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Landmark Court Of Appeal Decision Sheds Light On Treatment Of Pre-Marital Wealth, The Sharing Principle And The ‘Matrimonialisation’ Of Assets

In this recent Court of Appeal case, the court considered how money which was generated in part prior to a marriage should be treated on divorce. 

The key consideration here was how property should be treated when applying the sharing principle, and ‘how and when property can change or move from being non-matrimonial property, to which it [the sharing principle] does not apply, and become matrimonial property, to which it does apply.’ 

The husband (69) and wife (54) married in December 2005 and their marriage broke down in 2020. The assets totalled around £133m, and they have two children together. 

This was a complex case, but one of the key points related to the transfer of shares. During the marriage, the husband transferred around £77m in shares to the wife. The husband said that these assets were non-matrimonial, and therefore shouldn’t be shared equally, whereas the wife said that they should be shared equally as they had been ‘matrimonialised’. 

On appeal, the court decided that the wife’s original award of £45m was too high, and should have been substantially lower (£25m). Following this decision, if the parties can’t now reach an agreement, their case will need to revert back to the High Court for determination. 

The court found that in respect of the transfer, the lower could should have applied the sharing principle only to the proportion of assets which were the product of ‘matrimonial endeavour’, and not the whole amount.

The court found that source of the asset is the ‘critical factor’, rather than who holds the title to it. In other words, it’s more important where the asset came from that who owns the legal title. 

The key consideration is whether assets are the product of pre-marital or marital ‘endeavour’ when looking at fairness and the proportions in which assets should be distributed.

The case also references a prior decision of the Court of Appeal, that of Hart v Hart.  Sarah Balfour is a family partner who was involved in the case of Hart. 

Sarah said “It’s interesting to see the Court of Appeal quoting Hart once again.  It remains good authority for the Court’s ability to exercise its discretion and adopt a broad brush approach in cases where it has not been able to determine exactly what is matrimonial property and what is not. 

Standish is yet another example that a formulaic approach cannot be taken to these cases, and it remains impossible to predict the outcome of fully contested proceedings with any certainty.  For this (and many other reasons) divorcing couples should always consider non court dispute resolution.”

Claire-Marie Cornford is the lead Partner for the Will, Trust, and Estate Disputes team in London.

Claire-Marie said “This is also an interesting judgment for surviving spouses and civil partners pursuing claims under the Inheritance (Provision for Family and Dependants) Act 1975 for financial provision from their partner’s estate as the court will undertake a divorce cross-check by reference to developments in matrimonial law, such as this decision by the Court of Appeal”.