assets remained held in her name.
The wife claimed that the fact the assets were held in her name at the time of the divorce meant they should be shared with her equally, notwithstanding their pre-marital origins. Indeed, she asserted that they should be treated as her “separate” property and that they were only available for sharing because she had conceded she was willing to share them with the husband.
In the High Court, Mr Justice Moor found that the transfer of the non-marital assets by the husband to the wife had the effect of “matrimonialising” them, thus making them available for sharing. However, he decided that their pre-marital source was the key feature of the case and accordingly, they should be shared unequally.
The overall assets totalled £132 million. He awarded the wife £45 million, representing a 60/40 division in the husband’s favour of the marital assets, and ordered her to return the balance.
The wife appealed and the husband cross-appealed. His appeal succeeded. The Court of Appeal held that the assets transferred to the wife in 2017 were not transformed into matrimonial property. It held that at least 75% of the 2017 assets were not matrimonial and therefore reduced the wife’s total award by 40% to £25 million.
Sam Longworth, lead partner at Stewarts representing Clive Standish, said:
For those who have amassed high levels of wealth, an understanding as to when their assets will be shared on divorce and when they will not is a priority.
It is an area which regularly results in divorce disputes running into the tens of millions and beyond. Standish represents the critical next phase in the development of the law relating to asset division on divorce, a subject that impacts couples across England and Wales where around 40% of marriages end in divorce.
But in most cases with rather less cash to go around.
Some years ago the ABA reported a case in which the wife of an Oklahoma billionaire was awarded $580 million.
She appealed claiming it should have been $640 million.
She lost- with costs - leaving the question: what difference would those $60 million have made to her?
The problem with English and Welsh law – if it is a problem – is that whatever the Supreme Court may say, in law the first instance judge – Mr Justice Moor (Moor J), in Standish – has an absolute discretion as to how money is distributed between parties. The Supreme Court can only give guidance. It is the Matrimonial Causes Act 1973 Part 2 and Civil Partnership Act 2004 (for same sex couples) which gives that very wide discretion.
Imagine a hospital where, if one consultant gave you an opinion, then you could go on to eight more senior clinicians (for the judge analogy you have three in the Court of Appeal and five in the Supreme Court) for still more variations on the first opinion. Our NHS would grind still slower than now.
I say let very rich people make do with one opinion, ie that of Moor J – who is no slouch in this area of work, anyway – in Standish. Both parties still have more money than most of us could ever imagine, and deserve no sympathy. If they submit their case to the court let them make do with one High Court judge.
My exception to this view, is where a first instance judge – such as Moor J – got an aspect of legal principle wrong in his reasoning (eg in defining ownership of an asset or misunderstanding inheritance or tax law). To ‘matrimonialise’ (a new verb?) is not a matter of legal principle, unless Parliament says so. It is a matter of judicial discretion – ie how Moor J carefully reasoned and decided on the day he gave judgment. It should be out of bounds for further judicial interference (eg by Court of Appeal and Supreme Court).