Matrimionialisation

Is it a thing? What does it cover? And what effect should it have?

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 is expected to decide in Standish v Standish today.

What the justices were asked to consider is when money brought to the marriage by one party — “non-matrimonial property” — becomes shareable “matrimonial property”, defined as property generated during the partnership by the parties’ common endeavour. And when money is “matrimonialised” in this way, how should it be shared if there is more to go round than the parties need?

Lord Reed, who presided over the Standish case, was photographed in front of an image of the Supreme Court during a visit to the Montenegrin capital Podgorica on 20 June. In a speech about judicial transparency, he referred to the efforts he understood were being made in Montenegro to strengthen judicial independence, efficiency and public trust.

The sums at stake are huge. Anna Standish is appealing against a decision of the Court of Appeal last summer that she was entitled to £25 million. That might look like quite a good share of the money earned by her former husband Clive Standish, who had been a leading investment 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.

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.” Lady Justice King and Lord Justice Phillips 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

Until the end of the 20th century, an applicant could hope for no more than his (or, more often, her) “reasonable requirements” to be met.

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 had 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.

Today’s ruling will provide guidance for future disputes in which there is a surplus of assets. The vast majority of cases are currently resolved solely by reference to the parties’ needs.

The story so far

This summary of the facts — first published when I previewed the hearing two months ago — 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.

That meant the Court of Appeal was interpreting the concept of matrimonialisation more narrowly. Anna Standish has challenged that.

The issues

In a briefing yesterday, the law firm Mishcon de Reya suggested that the Supreme Court would endorse the current distinction between matrimonial assets — which should be shared — and non-matrimonial assets, which should be used only to meet needs or, occasionally, compensation.

The court was expected to consider three main issues:

1. Is the concept of matrimonialisation valid at all?

2. If so, which assets should be caught by it?

3. When assets are matrimonialised, should they be shared equally?

Matrimonial assets are usually shared equally, Mishcon de Reya observed, but the courts have held for some time that matrimonialised assets might be not be shared equally if their source was a party’s non-matrimonial property.

Update 1000: The Supreme Court has unanimously dismissed Anna Standish’s appeal. None of her husband’s pre-2017 assets had been matrimonialised.

A summary of the ruling is here and the judgment is here.