non-matrimonial property and its place in financial … property and its place in financial remedy...
TRANSCRIPT
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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St John’s Chambers’ Family Money Conference, 27th June 2013
Non-matrimonial property and its place in
financial remedy applications
Christopher Sharp QC, St John’s Chambers
NOTES
Matrimonial and non-matrimonial property
Following the decision in Miller and MacFarlane [2006] 2 AC
618 the search for a fair outcome has been directed under the
guidance of the three principles of ‚needs‛, ‚sharing‛ and
‚compensation‛.
The attempts to fit each case within these categories has not
proved popular with some of the judges of the Division, and
‘compensation’ at least is now largely a dead duck save in the
most exceptional of cases (MacFarlane being the paradigm):
see eg per Mostyn J: B v S (Financial Remedy: Marital Property
Regime) [2012] EWHC 265 (Fam) at para [73].
‘Needs’ and ‘sharing’, however, remain as the perceived
lodestars that guide the discretionary exercise of resolving
disputes over financial remedies.
Within the ‘sharing’ principle, a different approach has
developed according to the nature of the property to be
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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divided and this derives initially1 from Lord Nicholls’ comments
in White v White [2001] 1 AC 596, when dealing with property
acquired during the marriage by one spouse by gift or
succession or as a beneficiary under a trust. Having noted that
typically, in countries where a detailed statutory code is in
place, the legislation distinguishes between two classes of
property: inherited property, and property owned before the
marriage, on the one hand, and 'matrimonial property' on the
other hand (giving examples from Scotland and New Zealand)
he went on (in a very well known passage) to say:
42. This distinction is a recognition of the view, widely but not
universally held, that property owned by one spouse before
the marriage, and inherited property whenever acquired,
stand on a different footing from what may be loosely
called matrimonial property. According to this view, on a
breakdown of the marriage these two classes of property
should not necessarily be treated in the same way. Property
acquired before marriage and inherited property acquired
during marriage come from a source wholly external to the
marriage. 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.
43. 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. However, in
the ordinary course, this factor can be expected to carry
little weight, if any, in a case where the claimant's financial
needs cannot be met without recourse to this property.
1 at least within recent times, although as long ago as the farm case of P v P (financial provision) [1978] 3
All ER 70 the CA were identifying inherited assets as a specific element of ‘contribution’ within s.25(2)
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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It has therefore been recognised in Miller (if it was not already
very clear before) that ‘needs’ will trump other factors and all
assets will be brought into account, whatever different weight
they may be accorded in the final discretionary distribution.
This identification of different classes of asset found its more
specific articulation in Miller in the division into ‚matrimonial
and non-matrimonial property‛
Lord Nicholls was keen to avoid what he described as a
distinction between 'family' assets and 'business or investment'
assets. He accepted that in all cases the nature and source of
the parties' property are matters to be taken into account
when determining the requirements of fairness. The decision of
Munby J in P v P (Inherited Property) [2005] 1 FLR 576
regarding a family farm is an instance. But 'business and
investment' assets (Lord Nicholls stressed) can be the financial
fruits of a marriage partnership as much as 'family' assets (and
this is consistent with the requirement to avoid discrimination
articulated so clearly in White and in Lambert v Lambert).2 The
equal sharing principle, he said, and the rationale underlying it,
applies equally to the former as to the latter.
At paras 22 and 23 he set out what he meant as follows:
22. This does not mean that, when exercising his discretion, a
judge in this country must treat all property in the same
way. The statute requires the court to have regard to all the
circumstances of the case. One of the circumstances is that
there is a real difference, a difference of source, between (1)
2 Two recent cases decided by Moylan J illustrate how difficult it may be for a spouse who starts a business
during a marriage to argue that it is external to the marriage: SK v WL (Ancillary Relief: Post Separation Accrual)
[2011] 1 FLR 1471 and Evans v Evans [2013] EWHC 506 Fam
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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property acquired during the marriage otherwise than by
inheritance or gift, sometimes called the marital acquest but
more usually the matrimonial property, and (2) other
property. The former is the financial product of the parties'
common endeavour, the latter is not. 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.
23. The matter stands differently regarding property ('non-
matrimonial property') the parties bring with them into the
marriage or acquire by inheritance or gift during the
marriage. Then the duration of the marriage will be highly
relevant.
And he cited the passage above from White
Where Lord Nicholls and Baroness Hale (with whom the
majority agreed) differed was in identifying what is and is not
matrimonial property.
For Ld Nicholls matrimonial property was property acquired
during the marriage otherwise than by inheritance or gift, and
the entitlement of each party to a share of such matrimonial
property was the same however long or short the marriage
might have been; but for the majority matrimonial property
should be regarded as the family assets, i e assets which were
acquired for the use and benefit of the whole family or from
family businesses in which both parties worked, and if the
assets were not family assets, or not generated by the joint
efforts of the parties, then the duration of the marriage might
justify a departure from the yardstick of equality of division (i.e.
a reduction to reflect the period over which the domestic
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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contribution had continued, as opposed to accrual of an
interest over a period of time).
There is arguably, in Lady Hale’s approach, and the concept of
the ‘non-matrimonial, non family partnership’ business venture,
a greater possibility for the survival of the discriminatory
approach to the generation of the wealth to be divided where
that wealth has been created during, rather than prior to, the
marriage. Lord Nicholls’ approach appears to owe more to the
Scottish or New Zealand approaches, that matrimonial property
means (simply) the matrimonial home plus property acquired
during the marriage otherwise than by gift or inheritance, and
is (prima facie) to be divided equally.
The passage of time
Over time the impact of the origin of the asset will change (see
White per Ld Cooke and Miller per Ld Nicholls para 23 ‚the
duration of the marriage will be highly relevant‛ and Baroness
Hale ‚the importance of the source of the assets will diminish
over time‛).
In K v L (Ancillary Relief: Inherited Wealth) [2011] 2 FLR 980
Wilson LJ (as he then was) analysed these principles and
concluded that it would be more accurate to say that the
importance of the source of the assets may diminish over time
(para [17]). He envisaged three situations:
(a) Over time matrimonial property of such value has been
acquired as to diminish the significance of the initial
contribution by one spouse of non-matrimonial property.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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(b) Over time the non-matrimonial property initially
contributed has been mixed with matrimonial property in
circumstances in which the contributor may be said to have
accepted that it should be treated as matrimonial property
or in which, at any rate, the task of identifying its current
value is too difficult. (See ‘Mingling’ below)
(c) The contributor of non-matrimonial property has chosen
to invest it in the purchase of a matrimonial home which,
although vested in his or her sole name, has—as in most
cases one would expect—come over time to be treated by
the parties as a central item of matrimonial property.
But in K v L on the facts nothing led to a conclusion that even
over a long marriage there had been a diminution in the
importance of the source of the parties’ entire wealth which
continued to be represented by the shareholding owned at the
outset by W, ring fenced during the marriage, not accessed,
and not reflected in the modest life style the family enjoyed.
The impact of needs
The principle that derives from Charman v Charman (No 4)
[2007] 1 FLR 1246 is that the judge starts by applying the
principle of need and then considers the sharing principle and
when the result suggested by the needs principle is an award
greater than the result suggested by the sharing principle, the
former should prevail. Thus it is only where needs can be
satisfied without resorting to the non-matrimonial property
that the issue of how to distribute the non-matrimonial
property will be germane. However, ‚need‛ is an elastic
concept and allows much discretion in its assessment (see per
Mostyn J in B v S), so how is one to assess such ‚need‛?
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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Compare:
- ‘needs generously interpreted’ (Miller),
- ‘reasonable requirements’ (the pre-White yardstick); and
- ‘real need’ (in Radmacher [at 81] an agreement which
would leave a former spouse in a predicament of 'real
need' was stated to be a factor which would make it
likely to be unfair to hold the parties to their nuptial
agreement.)3
In N v F [2011] EWHC 586 (Fam) Mostyn J suggested that the
presence of pre-marital property could (like a nuptial
agreement) lead to a more conservative assessment of needs
(using the example of Radmacher where the ante-nuptial
agreement had the effect, by preserving pre-existing property,
of reducing the husband’s assessed needs).
While this might be right in some cases, it must be fact specific
and depend on the extent to which the pre-marital property
has been accessed during the marriage and the length of the
marriage and the consequential standard of living which was
enjoyed prior to the breakdown of the marriage
And yet in Robson [2011] 1 FLR 751 the parties had
irresponsibly dissipated H’s inheritance and drawn on the
capital to support a life style they could not afford. The CA held
that it was inappropriate for the judge to criticise this conduct
and then assess W’s needs on a basis which would require H to
continue to draw on that same inheritance.
3 One may ask what precisely does 'real need' mean? Is it less than 'reasonable needs’? How much less, and is
it subsistence level? Or does it mean the level of welfare benefits, for instance.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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Addressing matters more generally, however, Ward LJ said at
para 43(8) that the standard of living during the marriage
would be relevant:
‚...and the extent to which it has been afforded by, and
enhanced by, drawing down on the added wealth. The
way the property was preserved, enhanced or depleted
are factors to be taken into account. Where property is
acquired before the marriage or when inherited
property is acquired during the marriage, thus coming
from a source external to the marriage, then it may be
said that the spouse to whom it is given should in
fairness be allowed to keep it. On the other hand, the
more and the longer that wealth has been enjoyed, the
less fair it is that it should be ring-fenced and excluded
from distribution in such a way as to render it
unavailable to meet the claimant’s financial needs
generated by the relationship‛
In J v J (Financial Orders: Wife’s Long Term Needs) [2011] 2 FLR
1280 Moylan J eschewed any analysis of the different ways of
looking at need but preferred the words of the statute in
s.25(2)(b) ‚financial need‛ and recognised that the assessment
of need, at least at the outcome stage, has to be conducted or
justified by reference to the circumstances and context of the
case. It is not an exercise undertaken in abstract, and he
referred to Charman (No 4) at para [70]:
‚Thus the principle of need requires consideration of
the financial needs, obligations and responsibilities of
the parties (s.25(2)(b)); of the standard of living enjoyed
by the family before the breakdown of the marriage
(s.25(2)(c)); of the age of each party (s.25(2)(d)); and of
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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any physical or mental disability of either of them
(s.25(2)(e)).
This concentration on s.25(2) was also urged by Ward LJ in
Robson (para [43(1)]) when he advised against judicial glosses
on the statute’s wording (whether ‘reasonable requirements’ or
even ‘generously interpreted’ – as in Miller)
Rather than seeking to achieve a mathematically exact
calculation of the applicant’s future needs, a broad analysis
based on s.25 enables the court to assess what income it
would be ‘fair’ (in all the circumstances of the case) for this
wife to have available to her for the remainder of her life –
including additional discretionary expenditure varying from year
to year (where that reflects the circumstances of the marriage):
AR v AR [2011] EWHC 2717 Moylan J at [70-71].
It follows that it is a multi-factorial or ‘holistic’ assessment. The
origin of the property may be a consideration (that is part of
the s.25 exercise by reference to contributions) but (it is
suggested) what is of more relevance is how the parties
conducted their lives during the marriage
Thus if the non-matrimonial property was ring fenced and not
accessed then it will have limited impact on the assessment of
needs, but if it was fully available to the family then, aliter.
Cases such as Robson or Y v Y [2012] EWHC 2063 (Fam)
(Baron J) are examples of the latter.
A good example of the former is K v L (Ancillary Relief:
Inherited Wealth) (above) where the Court of Appeal upheld
Bodey J's decision which considered the relevance of shares
inherited by the wife many years prior to the marriage. It was a
long marriage and the parties had lived relatively modestly. At
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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the date of the marriage the shares were estimated to be
worth £680,0004, but by the time of the hearing, they were
estimated to be worth £57.4 million. Furthermore, the shares
had always been kept separate and apart from matrimonial
assets. Despite the length of the marriage, the husband was
awarded a lump sum of (only) £5 million plus the former
matrimonial home worth £225,000 (9.3% of the assets). The
provision to the husband was fair and although assessed
principally on his needs, provided for more than his needs even
if generously interpreted in the context of their lifestyle.
In NA v MA [2007] 1 FLR 1760 Baron J awarded applicant 23%
from a fund that was solely non-matrimonial property (£9.2m
out of £40m) but the award was based solely on her needs.
In Y v Y Baron J awarded 32.5% (£8.74m of £26.88m) again
on need (‚I accept that primarily this is a needs case given that
the Estate was pre-acquired‛) but the ‚needs‛ reflected many
other s.25 factors including the standard of living and
accommodation during the marriage and the access to the
inherited wealth that there had been.
In N v F (above) Mostyn awarded the wife 44.7% of the total
assets. The Judge emphasised that the high percentage was
due to the impact of the wife's needs; were it not for W's
needs he would have excluded more, possibly the entirety, of
the husband's pre-marital wealth from the division.
In K v L Wilson LJ observed (para [22]) that counsel had been
unable to identify a single case where an applicant had secured
4 At the start of cohabitation (1986) £300,000, at marriage (1991) £680,000, at separation (2007) £28 m and at
trial (2010) £57.4m. W had c. £1.3m other assets. The home was a semi in South London worth £225K and the
family budget was £79K pa
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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an award in excess of his or her needs where the assets were
entirely non-matrimonial.
A personal view is that:
- In Miller at [153] Baroness Hale said that: ‚The nature
and the source of the property and the way the couple
have run their lives may be taken into account in
deciding how it should be shared.‛ (my emphasis);
- In cases like Parra v Parra the way the parties have
arranged their financial affairs has been an important
factor. See also per Ld Nicholls in Miller at [25];
- Needs which are ‘relationship-generated‛ are an
important element (see Ward LJ in Robson);
- The Act refers to the standard of living during the
marriage as a relevant consideration (s.25(2));
- Over time the resort of the parties to extra-marital or
non-matrimonial assets will indicate an intention as to
how those asset should be treated. In Robson Ward LJ
said that while inherited capital required special
consideration it was not inviolate having regard (in that
case) to the length of time over which and the extent to
which the parties had relied on it to subsidise their life
style;
- In the circumstances, it is illogical for Mostyn J in N v F
to suggest that the origin of property which has been
accessed to supplement matrimonial assets and to
subsidise a standard of living may have a ‘conservative’
influence on the assessment of a party’s needs (save
perhaps to the extent, as in Robson, that the applicant
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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has been ‚complicit in their prodigality‛ to a culpable
and significant extent.)
The use of a Mesher Order
Nevertheless, where there are needs, then while (as is already
clear) they will take priority, this will not necessarily lead to an
outright absolute payment. In two recent cases the court has
used a Mesher order (rather in the way in which an award
might be made in a Schedule 1 Children Act case) to provide
the needy spouse (and children) with the temporary use of
capital with a charge back in the one case to a seriously injured
husband whose wealth derived from his personal injury claim
(Mansfield: see below) and in the other the order was used to
reflect the pre-marital property H had brought to the marriage
(and the effect of the pre-nuptial agreement entered into to
protect it): see V v V [2011] EWHC 3230 (Fam) Charles J. The
parties entered into a Swedish marriage settlement. There was
a substantial imbalance between matrimonial and pre-
matrimonial assets. W was provided with sufficient to meet the
needs of herself and the children during their minority with a
charge back to H thereafter.
A not dissimilar principle of retention of interest is seen in B v B
(ancillary relief) [2008] 2 FLR 1627 where all the assets had
derived from W’s pre-marital inheritance which had sustained
the family during the marriage. They had started a car wash
which H ran. The lower courts attempted to achieve equality
but the CA allowed W’s appeal. The origin of the wealth was
recognised by ensuring W could recover financial benefit from
the business. There had to be recognition of the fact that all
assets were provided by the wife, and that she had a
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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reasonable claim to the greater security which preservation of
more than half of them in her hands would bring. Fairness
would be achieved if, first, the husband was permitted to
continue in sole occupation of the carwash premises for the
purpose of his business; second, the proceeds of the carwash,
if and when sold, were divided equally between the parties;
and thirdly, rent was payable from the husband to the wife at
half the current market rent.
In this case the CA did point out that every case had to be
decided on its own facts, and the facts were unusual.
The nature of the property
Investment in a matrimonial home:
The matrimonial home will almost inevitably be treated as
matrimonial property, whatever the origins of its funding. See
Miller at para 22:
‘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’
BUT does this necessarily mean it will be shared 50/50?
Not according to Mostyn J: see S v AG (the lottery case infra)
where he said at para [9]:
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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‚But even the matrimonial home is not necessarily
divided equally under the sharing principle; an unequal
division may be justified if unequal contributions to its
acquisition can be demonstrated‛
And he referred to Wilson LJ in Vaughan v Vaughan [2008] 1
FLR 1108 at para [49]:
‚.....I consider that the husband’s prior ownership of the
home carried somewhat greater significance than either
the district or circuit judge appears to have ascribed to
it‛
although he had recognised that Baroness Hale had observed
in Miller that ‚the importance of the source of the assets will
diminish over time‛
In S v AG Mostyn J, despite finding that by purchasing the
home with part of the lottery monies W had converted that
part of what was non-matrimonial property into matrimonial
property and therefore subject (prima facie) to the principle of
sharing, nevertheless held that having regard to its origin and
the ‚relatively short period‛ that H lived there (less than 4
years) he was not entitled to an equal share (see further
below).
In NA v MA [2007] 1 FLR 1760 Baron J had said in relation to
the comment in Miller (above):
‚I do not take that to mean that the property must be
divided equally but its value and the lifestyle that it
produced are relevant factors in the Court’s
consideration of fairness.‛
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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In Y v Y the mansion that was the fmh was not sold but the
nature and style of the property which had been central to the
lifestyle informed the assessment of the wife applicant’s
housing need
Separate consideration of each (class of) asset
In Wells v Wells [2002] 2 FLR 97 the CA stressed the need to
identify the nature of assets and then either divide them by
class or recognise the difference in the liquidity in the course of
the division. In N v N (Ancillary Relief) [2010] 2 FLR 1093
Charles J considered the departure from equality separately by
reference to different classes of asset (rather than applying one
global discount). Rejecting the proposition that he should look
at all the assets as a composite whole, the judge held there
might be good reason (within the sharing principle) to depart
from equality in respect of some assets (even to the extent of
100%: see also per Charles J in J v J [2009] EWHC 2654 (Fam))
and not others5. 75% of the assets (total £16.5m) were non-
marital in origin (including a photographic collection £1.4m,
chattels £800K, family company £8.8m) and there were
deferred bonuses for the years subsequent to the separation.
W’s needs were assessed at £5.3m and that was the award
(32% of the whole).
The difficulty with this detailed analysis (and see S v S (Non-
Matrimonial Property: Conduct) above is that it involves a lot of
concentration on detail and inflated costs. In the recent case of
B v B [2013] EWHC 1232 (Fam) Coleridge J has made remarks,
5 The photograph albums (for example) were attributed 100% to H, although this was not to say that they
might be regarded as a source of finance on a (very) rainy day, or even need to be sold to meet the W’s claim
based on need (para 151-153]). The bonuses earned after separation were divided 70/30
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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approved by the President of the Family Division, about dealing
with what the judge described as 'the lesser issues and assets'.
Having regard to the pressure on resources, the limitation on
the use of experts and the need to curb all costs, he said: The
small differences (as a proportion of the pot) in the value of
[the less important assets] does not merit the time (and costs)
spent on them.‛ And he observed that often: ‚the pursuit of
precise accuracy is a spurious and vain endeavour where the
figures are in most cases derived from professional valuations
and opinion and assets are not being sold anyway‛ A broader
brush has to be applied: ‚Assets falling in this category should
be bundled up together and an overall value for them all
agreed. If not the court is itself likely to apply that system in a
broad, even rough and ready, way.‛
Mingling
This is the process identified in White and in Miller whereby
over time non-matrimonial assets are brought within the
economy of the parties and so lose their character in whole or
in part of ‘non-matrimonial’ property. Arguably by allowing
such mingling the original owner has accepted that they should
be shared. Thus where pre-acquired wealth is invested in a
matrimonial home, or the parties resort to inherited funds to
subsidise a life style they cannot otherwise afford (Robson), or
extra-marital funds are invested in a joint venture (White) the
origin of the property becomes less relevant.
Nevertheless it will not necessarily become wholly irrelevant. An
example is S v S (Non-Matrimonial Property: Conduct) [2007] 1
FLR 1496 where Burton J identified those items of pre-marital
property that survived and excluded those from the division but
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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in respect of the matrimonial property which included some
assets that had their source and derivation in non-matrimonial
property he reflected that origin in dividing the matrimonial
property 60/40.
Similarly see Mostyn J’s approach in N v F (below)
An alternative approach suggested by some (eg Peter
Duckworth) where a valuable asset has been brought into the
marriage with which that party has traded, is to treat the fruits
of that activity as matrimonial property but the underlying asset
to remain the property of the party who introduced it. This is
not wholly dissimilar to the approach in B v B (the car wash
case). My view is it would depend on the other party’s
involvement in the activity that gave rise to the ‚fruits‛.
Liquid funds or heirloom
Whether, or to what extent, inherited or non-matrimonial
property will be subject to sharing may depend upon the
nature of the asset. In Robson v Robson [2011] 2 FCR 625
(CA) Ward LJ at para [43] (7) said:
‚It is not only the source of the wealth which is relevant
but the nature of the inheritance. Thus the ancestral
castle may (note I say ‘may’ not ‘must’) deserve different
treatment from a farm inherited from the party’s father
who had acquired it in his life time, just as a valuable
heirloom intended to be retained in specie is of a
different character from an inherited portfolio of stocks
and shares. The nature and source of the asset may well
be a good reason for departing from equality within the
sharing principle‛
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
18
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See also the farm case of P v P (Inherited Property) [2005] 1 FLR
576 Munby J at [37] (and generally) 6. In respect of heirlooms,
see also N v N (above).
In Y v Y [2012] EWHC 2063 (Fam) Baron J helpfully reviews the
law relating to inherited property generally at para [28(a) –(k)]
but she rejected at [23(c)] H’s case that two collection of family
antiques (value £2.2m) should be ‚sacrosanct‛ saying
‚Obviously they have a sentimental value but, in the end, they
do have a real monetary value and are available to cover
indebtedness. Accordingly they should be included in the Asset
Schedule‛
The nature of the acquisition
Pre-acquired assets/wealth or property inherited (or received as
a gift) by one party during the marriage is dealt with above.
Wealth built up during the marriage but to be treated as non-
matrimonial property is a category envisaged by Baroness Hale
(Miller para 152, 153) where she refers to dual career families
6 But contrast D v D [2010] EWHC 138 (Fam): Charles J: Long
marriage (20 years +). H was a farmer and had inherited part of
the business which he ran with his brother and father (the brother
was subsequently bought out). Business grew during the marriage
(turnover 1985 £350K, 2009 £6.94m). Judge rejected H’s
argument that this was a farming case justifying a clean break
funded (only) by what the business (which was illiquid) could
afford. But it would not be fair in the circumstances to force H to
sell his shares or liquidate the business. W’s award: a lump sum
which H could raise and p/ps.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
19
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and where the wealth of each party has been kept separate.
She suggests this concept is simply a reflection of the fact that
in a matrimonial property regime which still starts with the
premise of separate property, there is still some scope for one
party to acquire and retain separate property which is not
automatically to be shared equally between them. However,
she also suggests that one should be careful not to take this
approach too far, and also implies that the concept may be less
applicable in a longer marriage than a short one. It is (I suggest)
a concept to be advanced with great caution. As Moylan J
observed in SK v WL (Ancillary Relief: Post-separation Accrual)
[2011] 1 FLR 1471 it will be difficult for a business started
during a marriage to be (as H contended) wholly external to it.
(see also Evans v Evans [2013] EWHC 506 (Fam) where Moylan
J rejected H’s case for a ‘special contribution’ in respect of a
business started during the marriage)
A third category of property is that acquired after separation.
Where this is wealth that has been wholly generated after the
termination of the marriage it is manifestly not possible for the
other party to argue that they made any direct contribution to
its generation, and it is not obviously the ‘fruits of the
marriage’, but where it represents the fruition of efforts that
had their root in the period of the marriage and/or were
funded by matrimonial property, obviously the situation is
otherwise – thus in R v R (2011: Coleridge J – see below) the
deferred fund had been established with matrimonial monies,
but would not come to fruition for many years during which
the husband would continue to manage and support the
venture and probably continue to inject additional funds. The
solution in that case was to provide W with a defined sum to
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
20
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be paid out when the project matured with 5% pa interest
accruing on that sum.
In Evans (above) Moylan departed from equality (45/55) to
allow for the post separation that H had made and would be
making before the company was sold.
In many cases the success of the business or the origin of the
post separation accrual of wealth will have its origins in earlier
endeavours and this is the ‚springboard‛ effect described by
Charles J in J v J [2009] EWHC 2654. This effect may also be
relevant to an assessment of the influence of pre-marital
wealth and is referred to further below.
In a further recent case (13.8.12) called R v R [2012] EWHC
2390 (Fam) Macur J dismissed H’s arguments that the post
separation accrual should justify a departure from equality on
the basis that the growth was ‚organic‛, the company had
done little more than ‚achieve its latent potential‛, that ‚the
springboard was already in place and needed little
adjustment‛, and that in any event the wife’s contributions to
its success in earlier years outweighed any post separation
contribution by H. While the case is fact specific, it is a good
working example of the analysis that should be brought to
bear in such cases.
The approach to property acquired post separation will vary
with the facts, but the general principles can be summarised:
- The court will take account of all property at its value at
the time of the hearing (Cowan v Cowan [2002] Fam
79; Norris v Norris [2003] 1 FLR 1142);
- The sharing principle applies to all the property (not
merely matrimonial property) [Charman (No 4) para [66]]
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
21
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but appropriate weight should be given to the fact that
a substantial part of that property has accrued due to
one party’s endeavours after the parties separated
(Moylan J: B v B (Ancillary Relief: Post Separation
Income) [2010] 2 FLR 1214)
- In general, it can be assumed that the marital
partnership does not stay alive for the purpose of
sharing future resources unless this is justified by need
or compensation. The ultimate objective is to give each
party an equal start on the road to independent living
(Baroness Hale, Miller [144]). This principle is further
illustrated by Mostyn J’s recent decision in B v S in
respect of maintenance. Future earning capacity is not
to be categorised as an accrued ‘capitalised’ asset to be
divided. See also per Munby LJ: H v H (Financial Relief)
[2010] 1 FLR 1864 at para [105], and most clearly the
CA in Jones v Jones [2011] 1 FLR 17237.
- The fact that H has been trading with W’s notional
share of the family wealth in generating post separation
losses or profits will be relevant (eg SK v WL (Ancillary
Relief: Post-separation Accrual above and even per
Mance LJ in Cowan v Cowan [2001] 2 FLR 192 at [133])
- Passive growth on matrimonial property will remain
matrimonial property (the obverse of K v L where
passive growth of non-matrimonial property remained
non-matrimonial property)
- One approach to post-separation bonuses is on a ‘run
off’ basis with the claimant spouse having a decreasing
77
Over-ruling GW v RW (Financial Provision: Departure from Equality) [2003] 2 FLR 108
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
22
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share of bonuses received over, say 3 years (H v H
[2007] 2 FLR 548) but it will be entirely fact specific,
depending on when the bonus was earned (i.e. before
or after separation), the length of the marriage, the
claimant spouse’s needs etc. There are many cases
exemplifying different approaches.
- Lapse of time from the separation will manifestly be a
relevant consideration reducing/eliminating any claim
over post separation accrual of value (see eg Vince v
Wyatt [2013] EWCA Civ 495.
The Springboard
Charles J employed this concept in his decision in J v J. That
(very) lengthy judgment was reviewed critically by CA in Jones v
Jones [2011] 1 FLR 1723. The facts included the history that H
had been employed in the oil and gas service industry for 19
years before using his experience and expertise in establishing a
successful business 10 years before the marriage. The marriage
lasted 10 years. The hearing took place 4 years after
separation. Before the hearing H sold the company for £25m.
The company had been valued at £2m at the time of the
marriage and £12m at the separation. H offered W half of that
gain but W sought £10m or 40% of the total assets. The CA
concluded that the judge, who had categorised 60% of the
value of the company as non-matrimonial property, and not to
be shared, had wrongly attributed a capital value to H’s
earning capacity at the date of the marriage. An earning
capacity is not to be given a capitalised value.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
23
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The CA held that the latent potential of a company or
‚springboard‛ concept would not usually cause a court to
adjust a professional valuation, as that valuation should reflect
the value of the springboard, but in this case it had not and the
value of the company at the marriage should be regarded as
having been £4m to reflect this. In addition the passive growth
on that value (as opposed to positive activity in its
management) meant that by the time of sale the non-
matrimonial element in the proceeds of sale was £9m leaving
£16m of matrimonial assets to be divided equally. Testing that
(£8m) against the overall assets gave 32%, which was a fair
outcome.
This concept arises at both ends of the marriage but insofar as
a party brings an established business into the marriage, it is
important to ensure that there is a reflection of the fruits of the
non-matrimonial element in the ultimate evaluation of the
assets available for distribution, and that the accountants
instructed to value the company give appropriate weight to its
potential at the beginning of the marriage so as to establish
what is properly regarded as the matrimonial and the non-
matrimonial elements.
The approach was followed in N v F [2011] 2 FLR 533 where
the total assets were £9.714m. H came to the marriage with
£2.116m, which updated for inflation was £3.4m or allowing
passive growth, using an assumed 3.75% compound interest
on the basis of an index such as FTSE100, = £4.2m at trial.
Mostyn J indicated that he would not up-date the values in this
way for the ‚same reasons‛ he had taken a similar view in FZ v
SZ and Others (Ancillary Relief: Conduct: Valuations) [2011] 1
FLR 64). In that case he found the FTSE had fallen but that
having regard to the degree of merger of funds over the
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
24
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marriage any investment return would have been properly
regarded as matrimonial property.
There had indeed been substantial ‘mingling’ of these pre-
acquired assets with matrimonial assets over the 16 year
marriage and the family had resorted to capital to maintain
their lifestyle when H gave up banking to become a teacher.
Mostyn J held it would be wrong and unfair to exclude none of
H’s pre-marital wealth from the sharing principle and excluded
£1m.
Another recent example of the ‘springboard’ calculation is AC v
DC (No 2) [2012] EWHC 2420 (Fam) per Sir Hugh Bennett.
Lottery wins:
In Cowan v Cowan [2001] 2 FLR 192 Mance LJ had raised the
question of how a lottery win should be treated. There are
several decisions in Australia but none arose in England until S
v AG (Financial Remedy: Lottery Prize) [2011] EWHC 2637
(Fam) Mostyn J. The case may have suffered for being decided
between two litigants in person who spoke virtually no English
assisted only by two MacKenzie Friends
Mostyn J started from the premise that matrimonial property
will normally be divided equally but that it will be a rare case
where the sharing (as opposed to the needs) principle will lead
to any distribution to the claimant of non-matrimonial
property. (With respect to him, this seems far too simplistic
although he repeated the statement in B v S). However, he
then goes on to identify circumstances in which an equal
division of even matrimonial property will not follow, including
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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cases where ‚the matrimonial property in question will not be
the product of the endeavours of the parties within the social-
economic partnership that is marriage‛
Reviewing the Australian cases he identifies a conflict between
the analysis that a lottery win is (a) a windfall accruing to the
joint benefit of the parties, not being the product of any labour
or skill, or (b) that it is contribution to the welfare of the family
by the winning party. However, there is then a debate as to
whether there is an assumption that the funds from which the
ticket was paid were joint and so the contribution represented
by the win is joint or whether (as Mostyn J seems to think) the
source of the price of the ticket is irrelevant as being a sum de
minimis and the purchasing party can claim the credit for the
contribution. He also distinguishes the case where the parties
normally buy a ticket together or as a syndicate, and the case
where one party buys from her own earnings without the other
knowing, and further those cases where the marriage is already
unhappy and the parties are drifting into separate lives socially
and economically (as in that case). It is therefore very fact
specific.
In this case the judge found the win to have been non-
matrimonial property but that part of the proceeds, when
invested in a family home, became matrimonial property. The
judge first assessed H’s needs at £82K (being a deferred
Duxbury sum to provide income after he retired). When
considering the application of the sharing principle, due to the
origin of the funds, and the short time he had lived in the
home, the judge assessed H’s fair share to be 15-20% or about
the same as his needs. This would leave W with the ability to
reduce her mortgage and to meet her needs. He had taken all
the s.25 factors into account.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
26
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Thus, the decision is fact specific and does not give any clear
guide to how a lottery win would be dealt with in another
factual matrix.
Personal injury awards/damages
The principles that apply to personal injury damages have been
clear for some years. The cases of Daubney v Daubney [1976]
Fam 267, Pritchard v J H Cobden Ltd [1988] Fam 22 and
Wagstaff v Wagstaff [1992] 1 FLR 333 establish the general
proposition that damages for personal injuries are not excluded
from consideration when a court conducts the s.25 exercise,
but that the source of and rationale for the funds should not
be ignored.
Wagstaff made clear that damages for pain and suffering and
loss of amenity were to be included in the court’s consideration
(although Lord Donaldson MR suggested that insofar as a lost
amenity needed to be replaced at a cost, that would amount to
a need under s.25(2)(b)). Butler Sloss LJ explained that although
the court had an unfettered discretion when considering the
criteria set out in s 25 the circumstances in which capital by
way of damages came into the hands of the recipient spouse
and the size of the award were relevant factors which would
temper the extent of, and in some cases exclude, the sharing of
such capital with the other spouse. It followed that, although
the capital remaining available to the husband out of the
damages award had to be brought into account by him, the
circumstances in which the husband's capital came into his
hands were highly relevant to the exercise of the court's
discretion. In C v C (Financial Provision: Personal Damages)
[1995] 2 FLR 171 the wife’s claims were wholly dismissed in
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
27
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light of H’s needs and the adverse impact an award in her
favour would have, compared to the minimal benefit to her.
No new principle emerged from the most recent case in this
area: Mansfield v Mansfield [2011] EWCA Civ 1056. In this
case (unlike eg Wagstaff) H received his damages before he
met W. As explained above the CA made a Mesher order to
enable W’s needs as primary carer for the children to be met
during their minority and his needs to be met thereafter.
Protecting the fund
An issue which arises in light of such cases, is how an injured
party may protect their damages award (which will have been
assessed specifically to meet the claimant’s needs and ‚not a
penny more and not a penny less‛ per Baroness Hale: Wells v
Wells [1999] 1 AC 345).
One way to provide greater security for an injured party may be
to follow the lead of the Supreme Court in Radmacher v
Granatino [2010] UKSC 42 where significantly greater weight
was given than heretofore to nuptial agreements. At para [79]
Lord Phillips said:
‚Often parties to a marriage will be motivated in
concluding a nuptial agreement by a wish to make
provision for existing property owned by one or other, or
property that one or other anticipates receiving from a
third party. The House of Lords in White v White and
Miller v Miller drew a distinction between such a property
and matrimonial property accumulated in the course of
the marriage. That distinction is particularly significant
where the parties make express agreement as to the
disposal of such property in the event of the termination
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
28
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of the marriage. There is nothing inherently unfair in such
an agreement and there may be good objective
justification for it, such as obligations towards existing
family members‛
Or – one might suggest – an injured person with particular
needs, but there will have to be a balancing of those needs
with those of other family members.
Appropriate provision will need to be made for children, and
the uninjured party’s needs will have to met as far as possible.
It may be that (as in Mansfield) the uninjured party will only
have use of part of the capital during the children’s minority (to
provide a home) and it can then be returned to the claimant in
his later years (a Mesher order). All this will be fact dependent.
Similarly, it may be more difficult to seek to ring fence
resources which are attributable to loss of earnings, since that
is a resource against which the other party might have had a
claim in any event.
Nevertheless, provided that the agreement is freely entered into
by each party with a full appreciation of its implications the
court is likely to give effect to the agreement unless, in the
circumstances prevailing, it would not be fair to hold the
parties to it.
These considerations will, of course, apply both to dissolution
of marriages (Matrimonial Causes Act 1973) and civil
partnerships (Civil Partnership Act 2004), and of course apply
to the wider classes of assets which may be categorised as non-
matrimonial (or pre-marital or extra-marital etc)
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
29
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Is there any clear policy in the case law?
There are several cases from which one may draw indications
that there is judicial unhappiness with the perceived need to
categorise the property in the case too rigidly into matrimonial
and non-matrimonial. In H v. H [2007] E.W.H.C. 459 Charles J
observed:
“42 The arguments were, or came close to, an assertion that
given the length of this marriage and, because of that, the
force of the application of the yardstick of equality to the
fruits of the marital partnership, it was appropriate at the
first stage of the court's reasoning for it (1) to define the
matrimonial property with precision, (2) to divide its value in
half, and (3) to treat that result as an established and
unalterable part of the award. ...
“43 In my judgment this is an incorrect approach because (i)
it ignores the flexibility of the statutory provisions and the
objective of achieving a fair result in the given case, that was
emphasised by the House of Lords, and (ii) it seeks to
impose a certainty or rigidity of division on a foundation of
the matrimonial property and thus on a concept that (a) is
not expressly mentioned by the Matrimonial Causes Act, and
(b) cannot always easily or precisely be identified and
valued”.
In CC v RC (2007 but reported at [2009] 1 FLR 8.) Moylan J
took a similar view and concentrated on the need for flexibility,
finding support in Lord Nicholls’ views in Miller when he said:
“26 This difference in treatment of matrimonial property and
non-matrimonial property might suggest that in every case a
clear and precise boundary should be drawn between these
two categories of property. This is not so. Fairness has a
broad horizon. Sometimes, in the case of a business, it can
be artificial to attempt to draw a sharp dividing line as at the
parties' wedding day. Similarly the 'equal sharing' principle
might suggest that each of the parties' assets should be
separately and exactly valued. But valuations are often a
matter of opinion on which experts differ. A thorough
investigation into these differences can be extremely
expensive and of doubtful utility. The costs involved can
quickly become disproportionate”.8
8 See eg the comments of Coleridge J in R v R and B v B
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
30
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“27 Accordingly, where it becomes necessary to distinguish
matrimonial property from non-matrimonial property the
court may do so with the degree of particularity or generality
appropriate in the case. The judge will then give to the
contribution made by one party's non-matrimonial property
the weight he considers just. He will do so with such
generality or particularity as he considers appropriate in the
circumstances of the case”.
Rather Moylan J concentrated on the s.25 factors, treating the
speeches in Miller as ‘guidance’ rather than statutory
expressions to be interpreted. In this he was also following
both Charles J in H v H and Coleridge J in RP v RP [2007] 1 FLR
2105 while the CA have returned to the same approach in
Robson with Ward LJ discouraging judicial glosses being placed
upon the words of the statute and encouraging a
concentration on s.25.
On the other hand is the much more formulaic approach of
judges like Mostyn J (in N v F, S v AG (Financial Remedy: Lottery
Prize) and B v S) or Wilson LJ in Jones v Jones) and typified in B
v B per David Salter sitting as a Dep H Ct judge: see below
The practical application of these different approaches is
exemplified in some recent cases:
AR v AR (Treatment of Inherited Wealth) [2011] EWHC
2717 (Fam) Moylan J [2011] All ER (D) 241 (Oct)
The case concerned a couple who had been married for 20
years. There was total wealth of between £21 million and £24
million, all of which was in the husband's name, save for £1
million. The assets had been inherited by the husband.
Considering the recent case law, Moylan J concluded as
follows:-
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
31
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(a) The sharing principle applies to both
matrimonial and non-matrimonial property,
should the circumstances of the individual case
require. It was therefore inappropriate to adopt
the rigid approach of categorising such assets as
set down by the House of Lords in
Miller/McFarlane.
(b) Nothing had happened to the non-matrimonial
property to change it into matrimonial property.
As stated by Wilson LJ in K v L, there were three
circumstances in which the categorisation of
property could change over time: the value of the
contribution diminishes over time; non-
matrimonial property becomes intermingled with
matrimonial property so that it cannot be treated
or valued separately; it is used for the purchase of
an asset such as the matrimonial home so that it
becomes treated as a central item of matrimonial
property.
(c) The court's objective is fairness which may
require a flexible application of the Duxbury
principles. The court was concerned with the
wife's claims: she was entitled to be housed at a
level equivalent to the family home and she was
entitled to enjoy a level of financial security above
that which would be offered by a basic Duxbury
calculation.
(d) The court was not concerned with the
contributions of the parties during the marriage in
the absence of any arguments regarding
exceptional contribution or conduct.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
32
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R v R [2011] EWHC 3093 (Fam) Coleridge J (5.4.11)
This is a helpful practical example of the application of the
modern case law principles in what was not a ‘big money’ case
(the assets were only a little over £4m of which half would not
be available for several years - ‚the deferred fund‛). The
marriage lasted 7 years, there was a young child (8) and W had
a previous child (12) while W was also quite young (44). H was
57. H’s case was that almost everything which now existed,
apart from the deferred fund, either existed prior to the
marriage or had derived from such pre-existing assets. The case
was argued by reference to the principles of ‘needs’ and
‘sharing’ but Coleridge J commented:
‚9. So the live issues involve a determination of the
proper approach to a limited means short-ish marriage
case like this, and accordingly, precisely how the cake
should be carved up in a way as fair that is as possible
to both sides. As with most non-big money cases, the
practicalities of translating clever so-called principles into
a result which accords proper respect to principle whilst
also providing reasonably for both the spouses, and
most importantly the children, calls for a deal of
creativity and a large measure of commonsense.‛
He doubted whether it is really helpful or even possible to
adopt and use the approach of ‚modern case law principles
which are designed to aid the court in achieving fairness‛ in
the case. While recognising the logic of the formulaic approach
he preferred to focus closely on s.25 and in particular the first
consideration of the welfare of the children.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
33
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In that context when looking at ‘contributions’ the judge made
this observation:
‚39. Contributions: both parties have played their full
part during the marriage and no one has suggested
otherwise. However, in any outcome decided on sharing
principles, pre-existing wealth brought into the marriage
has to figure fully in a case like this, particularly where
the husband was an established professional with a high
income and significant assets. The marriage is not long
and there is little evidence of what is sometimes called
"mingling" of assets, although there may have been
some improvements to property during the currency of
the marriage, paid for out of borrowed money.‛
Moreover, although the matrimonial home had been bought
from pre-existing funds, it was used as collateral for a loan for
H to invest in a successful commercial property venture. He
rapidly repaid that loan from income earned during the
marriage. In those circumstances Coleridge J commented that
the commercial venture was ‚properly considered a
matrimonial asset in every sense‛. This was the deferred fund.
In the event the case was decided on the basis of meeting the
immediate needs of W and the children, and securing a clean
break as soon as possible (given the shortness of the marriage)
from the deferred fund. However, on a more general note the
judge added this:
‚55. Finally, I would only add this: the injection into the
process in this case of the new principles that have been
collected from the well-known recent cases (for
example, White, Miller v Miller and Charman) may have
provided a greater degree of sophistication in the never-
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
34
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ending quest for fairness in cases where there is a large
surplus over and above the parties' financial needs.
However, as this case graphically demonstrates, this has
been done at the expense of simplicity where as I find
the resources are only barely able to cover the debts and
needs, a quart out of a pint pot case, or even perhaps a
quart out of a quart pot case. The extra evidence and
calculations called for when trying to pin down precise
values for 'sharing' and, for example, the extent of pre-
acquired assets leads to many extra layers of
complication, forensic debate and expensive evidence
on the part of both legal teams.
56. At the end of the day, the result in this case has
been driven mostly by needs and practicalities. Where in
a case that seems to be likely from an early stage, I
would, if I may say so in all humility, suggest that those
who do these cases waste not too much time and
energy in the preliminary theoretical discussions, but
rather move swiftly to look at the practicalities of the
suggested outcomes whilst keeping the primary
considerations generated by section 25 in the forefront
of their mind.
In GS v L [2011] EWHC 1759 Eleanor King J [2013] 1 FLR 300:
(which is interesting for its treatment of the community of
property agreement signed in Spain) H argued for the exclusion
of pre-marital property but the judge rejected the argument on
the basis that all the assets were required to meet needs, save
for a pension that accrued before the marriage, could not be
taken for many years and would not be available to meet
needs now.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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In B v B [2012] EWHC 314 (Fam) David Salter sitting as a
deputy high court judge provided some useful reminders about
the approach to pre-marital wealth cases:
- As Mostyn J had said in N v F ‚if a party is going to
assert the existence of pre-marital assets then it is
incumbent on him to prove the same by clear
evidence‛. In this case H failed to provide such proof in
respect of several categories of asset. His assertions that
they were pre-marital assets were therefore disregarded
- No adjustment was made for the ‘springboard’ effect on
those assets that were proved to be pre-marital because
the wealth had not appreciated in real terms and
because any investment return on such wealth should in
his view be regarded as matrimonial rather than non-
matrimonial (but he did not explain why).
- He assessed the net assets, deducted H’s pre-marital
assets, divided the balance 50/50 and found that this
equated with a separate assessment of W’s housing and
capitalised income needs. (As so often W’s final award
was c. 40% of the whole).
This formulaic approach can also be seen in AC v DC (No 2) Sir
Hugh Bennett [2012] EWHC 2420 (Fam) where the assets were
valued at £38m and after the deduction of the ‘spingboard’
valuation of the business introduced by H at £8m, the balance
was divided equally, giving W £15m of £38m.
In Davies v Davies [2012] EWCA Civ 1641 (the case of the hotel
in Paddington inherited by H) the CA upheld an award of
£2.2m reached by deducting 1/3 of the assets being the
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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element introduced by H (after a not very long marriage), the
balance being divided equally, giving W one third of the total.
Conclusion
There are two schools of thought emerging, one more
formulaic than the other. The former would seek to identify the
property as matrimonial or non-matrimonial and while dividing
the matrimonial property equally, the non-matrimonial property
would be retained by the party whose it was save so far as it
may be necessary to meet the other’s needs, quite possibly
interpreted quite modestly (if Mostyn J’s lead is followed sed
quaere). The other school of thought identifies the court’s task
as achieving a fair outcome, and is more inclusive, and less
categoric in its assessment of the property available for
distribution, but recognising that in the course of the s.25
exercise a reflection of the nature and origin of non-
matrimonial property will be a necessary part of achieving a fair
outcome once needs (assessed on a holistic basis) have been
adequately met.
If the former approach is adopted then Mostyn J in N v F
summarised the steps which the court needs to consider as
follows:
"(i) whether the existence of pre-marital property should
be reflected at all, this depends on questions of duration
and mingling;
(ii) if it does decide that reflection is fair and just, the court
should then decide how much of the pre-marital property
should be excluded. Should it be the actual historic sum?
Or less, if there has been much mingling? Or more, to
reflect a springboard and passive growth, as happened in
Jones?
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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(iii) the remaining matrimonial property should then
normally be divided equally;
(iv) the fairness of the award should then be tested by the
overall percentage technique."
In N v F Mostyn J identifies this conflict between the two
schools of thought and argues strongly for the former
approach on the basis of its ‚logical rigour‛ (and in more
recent cases he has suggested it would assist in encouraging
settlement of claims), but the broader brush approach has the
merit of avoiding what may frequently be artificial valuations,
considerable expense and unnecessary complications (the need
to prove the existence and historical value as well perhaps as
the current equivalent value highlighted in B v B is perhaps a
case in point) when what is required is practical solutions,
common sense and concentration on the s.25 factors (as
advocated by Charles J, Coleridge J and Moylan J). In any event
the formulaic approach still requires the judge to stand back
and test the outcome against the proportion the award bears
to the totality of the assets (Jones v Jones) and the non-
matrimonial assets will be invaded if needs are not met (eg as
in Y v Y)..
In many day to day cases all this may be academic. Where an
award based on the needs (of both parties) will exceed an
assessment based on sharing, then needs will prevail. On the
basis of Miller where an award based on sharing would provide
more than that based on needs (i.e. in a case where there is a
‚surplus‛), then it will prevail, but the case law demonstrates
that this approach can be amended to accommodate the
nature and origin of non-matrimonial property, how it has
been treated by the parties, and the length of time it has been
enjoyed.
N.B. While every effort is made to ensure the accuracy of the information given in these notes, they are not intended to be relied upon as legal advice and no liability will be accepted in relation to such reliance.
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Ultimately (as in so much else in this jurisdiction) and as Mostyn
J says in N v F : ‚...the treatment of pre-marital property is
highly fact specific and very discretionary‛
CFS QC
27th June 2013