A recent Court of Appeal case (Standish v Standish) resulted in an unequal division of property on divorce. The family’s total wealth was £132 million, yet the judge awarded the wife only £25 million after a 15-year marriage. Notably, the parties did not have a prenuptial agreement, and during the marriage, the husband transferred £77 million to the wife as part of a tax planning scheme. The case has significant implications for the sharing principle of asset division by providing clear guidance on this matter, particularly around the concept of non-matrimonial property.
What was the background?
The case involved a husband and wife who married in 2005 and had two children together. After moving to England from Australia, they purchased an estate in Hampshire. The husband had acquired the vast majority of his wealth prior to the marriage and held the majority of his wealth in his sole name until 2017. He retired in 2007, two years after marrying his wife.
In 2017, as part of a plan to settle the money into trusts to protect the family from inheritance tax, the husband put roughly £77m into the name of his wife. However, prior to the setting up of any trust, the wife commenced divorce proceedings.
At the time the case went to trial, the wife said that this money had become her separate property. Despite this, the wife said that she would be willing to share the money, as well as everything else, equally with her husband. Nevertheless, it was argued by the husband that the money should be returned to him as part of his non-matrimonial property.
In his decision, the judge found that while there had been matrimonialisation of the transferred money, the asset division should be unequally favoured toward the husband due to his previous wealth. He made the same decision for the farm business, whose shares had been partly transferred to the wife for tax efficiency.
On the other hand, the judge found that farmland was non-matrimonial property, and should not be included in the sharing principle. However, he found that the sharing principle did apply to the Hampshire estate, which was worth £21m.
Overall, this meant that the value of the transferred assets, which included the farm business and matrimonial home, was divided 60/40 in favour of the husband, with the farmland also left with the husband. This meant that, overall, £87m (66%) of the assets went to the husband, while £45m (34%) went to the wife.
The wife argued for half of the assets based on the importance of title, autonomy, as well as the absence of a nuptial agreement. However, the husband’s appeal involved him seeking a reduction to £25m for the awarding of assets to the wife.
Why did the Court of Appeal decide that the judge was incorrect in his decision? Let’s take a look.
Court of Appeal
After being referred to the Court of Appeal, the Lord Justice made the decision that the trial judge was wrong to have held that the transferred funds had been matrimonialised. This decision was made on the basis that the mere title had been transferred.
The Court of Appeal found that this transfer of title was an irrelevant consideration. Instead, the source of the asset was the critical factor. In practical terms, this means that he held that the fact that the 2017 Assets were non-matrimonial were not diminished purely because they were transferred to the wife. Furthermore, Lord Justice Moylan found that the way this had been applied was an extension of the concept of matrimonialisation itself.
Lord Justice Moyaln went on to say that “The sharing principle is founded or based on each party, in accordance with the objectives of fairness, equality and non-discrimination, being entitled to an equal share of their matrimonial property, namely the “fruits of the partnership” or the wealth built up by the parties’ endeavours during the marriage.”
In other words, the Court of Appeal held that the sharing principle for the 2017 assets should only have been applied to the portion between the marriage and the husband’s retirement in 2007. The way in which the trial judge had applied the sharing principle therefore resulted in an unjustified division of the wealth in favour of the wife.
By applying the sharing principle in what the Court of Appeal held was the correct way, this would have resulted in the wife receiving £25m in wealth instead of the £45m which the trial judge concluded.
The decision over whether the £25m would meet the wife’s needs was referred back to the trial judge to assess.
Our thoughts
There is a common understanding that matrimonial assets should be shared equally, regardless of the parties’ respective roles in the family, whether as a homemaker or a moneymaker. However, as demonstrated in this case, the sources of funds are clearly relevant to capital distribution. Not all assets held by the parties at the time of divorce are subject to equal division. To achieve overall fairness, equality, and non-discrimination, only the “fruits of the partnership”—the wealth accumulated through the parties’ efforts during the marriage—are subject to equal sharing. Non-matrimonial property, such as pre-marital wealth and inheritance, is excluded from sharing, although it may be relevant to meet needs if required.
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