In the recent case of Standish v Standish, the Supreme Court has found that the sharing principle does not apply to non-matrimonial property. In this article we summarise the details of the case, what the Supreme court decided and what this means going forward for divorce cases.
The case arises from the divorce of Mr and Mrs Standish. The husband is now aged 72, and the wife aged 57. The husband had a very successful career in the financial services industry. He retired in October 2007, a relevant date because his marriage to the wife had taken place in 2005. This was the second marriage for both parties, who began living together in 2004 in Switzerland, where the husband was working at that time. The parties married in 2005 and had two children together. The marriage irretrievably broke down in early 2020.
On a divorce, the courts have wide powers to achieve a fair outcome for the parties. While all the circumstances of the case should be considered, there are three key principles applied;
Reflecting changes in social attitudes and working patterns should also be considered and this is commonly known as the non-discrimination principle.
Compared to the scale of the husband's pre-marital wealth, the wife's assets were very modest. In March and early April 2017, 14 years after the parties had started their relationship and three years before it ended, the husband transferred approximately £77 million worth of assets to the wife (the 2017 transfer). They are now worth just over £80 million.
The husband was due to become deemed domiciled in England and Wales in April 2017, and he was therefore concerned with this jurisdiction’s inheritance tax liabilities. The wife, on the other hand, was non-domiciled due to her domicile of origin being Australia. The husband's case was that the intention of the 2017 transfer was for the wife to place the assets in a discretionary trust for the benefit of the children for inheritance tax purposes. At the time of the parties’ marriage breakdown in early 2020, the trust had not been established.
In 2022, Mr Justice Moor presiding in the Family Division of the High Court, decided that the 2017 transfer assets were matrimonial property and subject to the sharing principle. He divided the matrimonial property 60/40, splitting the parties’ total wealth of £132 million by awarding the husband £87 million and the wife £45 million. The departure was in the husband’s favour to reflect the fact that the assets were derived from an unmatched contribution by the husband.
Both the husband and wife appealed to the Court of Appeal, which decided that the husband was entitled to 75% of the now £80 million 2017 transfer assets, plus half of 25% of those assets. This was because only 25% of the 2017 transfer assets were matrimonial property and therefore subject to the sharing principle. The Court of Appeal decided therefore that the bulk of the 2017 transfer assets were non-matrimonial, and fell outside the sharing principle. The husband's established share was therefore ordered to be returned to the husband. The wife appealed to the Supreme Court.
The Supreme Court was being asked to decide how the sharing principle applies where a relatively short time before the divorce, the husband made a transfer of assets worth some £80 million to the wife for the purpose of setting up a trust to negate inheritance tax and where at the date of the divorce, the wife had not set up the trust and had instead retained the assets. The wife argued that the Court of Appeal placed too much weight on the husband being the primary source of the 2017 transfer assets, and she argued that the 2017 transfer was a gift.
The Supreme Court unanimously dismissed the wife's appeal and gave the following as its reasoning:
| What these four reasonings show is that the important question for the court as to whether that transformation from non-matrimonial property to matrimonial property has occurred, can be answered based on any facts of a case. Further, what is important to consider is how the parties have been dealing with the asset, and whether this shows that over time, they have been treating the asset as shared. |
Applying all that reasoning, the Supreme Court decided that the ruling of the Court of Appeal was indeed correct, and that none of the husband's premarital assets, which were assessed as being 75% of the 2017 transfer assets, have become matrimonialised. This is because the 2017 transfer to the wife was to save inheritance tax and was for the benefit of the children and not for the benefit of the wife. The 2017 transfer assets were not being treated by the husband or wife at any period of time as shared between them.
The Supreme Court decided the Court of Appeal was correct in its ruling that the husband is entitled to 75% of the 2017 transfer assets, which is the non-matrimonial property, plus half of the other 25% of those assets which is matrimonial property. The wife's appeal has therefore been dismissed by the Supreme Court.
This case highlights the importance of ensuring that careful consideration is given to protecting assets bought into the marriage by individuals. Pre and postnuptial agreements carry considerable persuasive weight and can be applied to protect assets, but also give clarity in the event the marriage was to end.
Our family solicitors have considerable experience helping individuals navigate the complex and challenging area of matrimonial finances. To speak to a member of our team, please get in touch.
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