When the court decides upon a financial settlement upon divorce it will often do so by reference to the ‘sharing principle’.
The sharing principle states that, as a general guide, an equal division of the matrimonial assets between the husband and the wife should be departed from only if, and to the extent that, there is good reason for doing so.
But this raises the question: what are the matrimonial assets?
The answer, in simple terms, is that the matrimonial assets are the assets that were acquired during the marriage, through the joint efforts of the parties to the marriage. Accordingly, assets acquired before the marriage or after the parties separated are non-matrimonial, as are assets that were not acquired through the joint efforts of the parties, such as gifts and inheritances.
The importance of distinguishing between matrimonial and non-matrimonial assets was highlighted by a recent Court of Appeal case.
The case concerned an appeal by the wife and a cross-appeal by the husband from a financial remedy order.
As Lord Justice Moylan, giving the leading judgment of the Court of Appeal, explained, the appeals concerned the proper application of the sharing principle and, in particular, the manner in which the court identifies assets to which it applies.
In broad terms, the parties agreed that it applies to matrimonial property and does not apply to non-matrimonial property. However, they disagreed as to what makes an asset matrimonial or non-matrimonial property, and also as to the manner in which an asset which was initially non-matrimonial can be ‘matrimonialised’ – in other words, become an asset to which the sharing principle applies.
The facts of the case, and the arguments raised on behalf of both the husband and the wife, were quite complicated, and the judgment of Lord Justice Moylan runs to 183 paragraphs. We will therefore concentrate on just one aspect of the husband’s appeal here, and simplify it, for the sake of clarity. Any reader wishing to read the full judgment may do so, at the link below.
The judge who made the original financial remedy order found that the total assets in the case were £132 million, of which £112 million was matrimonial property.
Within the sum of £112 million were investment funds totalling £80 million, which the husband had transferred from his sole name into the wife’s sole name in 2017 (“the 2017 Assets”), as part of a tax planning scheme.
The 2017 Assets had, in fact, been acquired by the husband prior to the marriage, and were therefore originally non-matrimonial. However, the judge took the view that the assets had been ‘matrimonialised’ by the 2017 transfer, and were therefore subject to the sharing principle.
The judge did, however, acknowledge that the 2017 Assets had only been ‘matrimonialised’ towards the end of the marriage. Accordingly, he divided them 60% to the husband and 40% to the wife.
The husband appealed, claiming that the judge had been wrong to find that the 2017 Assets had been ‘matrimonialised’. The 2017 Assets should not, therefore, have been subject to the sharing principle.
Lord Justice Moylan agreed with the husband. The source of the 2017 Assets had not changed as a result of their transfer to the wife and, in the application of the sharing principle, this remained the critical factor.
Accordingly, the husband’s appeal was allowed.
You can read the full report of the case here.
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