What’s yours is mine?

Judges are being more cautious when sharing out divorcing couples’ non-matrimonial assets

As any reader of the press in recent years will know, London has attained the dubious status of ’divorce capital of the world’. This is mainly due to the cases of White (2000) and Miller and McFarlane (2006), which introduced radical new concepts whereby a claimant’s award was no longer to be pegged at the ’bottom line’ level of reasonable ’needs’, but could in many ’big money’ cases extend to a full 50 per cent of the total assets.

This caused particular concern where the money, or some of it, had a ’non-matrimonial’ character, meaning that it was either family money received by gift, inheritance or distribution from trust, or it had been built up before the marriage. Under McFarlane such assets might, particularly in a longer marriage, fall into the general carve-up.

Miller remains the leading authority, emanating as it does from the old House of Lords (now the UK Supreme Court). However, it is six years old. It is therefore worth noting some recent shifts in the underlying law which indicate a more conservative app­roach to non-matrimonial wealth.

The Court of Appeal (CoA) gave judgment in the case of Robson in October 2010. It was held that although the non-matrimonial property (an ­inheritance) should be included in the ’pot’ for division, the court could nonetheless take account of the non-matrimonial character of the inheritance by adjusting away from a 50:50 split. The degree of adjustment would depend on the nature of the inheritance, how long ago it had ­arrived and the degree to which it had been intermingled with the family’s general finances.

In Jones (2011), the CoA sought first to define the non-matrimonial assets. These were then removed from account and equal sharing was applied to the remainder. Non-matrimonial property would only be brought into the equation if necessary to meet the parties’ needs.

In K v L (2011) the ’non-matrimonial property’ consisted of £57m of shares inherited by the wife. The shares had grown passively in value and had not been intermingled with the matrimonial property. It was also relevant that the parties had lived to a very modest standard. The husband was awarded only 5 per cent of the total assets, which the judge found would meet his needs.

In AR v AR (2011) the total assets amounted to around £24m, of which all but £1m was the husband’s pre-marital and inherited property. The judge felt that to decree that inherited/pre-acquired assets should only be invaded if required to meet the weaker party’s needs (as suggested in K v L) might be too “rigid a framework”. Nonetheless he concluded that wife’s award should be dictated by her needs rather than broader sharing, and awarded her £4.3m.

‘Needs’ will always trump any ­argument to ring-fence inherited or other non-matrimonial property and recent decisions seem to indicate an increased caution about sharing non-matrimonial assets on divorce. There is still no clear rule. In such cases there is no substitute for a pre-­nuptial agreement, which remains the best tool in the wealth ­protection kit.

Victoria Francis, a solicitor specialising in family law at Speechly Bircham, assisted with this article