Court sets out how assets should be shared when couples divorce

The High Court set out the principles that should apply when sharing family property in a divorce settlement.

The case involved a couple who had been married for 33 years and had three adult children, who were independent.

Both the wife and the husband had been independently wealthy before the marriage. The wife had non-matrimonial wealth of £14 million, which was invested in portfolios managed by the husband. He also had personal assets in offshore investments.

The matrimonial assets, worth £55 million, had been generated during the marriage by the husband’s employment as an investment banker and fund manager.

The wife did not work outside the home. In addition to their London home, which was jointly owned, the couple had acquired a country house through an offshore trust funded by the husband from his own resources, the primary beneficiaries of which were the children and grandchildren.

The issue in respect of the country house was the value to be attributed to the husband being able to remain there. He submitted that the wife’s separate funds should be regarded as matrimonial property because of the significant contribution he had made to the family's wealth.

Before deciding the case, the court set out the principles to be applied in the sharing of family property. It made the following observations:

  • The fact that one party's assets derived from a source outside the marriage, such as inheritance or pre-acquired wealth, did not necessarily lead to its exclusion from the court's consideration of a fair outcome to both. Such assets could be taken into account insofar as they represented a contribution by one party to the welfare of the family.
  • The overarching principle supporting fairness to both parties was that of non-discrimination, so that each party's contribution to the marriage would be treated as having a broadly equivalent value even though they might be different in kind.
  • Whether separately owned property should be reflected in the outcome depended on the extent to which it had been "mingled" with matrimonial property and the length of time over which such "mingling" had taken place. Therefore, the way in which such property had been used over the course of the marriage had the potential to affect whether it remained "separate" property.
  • Assets that were matrimonial in character would be included in the "sharing principle" and divided equally between the parties. Matrimonial property was property that was the product of marital endeavour or generated during the marriage rather than by external donation.
  • The application of the sharing principle impacted, in practice, only on the division of marital property and not on non-marital property. 
  • The application of the sharing principle would not always lead to an arithmetically equal division of the marital wealth; in appropriate circumstances, factors such as risk and liquidity might impact how sharing was achieved.
  • In relation to whether non-matrimonial property had been mingled with matrimonial property, the court had to consider whether the "contributor" had accepted that their property should be treated as matrimonial property. If the evidence led the court to conclude that one party had, through words, actions or deeds, manifested an acceptance that it should be treated as such, then it had to determine the extent to which that property should be shared between them.

In this case, it was essential to achieve a clean break between the parties.

The wife’s assets had remained separate from the matrimonial assets, either within family trust structures or in investment portfolios held in her sole name. The underlying capital in those funds had never been used to meet any family needs, nor had there ever been an understanding that they would be shared or that the husband would acquire any interest in them because of his management role.

On the basis of equal sharing, the wife would retain the London property and the matrimonial assets which she currently held. A 50% share would require a lump sum payment from the husband of £6,362,445. The husband would retain the country house in addition to his non-matrimonial funds.

Please contact us if you would like more information about the issues raised in this article or any aspect of family law.

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