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Court of Appeal case provides guidance on the matrimonialisation of pre-marital assets.
In the recent case of Standish v Standish [2024] EWCA Civ 567, the court has clarified two points:
- When property should be treated as matrimonial (or otherwise); and
- When a non-matrimonial asset may be matrimonialised (and therefore subject to sharing)
The sharing principle (White v White [2000]), is the concept that matrimonial assets are to be shared in equal proportions unless there is a good reason to depart from equality. This principle does not apply to non-matrimonial assets.
Background
The parties married in 2005. The husband had significant pre-marital wealth, and a highly successful career. The wife was a homemaker with modest pre-marital assets. H was a UK national and moved to Australia and met the wife, an Australian national. They moved to the UK in 2010. Divorce proceedings began in 2020.
Towards the end of the marriage in 2017, as part of a tax planning exercise, before he would be deemed domiciled in England, the husband transferred £77 million of assets to his wife, who would remain non-domiciled, designed to protect against inheritance tax. The assets were to be transferred into a discretionary trust in Jersey for the benefit of their children (although this never happened). The case centralized around the impact of these actions.
At first instance, Moor J decided that, the assets had become matrimonialised due to the transactions in 2017. They were therefore subject to the sharing principle. Of the matrimonial property, which totlaled £112m million, the husband was awarded 60% (£67m) and the wife was awarded 40% (£45m). The judge found there was a further c.£20 million of non-matrimonial assets, not to be shared.
Court of Appeal
The wife appealed, stating that the Moor J should have found that the 2017 assets and her shares in the farm were her own separate property, because she had the title to the assets (i.e. they were held in her name). She did however say that the assets should be treated as though they were matrimonial property and so shared equally.
The husband cross-appealed and by contrast, argued it was the source of funds that was the critically important factor rather than title or autonomy, and that Moor J had not adequately recognized this. Additionally, even if the 2017 assets and shares were matrimonial property, the judge’s distribution was excessive as insufficient weight was given to the fact that these assets were the product of his pre-marital endeavours.
At the Court of Appeal, Moylan J dismissed the wife’s appeal and allowed the husband’s cross-appeal. The source of the asset, he determined, and not the title, was the critical factor. This overturned Moor J’s finding that transferring title alone can lead to matrimonialisation.
The Court considered three ways in which assets could be matrimonialised:
- the percentage of the parties assets (or an asset) which might be said to be non-matrimonial was not sufficiently significant to be treated separately;
- where non-matrimonial property had been mixed with matrimonial property meaning that, in fairness, it should be included within the sharing principle; and
- where non-matrimonial property has been used in the purchase of the former matrimonial home, an asset which tended to be treated as matrimonial, regardless of its source.
Where an asset fell into category (a), the sharing principle would apply. Where an asset fell into category (c), the court will typically conclude that the former matrimonial home should be shared equally although this is not inevitable. Where, however, an asset fell into category (b), the court will have to consider whether fairness requires or justifies the asset being included within the sharing principle. If it does, that does not mean that it must be shared equally.
It was held that applying the sharing principle meant an unjustified division of the wealth in the wife’s favour. A fair application of the sharing principle would have provided the wife with approximately £25 million.
A decision will now be made at a further hearing, and will be based on the wife’s needs, rather than sharing.
Comment
This case provides clear guidance about whether assets that one party brought to the marriage should be treated as matrimonial or non-matrimonial. Whose name the asset is held in does not matter. Rather, the source of the asset is the critical factor.
The decision in Standish means that there is greater scope for argument that an asset brought to the marriage will not automatically be assumed to be subject to the sharing principle. There is however no guarantee as to outcome as the court uses its discretion. As such, it is worth those wishing to protect pre-marital wealth receiving appropriate professional advice, including considering entering into a pre-nuptial or post-nuptial agreement, to ensure certainty.
To discuss any of the issues raised in this article, please contact Sarah Green.
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