The Court of Appeal’s decision in Standish v Standish [2024] EWCA Civ 567 is a leading case on the treatment of non-matrimonial assets and, in particular, on the ‘mingling’ or ‘matrimonialisation’ of such assets.
Background
The marriage lasted 15 years and bore two children. When their relationship started, the husband had assets worth £57m. In 2017, to avoid inheritance tax, the husband transferred assets worth £77m into the wife’s sole name, with the intention that she would settle those funds in an offshore trust. That subsequent step was not taken by the wife.
The proceedings were heard by Moor J at first instance and his decision was reported as ARQ v YAQ [2022] EWFC 128. Both parties appealed his decision to the Court of Appeal.
The wife’s grounds of appeal included:
a. The transfers to her in 2017 converted those assets into her ‘separate property’. It was the title to the property which was relevant, not the source of the assets. Alternatively, the assets were matrimonial property and there was no justification other than for an equal division.
b. The judge should have found that the property, Ardenside was a matrimonial asset. Although it had been owned by the husband before the marriage, the parties had holidayed there and had improved it during the marriage.
The husband’s grounds of appeal were:
a. The sharing principle should not be applied to the 2017 assets nor Ardenside. They represented the husband’s pre-marital wealth.
b. Alternatively, if they were matrimonial assets, the wife had been awarded an excessive share of the family’s assets, having regard to the scale of the husband’s unmatched contribution of pre-marital wealth.
The key elements of the Court of Appeal’s decision were as follows:
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Relevance of legal title
Moylan LJ stated: ‘In my view, it is clearly established that, in the application of the sharing principle, the source of an asset is a critical factor and not title.’ By reference to the many reported cases cited by Moylan LJ, he noted that title does not feature as a significant factor, compared to the source of an asset. The latter features prominently in explaining the court’s approach to the application of the sharing principle. He also said: ‘The sharing principle will apply with equal force to an asset held in the sole name of one spouse as it does to an asset in joint names.’
Moylan LJ also rejected the use of the term ‘separate property’ and felt it better to adhere to the established terms of marital/matrimonial and non-marital/matrimonial property.
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Matrimonialisation
Moylan LJ wanted to be clear that he was not seeking to depart from what was said in the Court of Appeal’s decision in Hart v Hart [2017] EWCA Civ 1306, which remains a leading case on the issue of pre-acquired and inherited property. Moylan LJ stated that the concept of matrimonialisation should continue to be applied, although it ‘should be applied narrowly’. Citing Wilson LJ in K v L [2011] EWCA Civ 550, he acknowledged that: ‘The importance of the [non-marital] source of [an asset or assets] may diminish over time.’ Moylan LJ proposed that there should be some slight reformulation of the three scenarios which were referred to in K v L which reflected the development in case law since that 2011 decision. The three scenarios summarised by Moylan LJ were as follows:
a. The percentage of the parties’ assets which might reflect the produce of non-marital endeavour may not be sufficiently significant to justify an evidential investigation and/or a departure from an equal division of the wealth.
b. The extent to which non-matrimonial property has been mixed with matrimonial property and which means that it should be included within the sharing principle.
c. Non-marital property which has been used in the purchase of the family home, that being an asset which typically stands in a category of its own.
In the first example, the sharing principle applies in the conventional form. As for the family home in scenario (c), typically the property should be shared equally, although there are reported cases where that has not happened, for example FB v PS (Financial Remedies) [2015] EWHC 2797 (Fam).
Scenario (b) requires ‘a more nuanced approach’ where the evidence does not establish a clear dividing line between matrimonial and non-matrimonial property. The underlying question is whether such assets should be treated as having the same character as those built up during the marriage with the consequence that they should be shared on divorce.
If such assets are treated as having been matrimonialised and therefore subject to the sharing principle, it does not mean that the asset must be shared equally. There is no authority which supports the contention that once an asset is matrimonialised, it must be shared equally. The non-matrimonial source of the money in question remains a relevant consideration.
Implications of the decision
It must be remembered that the arguments heard by the Court of Appeal addressed sharing cases. Where cases are determined by needs, such factors will override arguments in respect of the source, treatment and nature of the assets.
In the vast majority of sharing cases, the family home will be divided equally, regardless of the source of the capital. There are however a few reported cases where the court has departed from that principle.
Although the legal title to property is not a relevant consideration, the source and treatment of such assets do however remain relevant. For an asset which has not been matrimonialised, it will not be subject to the sharing principle. The concept of matrimonialisation is however fact-specific; whether an asset has been matrimonialised and how it is to be treated will depend upon the individual facts of the case.
Andrew Newbury is a partner at Hall Brown Family Law, Manchester
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