Divorcing business partners' rights

Roger Pearson examines the rights of divorcing wives in both the business and marriage partnerships with their husbands.

A recent Court of Appeal decision has widened possibilities for the claims of divorcing wives who have acted in a business partnership with their husbands.

The decision of Lady Justice Butler-Sloss and Lords Justices Thorpe and Mantell in White v White upgrades the potential of ancillary relief claims for such wives.

The court has left no doubt that the rules relating to the break-up of business partnerships should be followed, rather than the long-established "Duxbury" approach of providing income for a wife to continue living in the style to which she is accustomed.

John Smith, a matrimonial specialist partner at Bevan Ashford, who represented the wife and won her a significant increase over the original High Court award of Mr Justice Holman, says that it is a decision that has broadened the scope for future claims where couples have been partners in both marriage and business.

With more wives involved in family businesses it is a decision which everyone engaged in ancillary relief proceedings should take note of.

The case involved 61 and 62-year-old husband and wife Martin and Pamela White, who farmed in partnership, and whose 33-year marriage ended in 1994.

When Mrs White sought ancillary relief however, even though she was partner in the business, the judge awarded her £800,000 – less than a third of the business assets of £4.5m.

Now though, calculating Mrs White's entitlement on the basis of a business partnership break-up, the Court of Appeal has increased her award by £700,000 to £1.5m.

In doing so, the comments of Lady Justice Butler-Sloss and Lord Justice Thorpe have provided pointers for the future approach to such cases.

Lord Justice Thorpe said the main feature of the case was that the Whites had traded as equal partners: "By opting for equal partnership the parties introduced a legal mechanism for determining the financial resources which each of the parties to the marriage has."

He said they "stood equal", save for the fact that a greater proportion of the business' capital had come from the husband's family. In those circumstances he considered Mrs White was entitled to a determination of what was hers "in law and equity".

Lady Justice Butler-Sloss said there was a danger of family law practitioners attempting to be too rigid in their application of previous case law and failing to recognise that cases needed to be decided on their individual facts.

She says: "Divorcing partners and their legal advisers ought to reflect upon the need to rethink the correct approach to the wife who is also in every sense the business partner of the husband."

Smith says: "I believe that the message from this decision is that contributions made by wives to family businesses – and their legal entitlement – will be more readily and adequately recognised than they have been in the past.

"The approach of the appeal judges here is encouragingly different from the general approach that courts have adopted in the past and I think it could result in many divorcing women who have been involved in the family business getting a fairer deal than they would have in the past."